Wall Street had ‘no idea’ what subprime CDSs were, Lewis writes
Michael Burry, the California hedge-fund manager who figured out how to bet against the subprime bubble, prodded seven Wall Street banks in early 2005 to create credit-default swaps for subprime-mortgage bonds, Michael Lewis writes in his book, “The Big Short.” Five of them “had no idea what he was talking about,” Lewis says. Only Deutsche Bank AG and Goldman Sachs Group Inc. expressed any interest in the concept, he says. “Inside of three years, credit-default swaps on subprime- mortgage bonds would become a trillion-dollar market and precipitate hundreds of billions of losses inside big Wall Street firms,” Lewis writes in an excerpt from the book on the Web site of Vanity Fair magazine. “Yet, when Michael Burry pestered the firms in the beginning of 2005, only Deutsche Bank and Goldman Sachs had any real interest in continuing the conversation. No one on Wall Street, as far as he could tell, saw what he was seeing.” The book is scheduled to be published later this month by W.W. Norton in the U.S. and by Allen Lane in the U.K.