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that specialized in mortgage bond trading--were the ones least likely to see anything but what they had been seeing for years. Here was a strange but true fact: The closer you were to the market, the harder it was to perceive its folly. Realizing this, Lippmann went looking for stock investors with a lot of exposure to falling home prices, or falling housing stock prices, and showed them his idea as a hedge. Look, you're making a fortune as this stuff keeps going up. Why not spend a little to cover yourself in a collapse? Greed hadn't worked, so he tried fear. He obtained a list of all the big stockholders in New Century, the big subprime lender. Prominent on the list was a hedge fund called FrontPoint Partners. He called the relevant Deutsche Bank salesman to set up a meeting. The salesman failed to notice that there was more than one hedge fund inside FrontPoint--it wasn't a single fund but a collection of independently managed hedge funds--and that the fund that was long New Century stock was a small group based on the West Coast.

When Greg Lippmann arrived in Steve Eisman's conference room in midtown Manhattan, Eisman surprised him by saying, "We're not the FrontPoint that is long New Century stock. We're the FrontPoint that is short New Century stock." Eisman was already betting against the shares of companies, such as New Century and IndyMac Bank, which originated subprime loans, along with companies that built the houses bought with the loans, such as Toll Brothers. These bets were not entirely satisfying because they weren't bets against the companies but market sentiment about the companies. Also, the bets were expensive to maintain. The companies paid high dividends, and their shares were often costly to borrow: New Century, for instance, paid a 20 percent dividend, and its shares cost 12 percent a year to borrow. For the pleasure of shorting 100 million dollars' worth of New Century's shares, Steve Eisman forked out $32 million a year.

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. Eisman knew more about that market, its characters, and its depravities than anyone Lippmann had ever spoken with. If anyone would make a dramatic bet against subprime, he thought, it was Eisman--and so he was puzzled when Eisman didn't do it. He was even more puzzled when, several months later, Eisman's new head trader, Danny Moses, and his research guy, Vinny Daniels, asked him to come back in to explain it all over again.

The problem with someone who is transparently self-interested is that the extent of his interests is never clear. Danny simply mistrusted Lippmann at first sight. "Fucking Lippmann," he called him, as in, "Fucking Lippmann never looks you in the eye when he talks to you. It bothers the shit out of me." Vinny could not believe that Deutsche Bank would let this guy loose to run around and torpedo their market unless it served the narrow interests of Deutsche Bank. To Danny and Vinny, Greg Lippmann was a walking embodiment of the bond market, which is to say he was put on earth to screw the customer.

Three times in as many months, Danny and Vinny called, and Lippmann returned--and that fact alone heightened their suspicion of him. He wasn't driving up from Wall Street to Midtown to promote world peace. So why was he here? Each time, Lippmann would talk a mile a minute, and Danny and Vinny would stare in wonder. Their meetings acquired the flavor of a postmodern literary puzzle: The story rang true even as the narrator seemed entirely unreliable. At some point during each of these sessions, Vinny would stop him to ask, "Greg, I'm trying to figure out why you are even here." This was a signal to bombard Lippmann with accusatory questions:

If it's such a great idea, why don't you quit Deutsche Bank and start a hedge fund and make a fortune for yourself?

It'd take me six months to set up a hedge fund. The world might wake up