1980-s Quote by Michael Lewis
““Many thrifts layered a billion dollars of brand-new loans on top of their existing, disastrous hundred million dollars of old loss-making loans, in a hope that the new would offset the old. Each new purchase of mortgage bonds (which was identical to making a loan) was like the last act of a desperate man. The strategy was wildly irresponsible, for the fundamental problem (borrowing short term and lending long term) hadn’t been remedied. The hypergrowth only meant that the next thrift crisis would be larger. But the thrift managers were not thinking that far in advance. They were simply trying to keep the door to the shop open. That explains why thrifts continued to buy mortgage bonds even as they sold their loans.””
About This Quote
Source Book: The Big Short, 2010
Short‑term borrowing to fund long‑term loans creates unsustainable risk, leading to larger crises.
In simple terms: Borrowing short, lending long is dangerous.
Key Takeaway
Avoid mismatched loan terms.
Themes
finance
risk
economic cycles
Mood
analytical
serious
Type
financial
educational
When to use this quote
- banking
- investment
- mortgage markets
Key Concepts
credit risk
financial engineering
Questions to Reflect On
- How can lenders align loan maturities?
- What reforms prevent reckless lending?
A Different Perspective
Short‑term fixes ignore underlying problems.
![“Crucial decisions are made, today as thousands of years ago, in terms of the intuitive guesses and preferences of a few men in positions of authority...[it is] quite likely that the fate of entire societies may be sealed by a series of avoidable mistakes committed by their leaders.” quote by Michael Lewis](https://sms4smile.com/quotes/img-quotes/a59/michael-lewis-705_decision-making_crucial-decisions-are-made-today-as-thou_16888.jpg)
