Check this out for a full explanation of our conversion to the LiveFyre commenting system and instructions on how to sign up for an account. As Lippmann put it, How can a guy who cant speak English lie?. Steven Eisman of The Big Short fame delivered an hour's worth of pithy and insightful comments on the global financial crisis, the markets, and the finance industry at the 71 st CFA Institute Annual Conference in Hong Kong. Jimmy Cayne owned a billion and smoked doobies the whole time and thats a fact. (March 8, 2010) - The Securities and Exchange Commission's investigation of the Florida State Board of Administration (FSBA), which manages $138.5 billion, has come to a close with . Everyone thought it was gold, he said. He parlayed the chance encounter into a short career as a bond salesman, which he recounted with equal parts Tom Wolfe and Joseph Heller in his first book, Liars Poker. Ive said everything I have to say, he said. and other data for a number of reasons, such as keeping FT Sites reliable and secure, Everyone was so levered there was no ability to take any pain and the rating agencies were told that the ratings were all wrong. 2017 Annual Conference at Bally's Las Vegas September 24~27 . She was head of mortgage research. Steve Eisman was a key character in Michael Lewis' best-selling "The Big Short" and was depicted by actor Steve Carell in the movie based on the book. Most people didnt understand how what amounted to a two-decade boom in the bond market had overwhelmed everything else. Kim and Chris thanked Mr. Eisman for his time, Mr. Brown agreed to work with Chris to produce the documents requested in the interview, and they concluded the meeting. Anybody who knew anything about how subprime lending works knew that underwriters always underwrote to the teaser rate that is, the customer could only afford the teaser rate, meaning the customer needs to refinance as reset dates get closer, he said. The dinner seems to go well, but immediately afterwards. Come back, tell me I wont testify, and Ill tell you the story, he said. In January 2007, Lippmann flew Steve Eisman and his team out to a giant annual convention of subprime lenders, speculators, and investors in Las Vegas. Kim asked if he had comments on the bubble in commercial versus residential real estate markets. -Graham S. The timeline below shows where the character Steve Eisman appears in, that her careeras well as her whole worldviewwas largely established by a man named, in the middle of the list is John Paulson, and at the top is, Meanwhile, Vincent Daniel grew up in Queens without the same advantages that, theyre making money or not. In this instance, we couldnt.. So assuming your correlation analysis was correct, you took the short side, sold it to the client, and then [did the deal with me to get a mark. You tell an underwriter credit is better than expected, [and they relax] standards. He looked to be in his early twenties, and he was, like everyone else, punching on his BlackBerry the whole time Miller and Eisman spoke. I would also love to be able to send the original video back to Steve Eisman himself! Directed by Adam McKay, The Big Short chronicles the years leading up to the 2007-08 global . The registration fee for the conference is $595 for members and $775 for nonmembers until July 21st and then increases to $715 and $895. You'll be able to access your notes and highlights, make requests, and get updates on new titles. He later served as Partner and Senior Portfolio Manager at FrontPoint Financial Services Fund, where he made the biggest impact of his career. Cornhole Capital. It was a complicated CDO of CMBS gobbledygook some combo of BBB-, BBB+, a smattering of AAA I dont think there was a manager. And it wasnt such a concern [because] youd only have cash up to your last mark So on the day you want to unwind the trade, your only trade was the cash up to last mark. The "Ali vs Foreman" scene from "The Big Short": https://www.youtube.com/watch?v=YeGJaVHkDi8, Steve Eisman (aka Marc Baum) talking about how he really did give the speech (starts at 11:30): https://www.youtube.com/watch?v=eR9zIZkefdk#t=690, Help me find the original Marc Baum (IRL Steve Eisman) "Ali vs Foreman" speech from "The Big Short", https://www.youtube.com/watch?v=YeGJaVHkDi8, https://www.youtube.com/watch?v=eR9zIZkefdk#t=690. There was one, but it wasnt as big as the residential side [it wasnt] as big a market. By the time Households CEO, Bill Aldinger, collected his $100 million, Eisman was on his way to becoming the financial markets first socialist. Three levels of dog shit lower than shit. Chris asked if Mr. Eisman had those kinds of discussions with Deutsche Bank and Goldman Sachs and if they recognized it was dog shit. Mr. Eisman said no, and that FrontPoint was in the minority. Refine any search. I basically do agree with it to a considerable agree, he said. Find related themes, quotes, symbols, characters, and more. Copyright 2023 Asset International, Inc. All Rights Reserved. SUBSCRIBE for more speakers http://is.gd/OxfordUnionOxford Union on Facebook: https://www.facebook.com/theoxfordunionOxford Union on Twitter: @OxfordUnionW. The 2017 theme is Assessment Leadership Beyond All Limits. Theres Josh [Rosner], theres us. It just was wrong, he said, and explained that rating agency models contained 1) inaccurate assumptions about pre-payment rates, and 2) inadequate loss projections for borrowers who did not refinance when their interest rates reset. Aside from adding an expensive layer to the eventual disaster, Credit Default Swaps may be among the reasons the government deemed Citigroup, Goldman Sachs and AIG "too big to fail." Standard Digital includes access to a wealth of global news, analysis and expert opinion. "Two years later," Lewis reports in a footnote, "Las Vegas would lead the nation in its rate of home foreclosures.". Kim asked if having an outlet to go short allowed more activity to occur in the cash market, and Mr. Eisman said that it probably did. He thanked Steve Eisman for making time to speak with the Commission staff and said that he was interested in hearing Mr. Eismans views on the causes of the crisis generally, on the role of subprime mortgage credit derivatives in the crisis, and any recommendations Mr. Eisman had on topics or individuals the FCIC should pursue during its investigation. Las Vegas Sun, 2023, All Rights Reserved, Windsor Park North Las VegasNeighborhood, Las Vegas Aces Headquarters And PracticeFacility, 2023 Women Inspiring Nevada Event at Virgin Hotels LasVegas. So we bailed out the crumbs who caused the calamity. Referencing Steve Eisman's March 2008 speech at Deutsche Bank, Kim asked Mr. Eisman to talk more about the connection of the monoline insurers to the financial crisis. Stock per se is not a solution. Eisman knew more about that market, its characters, and its depravities than anyone Lippmann had ever spoken with. "My students can't get enough of your charts and their results have gone through the roof." Elena Carletti Kim asked if Mr. Eisman had a view of the quality of mortgage research and fixed income research. Kim asked Mr. Eisman to comment on the conference call he hosted on July 17, 2007. Theres also AIG trader Gene Park, who sours on the housing market, and his companys massive bets on it, after reading a Wall Street Journal story about a subprime lender whose balance sheet turns out to be a little too good to be true, and a pair of semi-amateur investors convinced to go all in on shorting the housing market after attending a subprime mortgage conference in Las Vegas. The buyer was the CDO who bought it synthetically and then had to lay off the risk to AIG. A subprime loan is an ethically horrendous loan. He said that all of the trades involved synthetic subprime MBS. So now and then he lays it out in easy-to-grasp vernacular: "Looking for bad bonds inside a CDO was like fishing for crap in a Port-O-Let: The question wasn't whether you'd catch some but how quickly you'd be satisfied you'd caught enough." stream His bet against. Kim asked Mr. Eisman if he had comments on the insights or lack of insights among analysts on the sell side. Mr. Eisman said that he never really interacted with ABS or CDO analysts except for on conference calls. The question that remains is: If we turn our weary, collective head and ask them, politely, not to do it again, would that be socialism, exactly? Like all of his books, Lewis is more interested in stories and characters than didacticism, but his tale of what went wrong and who saw it coming provides something much more important than regulatory advice: Its the most insightful and enjoyable account yet of what went wrong on Wall Street, a must-read for any would-be reformers, regulators, or investment bankers hoping to learn from the mistakes of the past. He explained that the ratings were problematic because 1) they were wrong, and 2) they awarded higher ratings to riskier loans. Id have a list, he said, and there mightve been a CDO manager involved, might not have been. Chris asked if there was anything noteworthy about the process of picking collateral, given that Michael Lewiss book makes it sounds like Steve Eisman had an epiphany in January 2007 about CDO managers. They're like having in-class notes for every discussion!, This is absolutely THE best teacher resource I have ever purchased. Steve Eisman added that Alan Greenspan is the worst Chairman of the Fed in history, and that he allowed basically no regulation whatsoever and basically allows a shadow banking system [to grow] which is a way, really, to get things off balance sheets, to hide risk, to keep risk away from regulators. Kim asked how Mr. Eisman defined shadow banking, and he replied that anything not on a bank balance sheet is shadow banking. . We were still short. His audacious gamble is recounted in the 2015 movie "The Big Short," in which the actor Steve Carell plays a Mark Baum, a fictionalized version of Eisman. PDF downloads of all 1725 LitCharts literature guides, and of every new one we publish. We always looked for high California and Florida content, no-doc and low-doc loans. He said that he did trades in October 2006, in December 2006, and in February 2007 after the January Las Vegas conference. Turns out all risk weightings are wrong. No academic literature is worthwhile. Steven Ongena steve eisman vegas conference 2007. penn township hanover, pa map . Not only did he not care, he went out of his way to preempt others from doing anything, he said. As Lewis points out early in The Big Short, the stock market's job is to allocate capital. The problem was, the whole system worked fine as long as everyone could refinance. Our, "Sooo much more helpful thanSparkNotes. He quickly makes a name for himself as an analyst by proving that he isnt afraid to offer opinions that go against the grain. I think in stories, he tells Lewis, and its his nose for a flawed narrativelike learning that his childrens former baby nurse and her sister owned five separate investment properties in Queens, on none of which could they afford the mortgage paymentsthat leads him to uncover the fiction of perpetually rising housing prices and risk-free mortgage securities. For scumbags on the lam, it's a planet. Dorsey is proud to co-sponsor the ASF 2007. % [Lehman] not only securitized, they originated it, so they could have the full chain. Change the plan you will roll onto at any time during your trial by visiting the Settings & Account section. Mr. Even as late as the summer of 2006, as home prices began to fall, it took a certain kind of person to see the ugly facts and react to themto discern, in the profile of the beautiful young lady, the face of an old witch. The joke I had in summer of 07 was that in all of these institutions owning triple A rated stuff, the same conversation was happening on planet earth in 200 different languages between the CEO and the chief investment officer, and the conversation started with: We own WHAT? And thats how the system began to freeze.. Wing Chau was a beard, he said. But people priced WaMu better just because it said WaMu.. [I] thought they were certifiable lunatics. Mr. Eisman said that people still believed the Kool-Aid that housing prices never go down until 2007. The annual conference provides educational sessions, networking, events and exhibits that supply the tools you need to succeed. llq,D Lar9r=?+-u> m=,z\.S+,OXaF4w7t0q4 pvh|C`pXoq-nlOn4!+^KvG(##(`&-OY There werent that many people. The causes and culprits of the recent financial crisis are myriad, but a disturbingly high percentage of them were born at Salomon. The minute refis stopped, losses would explode. Eisman certainly hadnt. From the time you started talking, Bear Stearns stock has fallen more than twenty points. %PDF-1.4 Shorting Moodys was truly one of the joys of my life., Chris asked if Steve Eisman had any concerns about counterparty risk, and Mr. Eisman said that counterparty risk was not a concern until 2008, but then we had western civilization risk. Never asked, didnt want to know., In response to follow up questions from Kim and Chris, Mr. Eisman said that he never saw an Abacus ever again, and that he never traded with Merrill Lynch. His mind was now fully open to the possibility. (including. As a portfolio manager, Steve still works in the financial industry and shares what has changed in the field since 2008. The Big Short is an outsiders' story, about a handful of misfits who saw early on that Wall Street was either criminal or crazy, and who used its esoteric instruments to bet against it. Drawing on his years of Wall Street and investor experience, Steve gives audiences a greater understanding of the 2008 financial crisis why it happened and why most people never saw it coming. Chris asked if Deutsche and Goldman thought the CDOs were gold, and Mr. Eisman said that he never talked to anyone high up enough, but that Lippman thought it was dog shit, [which is] why he wanted to short it. risks and opportunities. In real life, the character Marc Baum (played by Steve Carrell) is based on a real Wall-Street investor named Steve Eisman who did actually successfully short the 2008 housing crisis. Eisman also flatly rejects the argument that it's all their fault. When youre a conservative Republican, you never think people are making money by ripping other people off, he said. Instant downloads of all 1725 LitChart PDFs Moneyball is perhaps the most influential account of the statistical revolution that has taken hold of American political, economic, and intellectual life in recent yearsthe magnum opus of a trend for quantification that spans from wonkish poli-sci policymaking, like the NYPDs CompStat system, to businesses built around algorithms like Google, to tongue-in-cheek pop culture fare, like the TV detective drama NUMB3RS, where a team of mathemagicians use the laws of probability to solve crimes. So he's a fuckin legend . Chris asked if any other investment banks not yet discussed approached him about doing a deal. It assumed pre-payment speeds of about 40%-50% and higher losses for the remaining people. Without this colorful cast, Lewis's tale would be a tedious business-school seminar. So theres a higher demand for subprime than usual. In his search for stock market investors he might terrify with his Doomsday scenario, Lippmann had made a lucky strike: He had stumbled onto a stock market investor who held an even darker view of the subprime mortgage market than he did. He said that Merrill was the worst in terms of marking, according to what he had heard, and that it was the worst because there were so many CDOs, they just didnt want to mark down., Chris asked if the first quarter of 2007 decision to force companies to disclose level one, two and three assets was a significant moment for FrontPoint. It helps that Lewis is himself a Wall Street expat, a witness to the birth of the modern financial industry at Salomon Brothers in the 1980s, as he detailed in his first book, Liar's Poker. So the last week of August 07, the salesperson thats my contact as Goldman Sachs called me and said that they had a transaction called Abacus 18 where they, Goldman were short the transaction it was a bespoke deal and they were short the transaction and they didnt want to be quite as short as they were and would I like some. A friend of Lewis from Salomons training program created the first mortgage derivative for Ranieri. It was not as much a problem for me I was just short., Chris asked if Mr. Eisman had any other comments on why this most recent bubble was so much larger than other bubbles in recent history.