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By Root 314 0

"Stream of consciousness. He went on about how the ratings agencies were whores. How the securities were worthless. How they all knew it. He gave words to stuff we were just suspecting. It was like he was talking out of school. When he was finished there was complete silence. No one specifically attempted a defense. They just talked around him. It was like everyone pretended he hadn't said it."* On the one hand, it was exhilarating to hear a market insider say what he thought to be true; on the other, if the market became self-aware, its madness couldn't last long. Charlie and Jamie and Ben assumed they had time to think things over before they went out and bought even more credit default swaps on the double-A tranche of subprime CDOs. "That speech spooked us," said Ben. "It seemed rather than six months to get our trade on we had one week."

The trouble, as ever, was finding Wall Street firms willing to deal with them. Their one source of supply, Bear Stearns, suddenly seemed more interested in shooting than in trading with them. Every other firm treated them as a joke. Cornhole Capital. But here, in Las Vegas, luck found them. To their surprise, they found that the consultant they now employed to analyze CDOs for them, David Burt, enjoyed serious stature in the industry. "David Burt was like God in Vegas," said Charlie. "We started just following him around. 'Hey. That guy you're talking to. We're paying him--can we talk to you too?'" This rented God introduced Charlie to a woman from Morgan Stanley named Stacey Strauss. Her job was to find investors who wanted to buy credit default swaps as quickly as she could. Charlie never figured out why she was willing in the extreme to bend Morgan Stanley's usual standards to do business with Cornwall. Charlie also accosted a man who analyzed the subprime mortgage bond market for Wachovia Bank, who happened to have been on the panel moderated by the shocking John Devaney. During the opening panel discussion, he, like everyone else, had pretended he hadn't heard John Devaney. When Devaney was finished, the Wachovia guy had given his little speech about the fundamental soundness of the subprime mortgage bond market. As he came off the stage, Charlie ambushed him and asked him if maybe Wachovia didn't want to put its money where its mouth was and sell him some credit default swaps.

The morning after his dinner with Wing Chau, Eisman woke up to his first glimpse of the bond market in the flesh, and a lot of sensationally phony baroque ceiling frescoes. The Venetian hotel--Palazzo Ducale on the outside, Divine Comedy on the inside--was overrun by thousands of white men in business casual now earning their living, one way or another, off subprime mortgages. Like all of Las Vegas, The Venetian was a jangle of seemingly random effects designed to heighten and exploit irrationality: the days that felt like nights and the nights that felt like days; the penny slots and the cash machines that spat out hundred-dollar bills; the grand hotel rooms that cost so little and made you feel so big. The point of all of it was to alter your perception of your chances and your money, and all of it depressed Eisman: He didn't even like to gamble. "I wouldn't know how to calculate odds if my life depended on it," he said. At the end of each day Vinny would head off to play low-stakes poker, Danny would join Lippmann and the other bond people at the craps tables, and Eisman would go to bed. That craps was the game of choice of the bond trader was interesting, though. Craps offered the player the illusion of control--after all, he rolled the dice--and a surface complexity that masked its deeper idiocy. "For some reason, when these people are playing it they actually believe they have the power to make the dice work," said Vinny.

Thousands and thousands of serious financial professionals, most of whom, just a few years ago, had been doing something else with their lives, were now playing craps with the money they had made off subprime mortgage bonds. The subprime mortgage industry Eisman once knew better