Greatest irony of all, they named their firm "Long-term Capital Management", while taking hugely leveraged short-term positions ($1 trillion dollars worth of derivatives backed by about $100 billion or so assets) that were beyond the understanding of anyone else. Didn't last 4 years before they blew. They did show 40% annual returns when they started and I guess that's what kept them going without much regulation. But man, did they crash hard. Investors who were returned their money after a year or 2, and those who were turned down from even investing must have thanked their Gods for saving them from absolute destruction.

There is another book by Michael Lewis (who also wrote "The Big Short") called "The Liar's Poker", where he talks about his time at Salomon Brothers and how they collapsed in a very similar fashion. Highly levered derivatives with a magic formula that has worked well (so far..). It's fascinating how they were allowed to do what they did. Open gambling with client's money, and no repercussions on loosing it all. "Blowing up a customer" was apparently common and chalked up to a rookie's mistake. "Baptism by fire". How did the rookies even get access to millions of dollars of money to bet on crazy derivatives!!

I feel that every time a major upset in the financial markets lands on us, it is because some group of really talented people managed to convince everyone that they discovered something that no one else has and have "cracked the market" by showing consistently high returns for a period of time, and gain access to huge pools of capital. Only, after a few years the market turns around, showing a side of things that they did not take into account and the whole thing goes belly up, market crashes, loads of people loose money, mostly its everyone else but that group (leverage, borrowing, access to someone else's capital etc).

And because everyone who was supposed to keep them in check did not do it because despite it being their job not to, they did take them for their word, they try to cover it all up by paying the very people who caused all the trouble and who were supposed to watch out for all this.

Banking world seems to have a lot of conflict of interest all around. It is much better now, with lots more rules and regulations, but it is still there.