Matt Wuerker 'The Big Short' a hot read on Hill

In the midst of a floor speech on regulatory reform, Senate Majority Whip Dick Durbin (D-Ill.) interrupted himself for a sort of commercial announcement.

“I’m going to plug a book: Michael Lewis’s ‘The Big Short.’”


While debating changes to Fannie Mae and Freddie Mac, Senate Banking Committee Chairman Chris Dodd (D-Conn.) told his colleagues: “Read this new book, ‘The Big Short.’”

Senate Majority Leader Harry Reid (D-Nev.) was decrying Republican obstructionism on the floor when he said, “I recommend everyone within the sound of my voice to read the book.”

Politicians have been known to latch onto books — Amity Shlaes’s “The Forgotten Man” was a must-read among Republicans last year during the bailouts — but few works have shaped a legislative debate quite like Lewis’s story about investors who made a killing by betting on the housing crash.

For a lot of Democrats — and even some Republicans — the book has created a kind of defining counternarrative of the economic collapse.

And it’s given Lewis rock star status among some on Capitol Hill.

In the fall, Lewis met with House Republicans to discuss the financial crisis.

Rep. Jackie Speier (D-Calif.) invited Lewis to speak to the House Democratic Caucus in May. Afterward, a brigade of senator fans, including Democrats Carl Levin of Michigan and Kay Hagan of North Carolina, approached him to say they liked the book.

“I was just in shock,” Lewis said. “They came up to say ‘Hi,’ and they read the book and liked it and mentioned it on the floor, that kind of thing.”

Back home in Berkeley, Calif., Lewis started getting calls from Hill staffers who wanted his insights on the financial meltdown and the best way to prevent another one.

“I tell them all the same thing: ‘I’m not Jesus, I’m Brian’” — a reference to the Monty Python character who repeatedly finds himself mistaken for the son of God.

Lewis may not be the Messiah, but lawmakers are treating his book as though it were the Bible.

“The Big Short” tells the story of the economic meltdown through the eyes of a handful of investors who were smart enough to see the subprime mortgage crisis coming — and greedy enough to cash in on it.

As lawmakers navigate the mind-numbing terrain of credit default swaps and interest-only, negative-amortizing, adjustable subprime mortgages, Lewis’s book gives them a straightforward way to think and talk about it all.

“The Big Short” has been mentioned at least 15 times on the Senate floor and in press conferences and committee hearings. At a hearing of the Senate Subcommittee on Financial Services and General Government in April, Durbin told Securities and Exchange Commission Chairwoman Mary Schapiro, “I’ve joined a lot of other people in just finishing Michael Lewis’s book, ‘The Big Short,’ and it’s really an eye-opener of what was going on at the time that this real estate bubble was created.”

Republican Sens. John Ensign of Nevada and Kit Bond of Missouri have name-dropped the book. And Sen. Ted Kaufman (D-Del.) is fond of dropping catchphrases from it — such as “thin files” and “barbelling” — during committee hearings.

Why are so many on the Hill glomming onto the same narrative?

“It’s very readable,” Kaufman said, noting that his chief of staff read it and recommended it to him. “It’s astonishing. At times, you’re upset by what you’re reading. I’m not into horror movies; for me, that’s as close as I get. That’s a horror movie.”

“It’s terrific for people who haven’t spent a lot of time on” the subject, Levin said. “My wife is really into it. I read it, marked it up for my staff, underlined it, made copies and asked them to read it.”

Speier called the book “an incredible piece of commentary on Wall Street” and said she hopes her colleagues learned something from Lewis’s appearance.

“He got a lot of exposure to those in a position of making sure that the reforms we do embrace are real. And his message was that unless everything is on an exchange and run through a clearinghouse, you’re not fixing it,” Speier said.

Lewis’s first book, “Liar’s Poker,” chronicled his experience as a bond trader and helped define Wall Street’s 1980s culture of greed and excess. “The Big Short” puts an exclamation point on that, and Democrats see in the narrative proof of the need for regulatory reform.

“If you’re wondering if there’s importance or an urgency to this issue, read the book ‘The Big Short’ by Michael Lewis, and then, when you’re finished reading, come back to the floor and say that you support this amendment,” Sen. Byron Dorgan (D-N.D.) urged his colleagues, arguing for his amendment to ban naked credit default swaps.

Reid used the book to make a point during a news conference after Republicans stalled voting on financial reform.

“I ask the American people, is America better off to do nothing? The answer is, obviously, no. Because they’re out there today, trying to come up with material for Lewis to write another book. They’ve got ideas,” Reid said. “Lots of people talked to him when he wrote ‘The Big Short.’ But there are some new stories developing as we speak, because they can do the same stuff as they were doing before. Because there is no responsibility. They’re doing it on their own. They’re free to do whatever they want. There’s no transparency at all.”

“He’s right,” Lewis said of Reid’s call to action. “They are coming up with new reasons for me to write another book. I’m making a little list of people I should make donations to.”

While “The Big Short” has received positive reviews, some experts warn that there’s a risk in trying to understand something as complex as the financial collapse through the prism of just one book.

“If you only read that one book, you might form the impression that it was very specific things in housing or a system of incentives that encouraged people to misunderstand housing,” said MIT professor and financial crisis chronicler Simon Johnson.

Johnson said he admires Lewis, but he cautioned that “this is a repeated cycle,” and the cause of the next bubble is likely to be something other than a dramatic drop in housing prices.

Lewis said he never wanted to be the go-to expert on the crisis.

“When senators are reading your book, it reaffirms your faith in society, on the one hand,” he said, “and, on the other hand, it makes you nervous, because I don’t think of myself as advising people who are actually going to change things.”