When the Goldman Sachs saleswoman called Mike Burry and…
““When the Goldman Sachs saleswoman called Mike Burry and told him that her firm would be happy to sell him credit default swaps in $100 million chunks, Burry guessed, rightly, that Goldman wasn’t ultimately on the other side of his bets. Goldman would never be so stupid as to make huge naked bets that millions of insolvent Americans would repay their home loans. He didn’t know who, or why, or how much, but he knew that some giant corporate entity with a triple-A rating was out there selling credit default swaps on subprime mortgage bonds. Only a triple-A-rated corporation could assume such risk, no money down, and no questions asked. Burry was right about this, too, but it would be three years before he knew it. The party on the other side of his bet against subprime mortgage bonds was the triple-A-rated insurance company AIG—American International Group, Inc.””
About This Quote
This interpretation was drafted with AI assistance. It is one reading of the quote, not the author's own explanation.
Burry inferred that only a highly rated institution could sell massive credit default swaps without capital, hinting at hidden risk in the subprime market.
In simple terms: Only top‑rated firms could sell huge swaps without money down.
Key Takeaway
Watch for hidden counterparties in complex deals.
Themes
finance
risk
misinformation
counterparty
credit
subprime
Mood
cautious
inquisitive
critical
Type
analytical
educational
warning
When to use this quote
- investment analysis
- risk assessment
- regulatory review
- portfolio management
- due diligence
Key Concepts
credit default swaps
triple‑A rating
systemic risk
financial engineering
moral hazard
Questions to Reflect On
- Who are the hidden parties in your financial contracts?
- How can you verify the credibility of counterparties?
A Different Perspective
Assumes all large institutions act rationally, ignoring potential conflicts of interest.