The global monetary crisis of 2008, which economic gurus guess could end up in a few trillion greenbacks of losses and that has already cost American taxpayers billions of bucks in government bailouts, was caused not by war or recession but by a silly, synthetic cash machine, built on defective mathematical models that most fiscal middle management did not particularly understand themselves, The NY Times’s Michiko Kakutani writes in her review of Michael Lewis’s new book The Gigantic Short : Within the Doomsday Machine. Greedy and heedless, Wall St firms had been turning subprime mortgages loans made to folk with low credit rating or small paperwork into exotic, harmful financial instruments that they were regarded as making a fortune laundering and reselling, and they were enabled in doing so by the ratings agencies that were intended to police risk, Ms.

Kakutani writes. The insanity of this growing and highly leveraged trade in mortgage derivatives continued even as the quality of the base loans grew increasingly dubious, even as it became likely the American housing bubble was going to pop. The clear and present danger posed by this demented edifice built on the unstable foundation of subprime mortgages wasn’t foreseen by the chief operatives of America’s premier banks.

It wasn’t foreseen by central authority regulators, by Treasury officers or by the Federal Agency. It was foreseen, by a few financiers, who were horrified at the craziness they saw at streetlevel and who used their prescience to earn a lot off the money system’s tragic disintegration. Some of their stories are told by Michael Lewis in The Giant Short. nobody writes with more account panache about money and finance than Mr. Lewis, the writer of Liar’s Poker, that now classic portrait of 1980s the Street, Ms. Kakutani says. His entertaining new book doesn’t attempt a macro view of the finance disaster, but instead proposes to open a tiny window on the accidents by recounting the stories of some savvy renegades who cashed in on their conviction the system was rotten, she asserts. In doing so Mr. Lewis faces the same issue the WSJ hack Gregory Zuckerman faced in the best Trade Ever, his contemporary book about John Paulson, a hedge fund boss who made $15 bill in 2007 by shorting the housing bubble the difficulty, specifically, the reader is put in the position of rooting for folk who, while smarter or even more farsighted than people who helped create disaster in the 1st place, were nevertheless making an attempt to make cash ( who saw a rare opportunity, as one put it ) by gambling against the condition of our monetary system, Ms. Kakutani writes. Still, Mr.

Lewis does a nimble job of using his subjects’ stories to explicate the gluttony, idiocies and hypocrisies of a system significantly short of grown-up supervision, a system full of firms that scorned the necessity for regime regulation in good times but insisted on being saved by executive in bad times, Ms.

Kakutani says. Mr.

Lewis disagrees the roots of the disintegration of 2008 can be discovered in the 1980s of Liar’s Poker, when complicated financial vehicles like mortgage derivatives were developed. He also means that these fiscal instruments ( which had names like the manmade subprime mortgage bond-backed C.D.O, or collateralized debt need ) grew increasingly opaque and complicated to help obscure the indisputable fact that they were built around increasingly suspect loans : low-doc or no-doc loans requiring small paperwork, variable-rate mortgages that expanded after 2 years, interest-only negative-amortizing variable-rate subprime mortgages, and mortgages given to migrant workers and poor immigrants with minimal English. As Mr. Lewis describes it, Wall St firms managed to hide the chance by complicating it and by getting the rating agencies notably, Moody’s and Standard