Folks who might be wondering if a book written in 1989 about a now defunct investment firm has any relevance in the world we live in now would find of great interest the detailed explanation of how an instrument called the Collateralized Mortgage Obligation (CMO) was invented by Salomon Brothers in June 1983. When I read Liar’s Poker a few years ago, little did I realize that this one instrument, would wreak such havoc more than two decades later when the housing bubble burst in 2006.
Unlike the book we reviewed last month, A Random Walk Down Wall Street by Burton G. Malkiel, Liar’s Poker is not dripping with data from academic studies, graphs or theories but is an easy read peppered with colorful language and anecdodes like the one below that painted a vivid picture of a culture brimming with greed and excess,