Steve Eisman Says Wall Street Execs Mistook Leverage for Genius

(Bloomberg) -- Steve Eisman, famous for his successful bet against subprime mortgages, said a cocktail of leverage, derivatives and risky housing debt helped cause the global financial crisis.

Ahead of the crisis in 2008, leverage in the U.S. and European banking system rose several times, encouraging risk taking. Wall Street executives used the opportunity to make enormous amounts of money for themselves and mistook the leverage for genius, according to Eisman.

“If you had gone and said to executives, ‘The entire paradigm of your career is wrong,’ the response was, ‘Listen kid, I made $50 million last year, what did you make?”’ Eisman, who is now a portfolio manager at Neuberger Berman Group, said at the Oxford Union in England on Thursday. It’s “very hard to tell someone who thinks he’s God he’s wrong.”

Eisman, who was featured in Michael Lewis’s book “The Big Short” and joined Neuberger Berman after closing his hedge fund Emrys Partners in 2014, was speaking at Oxford University’s 195-year-old debating society on whether Wall Street should be blamed for causing the financial crisis.

To contact the reporters on this story: Suzy Waite in London at swaite8@bloomberg.net, Nishant Kumar in London at nkumar173@bloomberg.net.

To contact the editors responsible for this story: Neil Callanan at ncallanan@bloomberg.net, Josh Friedman, Dan Reichl

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