"I'm afraid to get up in the morning" - Steve Eisman, the man behind The Big Short, on the future of the world economy

Steve Carrell as Mark Baum, the fictional portrayal of Steve Eisman, in The Big Short.
Steve Carrell as Mark Baum, the fictional portrayal of Steve Eisman, in The Big Short.
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As one of only a handful of people on the entire planet to predict the Financial Crisis of 2007-08, Steve Eisman is asked continuously where he thinks the next crash will come from.

His story of successfully foreseeing that the subprime mortgage bubble and an unregulated banking sector would place the world’s economy close to collapse was illustrated in the Oscar nominated film The Big Short in 2015 in which he is played by Steve Carrell.

The movie and the book upon which it was based made Mr Eisman (named Mark Baum in the film) a household name and as such he is constantly asked about what to expect in the future.

However whenever he is presented with this enquiry from those looking for sectors or positions to bet against, he always leaves the questioner feeling let down.

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Mr Eisman “My response is, I don’t see one.

“At this point the person gets very disappointed like they are upset that the world is not going to end.

“And I always say that, look, I have been through this once before and once was enough.”

What next?

However, speaking to an audience in Leeds from his New York office via satellite at a special event to celebrate the 40th anniversary of wealth management firm Andrews Gwynne, Mr Eisman is far from upbeat about the future.

With a career in finance and business stretching back more than 30 years, Mr Eisman said he is more confident than ever that the financial system in the United States is safe but less confident about its counterpart in Europe.

Steve Eisman - picture from Getty Images

Steve Eisman - picture from Getty Images

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And while he says that the world’s economy is far from immune from a recession, a repeat of the Financial Crisis is unlikely.

“It will be more of a garden variety recession rather than a financial crisis. For a financial crisis you need the banks to be at risk and I do not think they are going to be at risk the next time around.

"The banks are much less leveraged today then they were. In the United States, leverage has been cut by two thirds, and I would argue that the financial system in the United States is safe. I have been doing this for 30 years and I have never been able to say that until the last few years.

“I would say that with respect to Europe, it is safer but I would not call it completely safe. Leverage in Europe is still higher than it is in the United States.

Steve Carrell and Ryan Gosling in The Big Short.

Steve Carrell and Ryan Gosling in The Big Short.

“I think we are in a global slowdown and the question as to if that going to become a full blown recession will depend on a lot of things, like the trade war, Brexit, what is happening in Hong Kong which could end badly.

“There is a lot of risk out there in the world. Every day feels like an adventure,

“I am afraid to get up in the morning.”

The movie

Mr Eisman also detailed his experience of being portrayed in a Hollywood blockbuster, revealing that Brad Pitt was initially pencilled in to play him.

Read more: Review of The Big Short
In the film his character is an incredibly waspish and confrontational character, incensed at the greed and lack of morality on Wall Street, something he concedes was probably true.

The Big Short

The Big Short

“I think the film does capture the essence of the period,” he said.

“In terms of how accurately he portrayed me, my answer to that is that, when the movie came out, my response was that ‘it was an incredible portrayal, I hope he wins best actor, but that I don’t think he conveyed my incredible sense of humour and I don’t think I am quite that angry.

“And then three months later I found out something. In 2010 President Obama formed something called the Financial Crisis Commission and they came to meet me and interviewed me for several hours. A few months after the film came out the Financial Crisis Commission released all the papers that they had and one of the things they disclosed was the transcript of my interview.

"And when I read it I realised, ‘no, he was right, I was that angry”.

The crash

His anger still bubbles below the surface.

Looking back on the crash which caused a $22trillion loss to the US economy along he pulls no punches.

Mr Eisman said that the financial crisis was “driven by greed and malfeasance and in my view criminality that was never prosecuted”.

However, he said that much of the failure lay in the lack of regulation.

“People are people,” he said. “People were incentivised to do very bad things and they did them.

“The difference between now and then is that the regulators are actually regulating. They don’t trust the banks and they watch them very carefully.

“People haven’t changed but the regulators have actually woken up.

"The authorities had no real choice but to bail out the system, as painful as it was.

"If they hadn’t then the great recession would have become the great depression and that’s all there is to it."

And as for his big lesson from the financial crisis?

He sums it as being that “incentives trump ethics almost every time”.