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By Root 359 0

five years, Bear Stearns's leverage had gone from 20:1 to 40:1. Merrill Lynch's had gone from 16:1 in 2001 to 32:1 in 2007. Morgan Stanley and Citigroup were now at 33:1, Goldman Sachs looked conservative at 25:1, but then Goldman had a gift for disguising how leveraged it actually was. To bankrupt any of these firms, all that was required was a very slight decline in the value of their assets. The trillion-dollar question was, What were those assets? Until March 14, the stock market had given the big Wall Street firms the benefit of the doubt. No one knew what was going on inside Bear Stearns or Merrill Lynch or Citigroup, but these places had always been the smart money, ergo their bets must be the smart bets. On March 14, the market changed its opinion.

That morning, Eisman had been invited on short notice by Deutsche Bank's prominent bank analyst Mike Mayo to address a roomful of big investors. In an auditorium at Deutsche Bank's Wall Street headquarters, Eisman was scheduled to precede the retired chairman of the Federal Reserve, Alan Greenspan, and be paired with a famous investor named Bill Miller--who also happened to own more than $200 million of Bear Stearns stock. Eisman obviously thought it insane that anyone would sink huge sums of money into any Wall Street firm. Greenspan he viewed as almost beneath his contempt, which was saying something. "I think Alan Greenspan will go down as the worst chairman of the Federal Reserve in history," he'd say, when given the slightest chance. "That he kept interest rates too low for too long is the least of it. I'm convinced that he knew what was happening in subprime, and he ignored it, because the consumer getting screwed was not his problem. I sort of feel sorry for him because he's a guy who is really smart who was basically wrong about everything."

There was now hardly an important figure on Wall Street whom Eisman had not insulted, or tried to. At a public event in Hong Kong, after the chairman of HSBC had claimed that his bank's subprime losses were "contained," Eisman had raised his hand and said, "You don't actually believe that, do you? Because your whole book is fucked." Eisman had invited the bullish-on-subprime Bear Stearns analyst Gyan Sinha to his office and grilled him so mercilessly that a Bear Stearns salesman had called afterward and complained.

"Gyan is upset," he said.

"Tell him not to be," said Eisman. "We enjoyed it!"

At the end of 2007, Bear Stearns had nevertheless invited Eisman to a warm and fuzzy meet and greet with their new CEO, Alan Schwartz. Christmas with Bear, they called it. Schwartz told his audience how "crazy" the subprime bond market was, as no one in it seemed to be able to agree on the price of any given bond.

"And whose fault is that?" Eisman had blurted out. "This is how you guys wanted it. So you could rip off your customers."

To which the new CEO replied, "I don't want to cast blame."

Which Wall Street big shots Eisman had insulted was a matter of which Wall Street big shots' presence Eisman was allowed into. On March 14, 2008, he was invited into the presence of one of the biggest and most famous bullish investors in Wall Street banks, plus that of the illustrious former chairman of the Federal Reserve. It was a busy day in the markets--there were rumors that Bear Stearns might be having troubles--but, given a choice between watching the markets and watching Eisman, Danny Moses and Vincent Daniel and Porter Collins didn't think twice. "Let's be honest," said Vinny. "We went for the entertainment. It's like Ali-Frasier. Why would you not want to be there?" They drove to the fight with Ali, but took seats in the back row, and prepared to hide.

Eisman sat at a long table with the legendary Bill Miller. Miller spoke for maybe three minutes, and explained the wisdom of his investment in Bear Stearns. "And now for our bear," said Mike Mayo. "Steve Eisman."

"I got to stand up for this," said Eisman.

Miller had given his little talk sitting down. The event was meant to be more of a panel discussion than a speech, but Eisman