Bloomberg Without Bloomberg

The industry may be retrenching, but Bloomberg News is expanding, bringing in big shots such as former Time Inc. chief Norman Pearlstine. As it looks to become the 21st century’s top news provider, its bizarrely scrappy culture-instilled by Michael Bloomberg and editor Matthew Winkler-may be written out of the story.

by SETH MNOOKINDecember 2008

The founder: Michael Bloomberg, mayor of New York, who created Bloomberg L.P. three decades ago. Photograph by Nigel Parry/CPi.

 The last time Norman Pearlstine had a job in journalism, he spent his days across the street from Radio City Music Hall on the 34th floor of the Time-Life Building, a lofty realm he mockingly refers to as magazine heaven because mere mortals never get to breathe its rarefied air. As editor in chief of Time Inc., the largest magazine publisher in the country, Pearlstine oversaw a stable of 154 titles, includingEntertainment Weekly, Fortune, People, and Sports Illustrated. His office, with its leather couches and postcard-worthy city views, was larger than many studio apartments.

Pearlstine, who was raised and educated in Philadelphia and its suburbs, has long been a major figure in the Manhattan media world. After graduating from Haverford College and the University of Pennsylvania Law School, he joined the staff of The Wall Street Journal, and over the next quarter-century he ran the paper’s Asian edition, launched its European edition, and served as the managing editor and executive editor of the Journal itself. He pays careful attention to his attire, favoring English spread-collar dress shirts, eye-catching cuff links, and preening ties. Pearlstine remains, at 66, intensely competitive, and when he becomes particularly excited about a topic, his eyes bug out slightly from behind his glasses.

Michael Bloomberg answers the Proust Questionnaire. Illlustration by Risko.

After retiring from Time Inc., in 2006, Pearlstine took a position at the global private-equity firm the Carlyle Group, but he didn’t stay out of the game for long: last June he started a new job as the “chief content officer” at Bloomberg News. Bloomberg L.P.’s headquarters are on Manhattan’s Upper East Side in a neighborhood that is at a distinct remove from the rectangular swatch of Midtown real estate that’s home to the majority of the city’s major media players. Instead of CNN, The New York Times, and the New York Post,Pearlstine’s new neighbors are Barneys, Bergdorf Goodman, and Bloomingdale’s. The culture is as different as the locale: at Bloomberg, Pearlstine has to wear his corporate dog tags on a lanyard around his neck just to get through security. As a general rule, using elevators is against company policy-Michael Bloomberg, the company’s founder (now exploring a run for a third term as New York City’s mayor), feels elevators cut down on the type of human interactions that breed collaborative work-so if Pearlstine wants to meet with someone on a different floor, he has to either take the stairs or hop on an escalator along with the hoi polloi. Gone is the private office; here, both of Pearlstine’s workstations are smaller, and have less privacy, than that of his former secretary.

All of which is fine by him. As far as Pearlstine is concerned, what really differentiates Bloomberg News from all of the Establishment outlets he’s been at in the past is the fact that it is still making money. “I haven’t felt this energized in a long time,” he told me on his second day in his new digs. “I can’t stress enough the excitement.”

The news that Pearlstine had taken the Bloomberg job prompted a rush of articles in the city’s media pages. By bringing on one of the best-known members of the Old Guard, Bloomberg News got more attention than it had received in the 18 years since Michael Bloomberg created it after realizing that his eponymous financial-information company had to start producing exclusive editorial content if it wanted to safeguard against an erosion of subscribers to its computer terminals. Even today, after a two-year period in which Mike Bloomberg flirted with a presidential run and in which secretive negotiations concerning a possible sale of his company valued it at upwards of $20 billion, very little is known about an operation with one of the largest editorial staffs in the world. (Bloomberg himself owns just about 90 percent of Bloomberg L.P. Based on recent valuations, its annual operating profit is estimated to be more than $1.5 billion.) Still, Pearlstine’s hiring seemed to prompt more snobbish curiosity than anything else. To wit: when asked about Pearlstine’s new job, Paul Steiger, who succeeded Pearlstine at the top of theJournal’s masthead in 1991, told the Times that Bloomberg News was “not fundamentally a journalistic organization.”

The reaction among his former colleagues didn’t surprise Pearlstine; in fact, before his job discussions began, he hadn’t known all that much about his future employer, either. He hadn’t known, for instance, that Bloomberg News’s 2,300-person staff is larger than the combined editorial operations of the Timesand The Washington Post, or that included among its 135 bureaus are 30 in the Asia-Pacific region alone, or that Bloomberg had not so much been bucking the industry-wide trend toward contractions as obliterating it. While Pearlstine’s successor at Time Inc. has had to cut staff, Bloomberg News has added more than 300 in the past several years. A number of those have been high-profile defections from the decimated world of print media, including former Wall Street Journal Washington editor Al Hunt, formerPhiladelphia Inquirer executive editor Amanda Bennett, and former Time political columnist Margaret Carlson.

This growth is likely to continue: company chairman Peter Grauer and president Dan Doctoroff, the two former investment bankers who run Bloomberg L.P., have been taking advantage of the retrenching in the rest of the print media by finding ways to fill the resultant voids. Today, 10 papers around the world, including the Spanish-language edition of The Miami Herald and Tages-Anzeiger, the second-largest daily in Switzerland, run branded Bloomberg News pages on topics that these newspapers can no longer afford to cover. Over the past several years, as big-city dailies, including the Los Angeles Times and theChicago Tribune, have either killed off or dramatically cut the size of their book-review sections, Bloomberg’s arts division has expanded its culture coverage with an eye toward placing more of its content in daily newspapers. One of the country’s metro dailies is looking into outsourcing all of its health reporting to Bloomberg News as a way of meeting corporate-mandated budget cuts without decreasing its coverage areas.

Finally, after years of what resembled a policy of institutionalized neglect, Bloomberg’s multi-media divisions are being beefed up in a major way. In October, the company hired Andrew Lack, the former president and chief operating officer of NBC, to run Bloomberg’s Internet and radio operations and its 11 television channels, based everywhere from Germany to Japan. Like Pearlstine, Lack had been enormously successful-he transformed NBC News into the country’s highest-rated network news division in the 1990s-and like Pearlstine, he jumped at the chance to join up with an organization that was focused on expanding its reach instead of stanching its losses.

These ambitious efforts are in part driven by concerns about Bloomberg’s near-complete dependence on its terminals. While subscriptions are up around 8 percent over last year, the economic turmoil roiling the country does not augur well for the immediate future of any company that is so intimately entwined with the world of high finance. (Lehman Brothers alone had more than 3,000 subscribers, although some of those users will presumably end up with new jobs.) But diversifying also carries significant risks. By expanding its mandate, Bloomberg News is deviating from a mission that has proved to be so successful for so long: obsessively and single-mindedly providing content for the company’s core customers. But for the moment at least, it looks as if we’re moving toward a world in which more people will get their information from Bloomberg News than from any other single source. That might sound fantastical, but if you had speculated in 1980 that in less than 25 years a bare-bones start-up launched by an unemployed, five-foot-six-inch Jewish man from Medford, Massachusetts, would supplant Dow Jones and Reuters as the world’s primary distributor of financial data-which Bloomberg L.P. did in April 2004-well, that would have sounded pretty fantastical, too.

All of this-the higher profile, the big-name hires, the active expansion-should represent a crowning achievement for Matthew Winkler, Bloomberg News’s volatile founding editor in chief. But it’s more complicated than that. In the last half-century, only a handful of visionaries could claim to have created a new journalistic paradigm through sheer force of will. There’s Hugh Hefner’s Playboy and Jann Wenner’sRolling Stone. Ted Turner and Rupert Murdoch gave birth to CNN and Fox News, respectively. Then there’s Winkler and Bloomberg News. But while Wenner’s obsession with order and Turner’s mood swings are well documented, very little is known about Winkler; when the city’s boldfaced columns do acknowledge him, it’s usually to chronicle his abusive tirades or to mock his penchant for bow ties (or both). Since Pearlstine, who had given Winkler his first big break back in 1982, was hired, the top echelon at Bloomberg has consistently maintained that Winkler would remain the person running the show. By this fall, despite the company’s protestations, that pretense had been all but dropped: in July, three months before Lack’s arrival, Winkler lost control of Bloomberg News’s multi-media operation. (The company-wide meeting about those changes was set to the Beatles song “Revolution.”) Then, in September, the 52-year-old Winkler revealed that he was stepping back from a chunk of his responsibilities on the print side as well. “A good part of my day, every day, when I’m not on the road, has been in story meetings,” he explained. “There are at this point better ways for me to spend my time.”

According to Bloomberg L.P. spokeswoman Judith Czelusniak, all of these moves originated with Winkler himself. “They are part of Matt’s own plan to reorganize the news department,” she said. “He wants to be more involved in training and passing on his wisdom to new staffers. He is doing more public speaking.” If that sounds a bit like the hoary line about some fallen C.E.O. stepping aside to “spend more time with his family,” that’s because in essence it is; in fact, it directly contradicted some of what Winkler had told me less than four months earlier, after I asked him how he and Pearlstine would divide their duties now that they were working together again. Winkler, sitting in the glass cube that serves as a semi-private meeting area behind his desk in the company’s newsroom, told me that he would be happy even if he was doing nothing more than leading the daily news meetings and editing stories. “I can’t imagine [doing anything else],” he said. “I live every day for the story. It’s the one part of all this that really gets me excited…. I go to bed thinking about the stories we’re going to have tomorrow, and I wake up wanting to see what they look like and what the reaction is…. I love stories. It’s as simple as that.”

The new face: Norman Pearlstine, named last May as the chief content officer of Bloomberg News. Photograph by Nigel Parry.

Now it looks as if he’s being written out of his own masterpiece. Regardless of people’s opinions of Winkler-and over the years he’s been called everything from ruthless to batshit insane-there’s a certain poignancy to his current situation. It’s almost as if Winkler, having led his people through the desert, is being told he’s not allowed into the promised land.

Bloomberg L.P.’s horseshoe-shaped headquarters look and feel like a cross between the worlds of Terry Gilliam’s dystopian classic Brazil and Pixar’s Toy Story. There’s so much glass that it seems at times as if the only rooms without transparent walls are the restrooms. Upon entering the operation’s main floor, visitors are greeted by a BlackBerry-toting employee-more often than not a winsome young woman-who is wirelessly alerted by one of the security guards at the building’s entrance to every impending arrival. The walls are inlaid with fishtanks stocked with exotic, brightly colored species from around the world. Neon news zippers fight for attention with high-concept, ultra-modern art, including a chandelier programmed to blink out text by a Welsh Marxist writer, and an 11-by-16-foot titanium-alloy cloud, which is suspended from the ceiling. Every 10 minutes or so, a techno-inflected jingle rings out over a building-wide intercom, signifying that someone, somewhere, is being paged.

This mandated whimsy obscures what’s long been the company’s ruling ethos: we’ll provide you with everything you could ever need, which means you won’t ever have to leave. Bloomberg L.P.’s offices around the world offer free food-in New York there is everything from Cup-a-Soups and microwavable Chinese lunches to Rice Krispie Treats and Oreos. Emergency survival kits, complete with hand-cranked radios and gas masks, are located under every desk. “There was a part of it I sort of liked,” says one former employee, who requested anonymity because he writes finance-themed books and has appeared on Bloomberg Radio as part of his promotional tours. “The mentality is that, if you’re there, you’ll get taken care of. That’s part Orwellian and part paternalism.” The free junk food was great, he said, “but it was there to keep us from going out for coffee.”

This approach is also reflected in what has been Bloomberg News’s sui generis business model. Virtually every print outlet makes its money through some combination of single-copy sales, subscriptions, and advertising. Now, with consumers less willing to pay for content, and advertisers migrating to the Web, that old-school approach is looking less viable with every passing day. Bloomberg News doesn’t run ads, and it doesn’t charge its customers for content-at least not directly. The four million stories it runs every year are fed directly to the company’s 290,000 terminal users as part of the only subscription option Bloomberg offers, an all-you-can-eat package that caters to the international financial community by featuring the company’s ever growing array of data and proprietary analytics. Historically, the news division’s worth has derived from the notion that every new story represents another morsel of added value to its customers, and nowhere is up-to-the-minute knowledge more powerful than in a world in which a one-cent change in a security’s price can result in billions of dollars in profits-or losses. (Bloomberg News also functions as a more traditional wire service, selling its content to newspapers worldwide.)

Not surprisingly, the news division was designed to mirror the working environment in high finance. Reporters sit cheek by jowl in partitionless workstations, a simulacrum of the Wall Street trading floors on which Mike Bloomberg made his fortune. For years, the ideal Bloomberg employee was one who was at his desk at seven a.m. and didn’t get up until he left for the day. (Reto Gregori, Bloomberg News’s chief of staff, says he’s broken himself of the habit of eating lunch since he started working here.) Bloombergers, as they sometimes call themselves, tend to be well put together, with the women in smart pantsuits and the men with their zippers and belt buckles carefully lined up. They also do well for themselves: in the past, it wasn’t uncommon for refugees from the newspaper world to come close to doubling their salaries. The difference these days is not quite so stark; still, Bloomberg News reporters can count on making more than they would elsewhere.

Both past and present employees love to complain about the endless hours, but it’s hard to argue with the results. Ask people in the business world and they’ll tell you that Bloomberg has long been the industry gold standard. “One of the big reasons you need that terminal,” explains a spokesman for one of the city’s major financial firms, “is that everyone talks about what [news stories are] running on Bloomberg.” (He asked to remain anonymous for fear of offending other news organizations that cover his company.) “We don’t think about Dow Jones or Reuters or the A.P. in anywhere near the same kind of way, or as carrying the same type of magnitude. If I have a choice between giving an interview to Bloomberg or someone else, I never think twice about it.”

Over the years, the company has gained a grudging respect from the rest of the media world as well. In 1999, Bloomberg News was awarded one of the White House’s three coveted wire-service seats. Bloomberg News’s coverage of Washington is recognized for its foresight and clarity, and there are any number of stories the organization has led the way on, from the tobacco settlements of the late 1990s to the recent collapse of Bear Stearns. The company’s magazine, which started as a monthly user manual for terminal subscribers, is today known for its investigative reporting: in the past three years alone,Bloomberg Markets has won a George Polk award for health reporting, a Gerald Loeb award for excellence in business journalism, and two Investigative Reporters and Editors awards. Last year, it was a National Magazine Award finalist for “Toxic Debt,” a remarkably prescient three-part series published in July 2007 that detailed how bundled subprime mortgages were putting every aspect of the American economy at risk. In their own ways, each of those accomplishments is a testament to Matt Winkler’s ferocious will to succeed.

More than a quarter-century has passed since Winkler and Norman Pearlstine first crossed paths. At the time, the already renowned Pearlstine was assembling a staff for a new, Brussels-based European edition of The Wall Street Journal, and Winkler was a 26-year-old Dow Jones wire reporter. Intrigued by Winkler’s reputation as someone who got “wildly excited and emotional” about stories, Pearlstine decided to take a chance on the driven young man who had mastered the arcana of foreign-debt securities.

It didn’t take long for Pearlstine to learn firsthand about Winkler’s operating procedure. Every day, after Pearlstine finished his work in the newsroom, he made the 90-minute drive to the paper’s printing plant in the Netherlands, where he’d paste up that day’s pages in advance of a midnight deadline. One night at 11:55, a call was routed to Pearlstine from an editor in Brussels. It was Winkler. “He was yelling, ‘You’ve gotta stop the presses! I’ve got a great scoop!,’” Pearlstine says. “And I said, ‘O.K., Matt-what’s the story?’ And he said, ‘The Swedish Euro bond is going off at a half-point over the libor!’” Pearlstine was nonplussed. “None of us had a clue what he was talking about,” he says affectionately. “We just looked at each other and said, ‘Who is this guy Winkler?’” The presses ran as scheduled that night.

A half-decade later, both men were back in New York-Pearlstine as the Journal’s top editor, Winkler as a bonds reporter. Neither Winkler’s nose for news nor his sense of outrage had dulled any, and when he learned that the Journal was contracting with a company called Bloomberg Financial Markets to provide the paper with the price of Treasury issues, he was incredulous. Why, he wanted to know, was the best-known financial-information company in the world paying another company for data? After an abortive effort at persuading his bosses to cancel the Journal’s contract with Bloomberg, Winkler decided to figure out exactly what the hell was going on.

On September 22, 1988, he and co-writer Michael W. Miller published their findings in the form of a glowing, 2,400-word front-page story about Mike Bloomberg and his six-year-old financial-information-services company. Despite the fact that Bloomberg provided its data and analytics to a total of only 5,000 terminals around the world-compared with 165,000 for Reuters and 67,000 for the Dow Jones-owned Telerate-few people, according to the story, were “as cagey about guiding the flow of information as Mr. Bloomberg, a 46-year-old with a puckish sense of humor and a prodigious temper.” In the article, Winkler deftly identified Bloomberg’s business model: if he created an all-purpose, proprietary system through which he could give finance professionals all the information they needed in the course of their days, he could muscle in on his competitors’ well-established turf. Bloomberg didn’t sell a physical product, per se-the company’s terminals were leased out at a flat monthly rate-but the unique information those subscriptions provided was quickly becoming essential for any trader who didn’t want to lose a step on his rivals.

As his company continued to grow, Mike Bloomberg became worried that his competitors would smarten up and kneecap his ability to supply his customers with news. Bloomberg’s secret sauce might have been its analytics, but it also needed a constant stream of news-traders, after all, had to know what was happening around the globe. Without a wire service of his own, Bloomberg was forced to pay Dow Jones and Reuters for their news feeds. The day they realized what they stood to gain by cutting him off was the day his all-in-one business model would fall apart.

Left, the editor: Matthew Winkler, who conceived Bloomberg News and retains the title editor in chief.Right, the multi-media man: Andrew Lack, recently hired as Bloomberg’s chief executive officer for television, radio, and interactive operations. Photographs by Nigel Parry.

A little more than a year after Winkler’s Journal article ran, the reporter’s phone rang. “It’s Bloomberg,” the voice on the other end of the line announced. “I need some advice. What would it take to get into the news business?” The more Winkler thought about it, the more convinced he became that the answer was nothing more than a handful of warm bodies and a lot of hard work. Mike Bloomberg had been able to get a toehold in the financial-data business because the rest of the industry had been too complacent to look for ways to increase efficiency. Similarly, Reuters and Dow Jones’s effective 100-year duopoly had resulted in what Winkler says was a “journalistic wasteland” as far as breaking stories was concerned. Within days, Winkler had begun to game out the possibilities. “What would it be like,” he wondered, “if the person who was depending on those economic figures to make a decision gets, at 8:30, precisely the moment when the numbers are released, a thousand words that is comparable to what he’s going to read in tomorrow’s Wall Street Journal?” It wasn’t long before Winkler told Bloomberg that he was the man to put this plan into effect.

When Winkler told Pearlstine of his job offer, Pearlstine didn’t try to dissuade him. “There was a career path at the Journal,” Pearlstine says, “but it wasn’t a career path where I could say … ‘There’s no job you can’t aspire to.’” Besides, bond coverage “wasn’t that important for the Journal. And I didn’t know what a Bloomberg was.” Winkler gave notice. “I thought it was a sustainable hit for the Journal, frankly,” Pearlstine says.

When Winkler started at Bloomberg, he had little of substance with which to persuade his former colleagues to join him on what seemed like, at best, a valiantly quixotic effort. As a result, his early hires tended to be rookie reporters, and Winkler made abundantly clear that their futures at the company depended on an ironclad adherence to his edicts. This began with Winkler’s “Goldilocks and the Three Bears” approach to writing stories. At the time, the vast majority of Bloomberg News’s articles concerned calendar-driven events-earnings reports, quarterly statements, and the like. “It’s either going to be better than expectations or worse than expectations, or it’s going to be exactly what people [thought],” Winkler says. “We can get ready for all three scenarios” by writing three variations of the same story before the event occurs. That way, when it unfolded, “we [would] know, Oh, that’s Scenario B, or that’s Scenario C or Scenario A, and we have a story right away. So, the preparation part was key.”

That preparation translated into grueling hours and onerous strictures. Midnight phone calls from Winkler himself were not uncommon. Every morning, the staff conducted a postmortem in which it reviewed all of its competitors’ stories and then went through every instance in which Bloomberg’s had not come out on top. Staffers were forbidden to speak to the press. (To this day, it is company policy that interviews-even with the company’s chairman and president-are not to be done without a member of Bloomberg’s P.R. staff being present. Even sanctioned phone discussions I had with Bloomberg employees were conducted with a spokesperson on the line.) Winkler’s exacting approach was eventually codified in an often mocked companywide stylebook titled The Bloomberg Way. Bloomberg News stories, it declared, “have a structure that is as immutable as the rules that govern sonnets and symphonies.” Every story needed to include “the Five Fs”: first, fastest, factual, final, and future. Leads were to be exactly four paragraphs long, comprising the stating of a theme, a quotation in “plain English from someone who backs up that theme,” numbers-based details that further support it, and an explanation of what’s at stake. The use of “but” was banned-it forced readers “to deal with conflicting ideas in the same sentence.” Words such as “despite” and “however” were to be avoided for the same reason.

“You can’t be effective as a businessman, as a trader, unless you get the truth,” Winkler told me, explaining the importance of the system he had put in place. He pointed to his own years as a reporter as a way of demonstrating that he had never asked his staff “to do anything that I haven’t already done. I wouldn’t dare do that, because that wouldn’t be fair. [I told them] I know this can be done. We just have to figure out how we’re going to get it done here.” But expecting that level of performance from his novice reporters meant Winkler was setting himself up to be disappointed. When that occurred, the results were ugly. His screaming jags soon became the stuff of legend. He’d erupt in the middle of meetings, on the phone, while editing a story. In 1993, Winkler lit into two Washington reporters who hadn’t returned a call from a colleague during a stretch in which they’d been working 15-hour days. His memo on the incident was titled “Proud to Be Stupid” and it labeled the offending parties “the antithesis of what this news organization stands for.” In the late 1990s, he pushed a reporter in the newsroom. (The reporter, who left the organization, was paid a settlement.) Perhaps most embarrassingly, late last year, an audio recording of one of Winkler’s tirades was posted on Gawker. In it, Winkler is heard screaming maniacally at a female editor.

editor: The enemy that day was … the computer.

winkler: No.

editor: Didn’t he …

winkler: No. The enemy was not the computer.

editor: Didn’t he …

winkler: No! That’s wrong! No!

editor: Can I ask you something?

winkler: Excuse me! Excuse me! The enemy was not the computer! That’s why we’re having this meeting! I figured, I figured, a lot of you were going to think this way! It’s wrong! It’s not the computer! It’s not the computer! It’s the human!

Within minutes of the posting, former employees were trading e-mails. “That was a Category 2 Winkler hurricane,” one told me. “That was nothing. You should hear a Category 4.”

Throughout all of this, Bloomberg’s news division continued to grow. By 2000, Winkler was in charge of 1,200 employees. These were no longer all 22-year-olds in their first jobs in journalism. Time and again, editors told either Winkler or Bloomberg himself that Winkler’s behavior was unacceptable. Increasingly, high-level staffers quit rather than deal with the invective. None of this seemed to have any effect. “There’s a culture of verbal abuse and terror,” a mid-level editor told me a month before Pearlstine was hired, “and it all starts with Matt. You live in terror because you never know what’s going to set him off.” (This editor asked not to be identified-even by gender-and requested that all communication be over non-Bloomberg phone lines for fear that the company might have access to employees’ private e-mail accounts.) “He may well have an anger-management problem,” says a former employee who is now in public relations. “Once that switch goes off, he can’t moderate it. Matt is not sadistic-he is driven. From his point of view, he [could always] say, ‘Look at the results. We’ve created a news organization that does x, y, and z. We have growing revenue. We are what’s next. We are the future. So why should I let up?’”

Winkler’s simpatico relationship with Mike Bloomberg helps explain how Winkler escaped serious repercussions for so long. Their bond is perhaps best exemplified in Bloomberg by Bloomberg,Mike Bloomberg’s 1997 quasi-autobiography, which Winkler wrote after taking notes as Bloomberg talked about his past. Part personal history, part management guide, the book’s 250 pages are filled with half-baked aphorisms, many of which are punctuated with jarringly exuberant exclamation points. (”In life, unlike in children’s games, second place is first loser!” “Think about the percentage of your life spent working and commuting. If you’re not content doing it, you’re probably a pretty miserable person. Change it!”)

Even more striking is the manner in which the book frames the company’s relationship to the outside world: “When someone departs, those of us who stay are hurt…. We’re trying to feed our families, and his or her leaving makes that task more difficult. Him or her, or my kids? That’s an easy choice!” Later, Bloomberg/Winkler writes, “The Bloomberg philosophy may sound strange to ‘outsiders,’ but not to those who matter-us. We’ve always assumed that even if we’re paranoid, they probably are out to get us. While you’re reading this, we’re thinking about how our competitors are plotting to take the food from our children’s mouths.” If employees left to work for a competitor, “they’ve become bad people. Period. We have a loyalty to us. Leave, and you’re them.” There was even a policy against rehiring anyone who quit for anything other than family reasons: “How could we ever again look in the eye the one who stayed if we let the ‘traitor’ come back?”

Left, the president: Dan Doctoroff. “The economics are incredibly compelling.” Right, the chairman: Peter Grauer. “Write one shitty, Jayson Blair-type story and you’re screwed.” Photographs by Nigel Parry.

Late last year, Mike Bloomberg announced what everyone had long surmised: that he wasn’t going to return to active management of the company he had founded. Soon afterward, Bloomberg L.P. named Dan Doctoroff the company’s new president. Doctoroff is a trim, affable man, who, despite the retreat of his graying curls, seems younger than his 50 years. He grew up outside of Detroit and went to Harvard and the University of Chicago Law School, and made his fortune running the private-equity firm Oak Hill Capital Partners. In 1998 he founded NYC2012 in an effort to bring the Olympic Games to New York. Three years later, Bloomberg hired Doctoroff as New York City’s deputy mayor for economic development. (Mike Bloomberg insists he has had very little involvement with the day-to-day operations of Bloomberg L.P. since he was elected mayor in 2001. News accounts have at times painted a different picture. Bloomberg has acknowledged that he did play a role in Doctoroff’s hiring.)

Unlike Winkler, or Pearlstine for that matter, Doctoroff doesn’t get excited discussing the nuts and bolts of a felicitous lead. What he does get excited about is discussing how Winkler created a whole new business model for news. “Matt’s unique achievement,” Doctoroff says, “is really to recognize the symbiotic relationship between news and the rest of [Bloomberg L.P.'s] business”-essentially to think of a journalistic organization as a capitalistic one. “He has been absolutely brilliant at conceptualizing that.”

As an example, Doctoroff tells of a recent meeting he had with a senior manager at a large investment bank in London. Bloomberg, the banker said, was seriously lagging in commodities coverage. It was Winkler who followed up on the conversation, and after hearing exactly what it was that commodities traders were looking for, he went out and hired 32 new reporters and editors. Adding that amount of staff comes at considerable expense, but the result, according to Doctoroff, was several thousand new customers, each of whom now pays between $1,500 and $1,800 a month for his terminal subscription. As Doctoroff puts it, “The economics are incredibly compelling.”

The company’s specialized relationships with individual newspapers also fit into this journalism-as-capitalism approach. “Because we’re not burdened by [the] old, broken business models that almost every other news organization is,” he says, Bloomberg News can cover regional core industries and sell that content for a price that’s significantly less than what newspapers would need to pay their own staffs to do the same thing. “I don’t need to make money off of that operation,” Doctoroff says. “If I take the money and invest it in additional reporters … I just provided much greater value to my terminal customers,” because, presumably, more local biotech stories will make a Bloomberg terminal subscription that much more appealing to a customer in, say, Boston. “Everybody wins. That’s the kind of opportunity that we uniquely have. And it doesn’t have to just be true for business or financial news either.”

Or just for print. Doctoroff readily admits that Bloomberg’s multi-media operations have “underperformed” as a result of a laserlike focus on producing content for terminal customers. That, too, is changing-as best evidenced by the arrival of Andrew Lack. “We believe we should be the best at everything we decide to do,” Doctoroff says. “I’d be lying if I told you, either on the Internet or on TV, that’s where we are today.” Lack, who came to Bloomberg after a rocky stint at Sony-BMG Music, said in a conversation less than two hours after his hiring was announced that he’ll be “making some bets and putting some ideas on the board,” which is the sound-bite version of “Watch this space.” For the moment, the specifics of those bets were less important to Lack than what Bloomberg represents for the future. “In this particular environment, to hear words like growth, change, expansion-those are words you don’t hear a lot in news organizations these days,” he said. “I don’t mean to sound harsh. But there are declining audiences in newspapers and declining audiences in broadcast platforms and in some cases in cable platforms. There are fewer resources to do the job. But here, this is an organization that has 140 bureaus around the world. There are two-thousand-something employees.” He sounded just as surprised as Pearlstine had been four months earlier.

In the six years since Peter Grauer was named chairman of Bloomberg L.P., the most idiosyncratic excesses of the company’s culture have been steadily toned down. That trend has accelerated dramatically since Doctoroff came on board. The notorious White House Correspondents’ Dinner after-parties, which in years past attracted the likes of Jennifer Love Hewitt and Chloë Sevigny and featured ice-luge vodka shots, heaps of caviar, sushi bars, and sundae stations, are now staid to the point of being boring. Over the summer, Lex Fenwick, the most flamboyant of Bloomberg’s Old Guard, stepped down as C.E.O. to “pursue new business opportunities” through an offshoot called Bloomberg Ventures. Fenwick is known for purple suits and his insistence that the back of Bloomberg business cards be bright orange. In 2003 he installed a boxing ring, complete with scoreboard and hanging mike, in Bloomberg’s London sales office as a way of spurring his salespeople’s competitive juices when they cold-called prospective clients. He’s also at the center of a class-action lawsuit alleging that the company discriminated against pregnant employees, and is accused in court papers of ordering the firing of two employees by saying, “I’m not having any pregnant bitches working for me.” The company has said that the suit, which is expected to go to trial next year, “sounds like an effort to damage reputations and … pressure the company for financial gain.”

Recently, even the relentless demands the company puts on its employees have been eased. Last August, Bloomberg L.P. began allowing employees to request flextime, shorter workweeks, and the ability to work from home. This is a radical shift from the ethos laid out in Bloomberg by Bloomberg, which holds that “you’ve got to come in early, stay late, lunch at your desk, take projects home nights and weekends. The time you put in is the single most important controllable variable determining your future.” The rigid stylistic restrictions have been loosened, and the daily postmortems have been done away with as well.

These changes are partly, Grauer says, the result of dealing with “issues associated with being a big, growing, visible, important news source,” and he insists that a softening of the culture does not mean a softening of standards. “The keepers of our reputation are all the people who work for us around the world,” he says. “Write one shitty, Jayson Blair-type story and you’re screwed.”

Michael Bloomberg answers the Proust Questionnaire. Illlustration by Risko.

To be sure, there have not been any Jayson Blair-type fiascoes. Still, not long after my conversation with Grauer-and in the very period during which Winkler’s day-to-day responsibilities were being pared back-Bloomberg News did make a number of embarrassing, high-profile errors. In late August, it ran an obituary for Apple Inc. C.E.O. and pancreatic-cancer survivor Steve Jobs, a misstep that mercifully occurred after trading had closed for the day and was corrected in short order. Ten days later, United Airlines was not so lucky: the company lost more than $1 billion in value when Bloomberg sent out a news alert based on a five-year-old article that had been erroneously posted on the South FloridaSun-Sentinel’s Web site claiming that the airline was filing for bankruptcy. (Share prices recovered somewhat after the report was retracted.) In between those two blunders was another false dispatch, this one claiming that Republican vice-presidential nominee Sarah Palin had once been arrested for drunken driving. It’s possible that all of those mistakes would have occurred if Winkler were still Bloomberg News’s all-powerful majordomo. But there’s no way some heads wouldn’t have rolled.

If Bloomberg News really has found a new paradigm for journalistic success and solvency, it only heightens the pathos of the situation in which Winkler finds himself. There seems, in retrospect, something almost wistful about our conversation last spring. “Everything I learned as a journalist I learned in the decade that I was at The Wall Street Journal,” he told me. “Mostly working for Norm.” Now that he and Pearlstine were working together again, he said, “it feels great. It always felt great; it feels even better now. It feels better because I know so much more than I did then, and, actually, I can appreciate a lot of the things instinctively that, perhaps, he was trying to do.” There were times when Winkler seemed impatient with or annoyed by my questions, but as soon as he began talking about Pearlstine, his whole demeanor changed. He sat forward in his chair. His gestures grew more expansive.

“Even if everything was exactly like it was then, only carried forward, you know, 30 years, I’d still think it would be terrific I was just one of those guys happily toiling on his behalf. It was a thrill. And I’d do it again if I was asked to.”

Seth Mnookin is a Vanity Fair contributing editor.

The BM&F Bovespa (IPA: [bo.'ves.pa]; Portuguese: Bolsa de Valores de São Paulo) is a São Paulo-based stock exchange. It is the second largest stock exchange inThe Americas and the third largest in the world.^.The BM&F Bovespa is linked to all Brazilian stock exchanges, including Rio de Janeiro’s Boverj (BVRJ), where only government bonds are traded. The benchmark indicator of Bovespa is the 50-stock Índice Bovespa. There were 450 companies traded at Bovespa as of April 30,2008^[3].

Energy & Genius
A Brief History of Energy Boondoggles
Daniel Fisher 11.24.08, 12:00 AM ET  Forbes.com

The U.S. Department of Energy has spent $57.5 billion over the past 30 years researching and developing clean energy technologies. In all that time the nation’s energy portfolio has barely budged. Fossil fuel as a share of our energy supply has fallen from 93% in 1973 to 85% today. Almost all of that drop is attributable to the growth of nuclear power. Oil still fuels 97% of transportation. Renewables like wind, solar and hydropower account for 7% of total energy consumption.

The public-sector response shows a picture of a panic followed by a very long, contrite hangover. Outlays for federal energy R&D in 1978 hit $6 billion (in today’s money). Once the oil panic of the 1970s ebbed and prices fell, Washington reversed course almost overnight and federal energy research dried up, hitting a low of $505 million in 1998. A lot of private money dried up with it. Synfuel plants collected rust.

Now we’re back in full swing with public and private investment in alternative energy research and generation. Federal outlays are above $1 billion to fund science projects, some of them based on shaky scientific and logistical assumptions. With the recent collapse in oil and gas prices undercutting some of the economics of alternatives, it may be useful to remember how this scenario has played out in the past.

In the Mojave Desert near Daggett, Calif. the Department of Energy poured $147 million into Solar One, a plant that concentrated solar energy from 2,000 mirrors onto a 300-foot concrete tower to make steam. It began operating in 1982 and was converted in 1995 to heat 3.4 million pounds of salt to a liquid state. DOE officials called the plant “a resounding success” when partner Southern California Edison shut it down in 1999 for the usual reason: It wasn’t commercially viable.

Great Plains Synfuels was the biggest single project under President Carter’s proposed $19 billion Synthetic Fuels Corp. This coal-gasification plant in Beulah, N.D. was completed in 1985 with $1.5 billion in federal loan guarantees and went bust that same year. The government took over, sold it to a private operator with rights to a share of the profits and (by at least one federal estimate made when oil was $23 a barrel) will recoup the subsidy (sans interest) by the end of this decade.

Jojoba plantations sprang up in the Sonoran Desert of Arizona and California in the 1970s. The plant was a source of lubricant that could substitute for outlawed sperm-whale oil. Biofuel fans promoted the waxy substance as a wonder fuel additive. Doctors and dentists who poured money into the schemes learned that the only people making money were the promoters.

In the mid-1980s taxpayers sank $78 million into a New Iberia, La. ethanol plant built by Saudi arms dealer Adnan Khashoggi’s Triad America. The plant never opened, Khashoggi’s company went bankrupt in 1987 and the site is a sugarcane field pocked with rusting equipment.

After the energy shocks of the 1970s, Congress offered $1.9 billion in loan guarantees to Tosco, Unocal and others to convert oil-bearing shale rock into some kind of fuel. Unocal closed its breakdown-plagued, $650 million plant in Parachute Creek, Colo. in 1991 after it failed to make money even with $114 million in federal subsidies. The $1.1 billion Tosco project was not completed and never got a subsidy.

In January, after spending $30 million on design work, the DOE pulled out of a utility consortium called FutureGen that was to build a coal-gasification plant near Mattoon, Ill. The plant would have cost $1.8 billion.

Government subsidizers are undaunted. Now the feds plan to guarantee up to $8 billion in loans for new clean-coal and green energy projects.

http://www.hyperionpowergeneration.com/

Clean, Safe, Affordable Power  Where you need it,  When you need it.

Who would have thought that the benefits of generating electricity from huge nuclear power plants…    Clean no greenhouse gases to contribute to climate change Safe the most controlled and regulated type of power on the planet Affordable the cheapest in terms of dollars & environmental impact  Reliable Available 24 /7 rain or shine, windy or calm …could ever be provided in a small, compact, energy module that can be transported by truck, rail or ship to remote locations wherever reliable electricity and heat for communities and industry is needed?Now it is! Introducing the Hyperion Power Module (HPG)     Think About It:  Global warming. Dependence on foreign oil. Infrastructure vulnerable to natural and manmade catastrophes. Undrinkable water, poverty, disease, social unrest.  These increasingly serious problems can only be solved by finding solutions to the ever-expanding energy crisis.  For many good reasons, an integral part of the new mix of energy technologies that will be needed to solve these problems is Nuclear. Wind, solar, geothermal - all available technologies are important and will have their place in the ultimate solution to our global energy problem. But the workhorse is going to be nuclear.(see why nuclear) However, until now - until Hyperion, nuclear power and the many benefits it offers: clean, emission-free, affordable energy - was only available from large, expensive nuclear power plants that took 10 years or more to build. And, many locations that could have benefited from nuclear power were not appropriate - the land was not available or the population was not large enough to warrant a huge power plant. Invented at the famed Los Alamos National Laboratory, Hyperion small modular power reactors make all the benefits of safe, clean nuclear power available for remote locations. For both industrial and community applications, Hyperion offers reliable energy with no greenhouse gas emissions. Hyperion power is also cheaper than fossil fuels and, when you consider the cost of land and materials, watt to watt, Hyperion’s innovative energy technology is even more affordable than many developing “alternative” energy technologies. Small enough to be transported on a ship, truck or train, Hyperion power modules are about the size of a “hot tub” - approximately 1.5 meters wide. Out of sight and safe from nefarious threats, Hyperion power modules are buried far underground and guarded by a security detail. Like a power battery, Hyperion modules have no moving parts to wear down, and are delivered factory sealed. They are never opened on site. Even if one were compromised, the material inside would not be appropriate for proliferation purposes. Further, due to the unique, yet proven science upon which this new technology is based, it is impossible for the module to go supercritical, “melt down” or create any type of emergency situation. If opened, the very small amount of fuel that is enclosed would immediately cool. The waste produced after five years of operation is approximately the size of a softball and is a good candidate for fuel recycling. Perfect for moderately-sized projects, Hyperion produces only 25 MWe - enough to provide electricity for about 20,000 average American sized homes or its industrial equivalent. Ganged or teamed together, the modules can produce even more consistent energy for larger projects. The Hyperion team is committed to helping make the clean and safe benefits of nuclear power - benefits that could assist in solving the worst of our planet’s problems - available in even the most remote locations. We hope you will enjoy learning about Hyperion through our web site!

Inside Europe’s corruption capital: How Bulgaria’s crime mafia plunders EU grant money

Tilled to this day by horse-drawn ploughs, the rolling pastures of rural Bulgaria have long been known for their cheap wines, strong tobaccos, sweet honey and juicy apricots.

By Colin Freeman in Sofia :  Telegraph.co.UK
Last Updated: 12:34AM GMT 16 Nov 2008

 Assen Droumev, former director of the state agriculture fund, appears in court on fraud charges Photo: Linus Moran

Yet just a year after this former corner of the Soviet empire became part of the European Union, its country lanes roar to the sound of brand new four-wheel drives, while alongside tumbledown peasant cottages have sprung up smart new villas.

Among the locals sipping brandy in the village bars, there is little doubt what the most lucrative annual harvest is these days. It comes not from the soil or the vine, but from piles of grant application forms marked “Sapard”.

Officially the “Special Accession Programme for Agriculture and Rural Development”, Sapard is the multi-billion pound Brussels fund set up to help former Eastern Bloc countries drag their backward farming sectors into the modern world. But in Bulgaria and neighbouring Romania, farm workers are already proving quick to spot what their colleagues in France, Italy and Spain first noticed 30 years ago - that as with any generous subsidies administered from afar, it is ripe for fraud.

“I went last month to a farming town where the locals asked me ‘Do you know how to recognise somebody round here who has got a Sapard grant?’” said Bulgarian MP Atanas Atanasov, an outpoken critic of his country’s corruption record, which is the worst of all 27 EU nations.

“They said, ‘Just look for the people driving the most expensive SUVs.’ It isn’t accidental that these people have suddenly got so much money, and it isn’t just in that one town either. It’s everywhere.”

The plundering of the scheme, which handed over more than £2 billion to Bulgaria between 2000 and 2006, is just one of the many murky tales surrounding what has really happened to the vast quantities of taxpayers’ cash poured by Brussels bureaucrats into Europe’s poorest nation, which is earmarked for another £7 billion between now and 2013.

The funds, a cornerstone of the EU’s expansion plan, were originally designed to woo Bulgaria’s eight million mainly-Slavic-speaking people away from Moscow’s sphere of influence - courting favour by rebuilding crumbling roads and railways and replacing drab-Soviet-style schools and town halls.

But that effort largely overlooked the fact that in Bulgaria, the corrupt, gangster-ridden political class that emerged in the vacuum of communism’s collapse already owed far more to Russia than it did to Europe.

Throughout the 1990s, its government became infiltrated by ex-communists, former secret agents and organised criminals known as “thick necks”, who to this day cruise the boulevards of Sofia accompanied by bodyguards, and who settle business feuds through contract killings rather than the courts. For many of their number, the EU grants are a once-in-a-lifetime chance not to rebuild their countr, but to line their own pockets.

“The former communists that rule Bulgaria are fond of European money, but not European regulations,” said Mr Atanasov. “The wolf will change its fur, but not its temper. I hate to say it as a Bulgarian, but corruption is rife here. It is not so much under the table, as on the table.”

Only in July, the European Commission suspended payments of £350 million to Bulgaria, accusing it of mismanagement of European funds through corruption and inefficiency, and failing to prosecute offenders, who are often thought to be shielded through political connections.

Yet although much of the corruption goes undetected, there is little doubt that the whispers Mr Atanasov picks up during his countryside tours are more than mere village gossip. That much has been made clear by a string of cases that opened in Bulgarian courts in the past month, the first in what Brussels says is a litmus test of Sofia’s willingness to clean up its act.

In one, eight members of what EU anti-fraud investigators describe as a “criminal company network composed of more than 50 Bulgarian enterprises” face trial for allegedly defrauding Sapard of £4 million in a scam involving grants to replace old meat processing equipment.

Rusting and worn after years of churning out stodgy Soviet fare, the old East German-built meat processors should have been destined for the scrap heap. Instead, they ended up as virtual money machines, after being shipped to an accomplice in East Germany and “bought” back as new for 24 times the original price. A leaked copy of a report by the European Anti-Fraud Office seen by the Sunday Telegraph also accuses the group of committing tax fraud, illegally importing Chinese rabbit meat into the EU with fake health certificates and buying rolling stock from Bulgaria’s dilapidated Communist-era railways. The report said that one figure, Mario Nikolov, had “close links to the Bulgarian government”, and accused him of passing around 200,000 leva (£90,000) to the Socialist Party of Prime Minister Sergey Stanishev in 2005.

Further crony capitalism is detailed in allegations that another group member was a business partner of a former government minister who, the report says, tried to “influence an ongoing investigation” against him. The whiff of corruption around Bulgaria’s elite grew even stronger last Thursday, when Assen Droumev, the former director of the Bulgarian state agriculture fund, appeared in court on charges that he had misappropriated money from the Sapard fund that he himself was responsible for disbursing.

Both Mr Droumev and Mr Nikolov deny any impropriety, claiming they have been made scapegoats so Sofia can persuade Brussels to reinstate its funding. “I am not guilty, I am proud of my department’s work,” protested a bemused-looking Mr Droumev on Thursday, as he was brought handcuffed into court by two paramilitary policemen.

The EU says it will watch the two cases closely and will review the funding situation in the spring, ahead of Bulgaria’s general elections. “The situation is still problematic,” said a spokesman for the European Anti-Fraud Office. “We appreciate that the authorities are going in the right direction and we await the results.”

But while Brussels says all it wants is for the Bulgarian courts to start applying the law evenly, the likely role of these two cases in determining whether the purse strings are re-opened means few people believe the defendants will walk free. Seasoned observers of Bulgarian political intrigue already claim to detect a crude political hand in the timing of both the Nikolov and Droumev court appearances, as well as last week’s arrest of Bulgarian banking and football tycoon, Hristo Kovachki on tax charges. All three cases, they point out, took place ahead of a scheduled visit from Franz-Hermann Bruener, director-general of the anti-fraud office, to see how things are progressing.

The Bulgarian government says it is doing its best to end what is mainly a legacy from the chaotic post-Soviet years, and that opposition politicians are simply making worse by exaggerating the scale of the problems. As in parts of the Third World, corruption allegations have become so common that they are now part of routine political score-settling, which makes investigating them even more difficult. Many, though, believe that it is still business - corrupt or otherwise - as usual. “All that is happening is that a few people are being nominated as fall guys so that the system can carry on as normal,” said one British executive based in Bulgaria. “Things have not been cleaned up since EU accession. If anything, it’s got worse.”

NYSE Euronext Expands Real-Time Quotes to Include NYSE Arca Real-Time Last Trade Data

-CNBC and Google the first to offer immediate access to pre- and post-market stock prices-
-Most comprehensive package of online stock market data-

NEW YORK , Nov. 14, 2008 – NYSE Arca last-trade data is now available online from CNBC , First in Business Worldwide, and Google Finance, thereby broadening the availability of free real-time stock prices available to investors beyond regular trading hours to pre- and post-market hours trade data in NYSE (Tape A), NYSE Alternext US (formerly Amex; Tape B) and Nasdaq (Tape C) listed securities.  

This past June, CNBC and Google were the first among Internet and media organizations to acquire real-time, last-trade market data from the NYSE for free public display and access on their websites.

“With the addition of NYSE Arca last-trade data, CNBC and Google further demonstrate their commitment to investors by making available a comprehensive array of free online real-time stock prices during the full trading day,” said Ronald Jordan, Executive Vice President, NYSE Euronext Data Solutions.  “CNBC and Google were first to market in delivering free real-time stock prices to investors.  Now, by enhancing their web-based market data portfolio with NYSE Arca Real-Time last trade data, they are providing investors even greater functionality and accessibility to market information.  Investors can now go to CNBC and Google to get the most accurate and timely stock prices any time stocks are trading, something attractive and beneficial for all investors.”

“CNBC is committed to delivering our audience the most accurate and actionable news and data available,” said Scott Drake, Vice President, CNBC Digital Products and Technology. “Beginning today, CNBC .com will provide extended hours quotes in both the pre and post markets from 4 AM to 8 PM in real-time (http://data.cnbc.com/quotes/nyx).   CNBC  .com users will see an instantaneous price impact to any market moving news outside the traditional market hours. This is the kind of service that our audiences on the web and on mobile devices expect CNBC to provide.”

“The NYSE has been a great partner in bringing this data online and making it available for everyone through Google Finance” says R.J. Pittman, Director of Product Management at Google.  “We are excited to continue to provide more useful and important financial data online to make this information more accessible for all internet users.”

NYSE Euronext first proposed the idea for NYSE Realtime Stock Prices in January 2007.  Information providers may purchase the data from NYSE Euronext for a flat monthly fee. 

For more information on NYSE Realtime Stock Prices, go to: http://www.nyse.com/realtime

The End

by Michael Lewis   Nov 11 2008

The era that defined Wall Street is finally, officially over. Michael Lewis, who chronicled its excess in Liar’s Poker, returns to his old haunt to figure out what went wrong.

 Photoillustration by: Ji Lee

To this day, the willingness of a Wall Street investment bank to pay me hundreds of thousands of dollars to dispense investment advice to grownups remains a mystery to me. I was 24 years old, with no experience of, or particular interest in, guessing which stocks and bonds would rise and which would fall. The essential function of Wall Street is to allocate capital-to decide who should get it and who should not. Believe me when I tell you that I hadn’t the first clue. 

I’d never taken an accounting course, never run a business, never even had savings of my own to manage. I stumbled into a job at Salomon Brothers in 1985 and stumbled out much richer three years later, and even though I wrote a book about the experience, the whole thing still strikes me as preposterous-which is one of the reasons the money was so easy to walk away from. I figured the situation was unsustainable. Sooner rather than later, someone was going to identify me, along with a lot of people more or less like me, as a fraud. Sooner rather than later, there would come a Great Reckoning when Wall Street would wake up and hundreds if not thousands of young people like me, who had no business making huge bets with other people’s money, would be expelled from finance.

When I sat down to write my account of the experience in 1989-Liar’s Poker, it was called-it was in the spirit of a young man who thought he was getting out while the getting was good. I was merely scribbling down a message on my way out and stuffing it into a bottle for those who would pass through these parts in the far distant future. 

Unless some insider got all of this down on paper, I figured, no future human would believe that it happened. 

I thought I was writing a period piece about the 1980s in America. Not for a moment did I suspect that the financial 1980s would last two full decades longer or that the difference in degree between Wall Street and ordinary life would swell into a difference in kind. I expected readers of the future to be outraged that back in 1986, the C.E.O. of Salomon Brothers, John Gutfreund, was paid $3.1 million; I expected them to gape in horror when I reported that one of our traders, Howie Rubin, had moved to Merrill Lynch, where he lost $250 million; I assumed they’d be shocked to learn that a Wall Street C.E.O. had only the vaguest idea of the risks his traders were running. What I didn’t expect was that any future reader would look on my experience and say, “How quaint.”

I had no great agenda, apart from telling what I took to be a remarkable tale, but if you got a few drinks in me and then asked what effect I thought my book would have on the world, I might have said something like, “I hope that college students trying to figure out what to do with their lives will read it and decide that it’s silly to phony it up and abandon their passions to become financiers.” I hoped that some bright kid at, say, Ohio State University who really wanted to be an oceanographer would read my book, spurn the offer from Morgan Stanley, and set out to sea. 

Somehow that message failed to come across. Six months after Liar’s Poker was published, I was knee-deep in letters from students at Ohio State who wanted to know if I had any other secrets to share about Wall Street. They’d read my book as a how-to manual.

In the two decades since then, I had been waiting for the end of Wall Street. The outrageous bonuses, the slender returns to shareholders, the never-ending scandals, the bursting of the internet bubble, the crisis following the collapse of Long-Term Capital Management: Over and over again, the big Wall Street investment banks would be, in some narrow way, discredited. Yet they just kept on growing, along with the sums of money that they doled out to 26-year-olds to perform tasks of no obvious social utility. The rebellion by American youth against the money culture never happened. Why bother to overturn your parents’ world when you can buy it, slice it up into tranches, and sell off the pieces? 

 At some point, I gave up waiting for the end. There was no scandal or reversal, I assumed, that could sink the system. 

Then came Meredith Whitney with news. Whitney was an obscure analyst of financial firms for Oppenheimer Securities who, on October 31, 2007, ceased to be obscure. On that day, she predicted that Citigroup had so mismanaged its affairs that it would need to slash its dividend or go bust. It’s never entirely clear on any given day what causes what in the stock market, but it was pretty obvious that on October 31, Meredith Whitney caused the market in financial stocks to crash. By the end of the trading day, a woman whom basically no one had ever heard of had shaved $369 billion off the value of financial firms in the market. Four days later, Citigroup’s C.E.O., Chuck Prince, resigned. In January, Citigroup slashed its dividend. 

From that moment, Whitney became E.F. Hutton: When she spoke, people listened. Her message was clear. If you want to know what these Wall Street firms are really worth, take a hard look at the crappy assets they bought with huge sums of borrowed money, and imagine what they’d fetch in a fire sale. The vast assemblages of highly paid people inside the firms were essentially worth nothing. For better than a year now, Whitney has responded to the claims by bankers and brokers that they had put their problems behind them with this write-down or that capital raise with a claim of her own: You’re wrong. You’re still not facing up to how badly you have mismanaged your business. 

Rivals accused Whitney of being overrated; bloggers accused her of being lucky. What she was, mainly, was right. But it’s true that she was, in part, guessing. There was no way she could have known what was going to happen to these Wall Street firms. The C.E.O.’s themselves didn’t know. 

Now, obviously, Meredith Whitney didn’t sink Wall Street. She just expressed most clearly and loudly a view that was, in retrospect, far more seditious to the financial order than, say, Eliot Spitzer’s campaign against Wall Street corruption. If mere scandal could have destroyed the big Wall Street investment banks, they’d have vanished long ago. This woman wasn’t saying that Wall Street bankers were corrupt. She was saying they were stupid. These people whose job it was to allocate capital apparently didn’t even know how to manage their own. 

At some point, I could no longer contain myself: I called Whitney. This was back in March, when Wall Street’s fate still hung in the balance. I thought, If she’s right, then this really could be the end of Wall Street as we’ve known it. I was curious to see if she made sense but also to know where this young woman who was crashing the stock market with her every utterance had come from.

It turned out that she made a great deal of sense and that she’d arrived on Wall Street in 1993, from the Brown University history department. “I got to New York, and I didn’t even know research existed,” she says. She’d wound up at Oppenheimer and had the most incredible piece of luck: to be trained by a man who helped her establish not merely a career but a worldview. His name, she says, was Steve Eisman. 

Eisman had moved on, but they kept in touch. “After I made the Citi call,” she says, “one of the best things that happened was when Steve called and told me how proud he was of me.”

Having never heard of Eisman, I didn’t think anything of this. But a few months later, I called Whitney again and asked her, as I was asking others, whom she knew who had anticipated the cataclysm and set themselves up to make a fortune from it. There’s a long list of people who now say they saw it coming all along but a far shorter one of people who actually did. Of those, even fewer had the nerve to bet on their vision. It’s not easy to stand apart from mass hysteria-to believe that most of what’s in the financial news is wrong or distorted, to believe that most important financial people are either lying or deluded-without actually being insane. A handful of people had been inside the black box, understood how it worked, and bet on it blowing up. Whitney rattled off a list with a half-dozen names on it. At the top was Steve Eisman. 

Steve Eisman entered finance about the time I exited it. He’d grown up in New York City and gone to a Jewish day school, the University of Pennsylvania, and Harvard Law School. In 1991, he was a 30-year-old corporate lawyer. “I hated it,” he says. “I hated being a lawyer. My parents worked as brokers at Oppenheimer. They managed to finagle me a job. It’s not pretty, but that’s what happened.” 

He was hired as a junior equity analyst, a helpmate who didn’t actually offer his opinions. That changed in December 1991, less than a year into his new job, when a subprime mortgage lender called Ames Financial went public and no one at Oppenheimer particularly cared to express an opinion about it. One of Oppenheimer’s investment bankers stomped around the research department looking for anyone who knew anything about the mortgage business. Recalls Eisman: “I’m a junior analyst and just trying to figure out which end is up, but I told him that as a lawyer I’d worked on a deal for the Money Store.” He was promptly appointed the lead analyst for Ames Financial. “What I didn’t tell him was that my job had been to proofread the documents and that I hadn’t understood a word of the fucking things.”

Ames Financial belonged to a category of firms known as nonbank financial institutions. The category didn’t include J.P. Morgan, but it did encompass many little-known companies that one way or another were involved in the early-1990s boom in subprime mortgage lending-the lower class of American finance. 

The second company for which Eisman was given sole responsibility was Lomas Financial, which had just emerged from bankruptcy. “I put a sell rating on the thing because it was a piece of shit,” Eisman says. “I didn’t know that you weren’t supposed to put a sell rating on companies. I thought there were three boxes-buy, hold, sell-and you could pick the one you thought you should.” He was pressured generally to be a bit more upbeat, but upbeat wasn’t Steve Eisman’s style. Upbeat and Eisman didn’t occupy the same planet. A hedge fund manager who counts Eisman as a friend set out to explain him to me but quit a minute into it. After describing how Eisman exposed various important people as either liars or idiots, the hedge fund manager started to laugh. “He’s sort of a prick in a way, but he’s smart and honest and fearless.”

 ”A lot of people don’t get Steve,” Whitney says. “But the people who get him love him.” Eisman stuck to his sell rating on Lomas Financial, even after the company announced that investors needn’t worry about its financial condition, as it had hedged its market risk. “The single greatest line I ever wrote as an analyst,” says Eisman, “was after Lomas said they were hedged.” He recited the line from memory: “ ‘The Lomas Financial Corp. is a perfectly hedged financial institution: It loses money in every conceivable interest-rate environment.’ I enjoyed writing that sentence more than any sentence I ever wrote.” A few months after he’d delivered that line in his report, Lomas Financial returned to bankruptcy. 

Eisman wasn’t, in short, an analyst with a sunny disposition who expected the best of his fellow financial man and the companies he created. “You have to understand,” Eisman says in his defense, “I did subprime first. I lived with the worst first. These guys lied to infinity. What I learned from that experience was that Wall Street didn’t give a shit what it sold.” 

Harboring suspicions about people’s morals and telling investors that companies don’t deserve their capital wasn’t, in the 1990s or at any other time, the fast track to success on Wall Street. Eisman quit Oppenheimer in 2001 to work as an analyst at a hedge fund, but what he really wanted to do was run money. FrontPoint Partners, another hedge fund, hired him in 2004 to invest in financial stocks. Eisman’s brief was to evaluate Wall Street banks, homebuilders, mortgage originators, and any company (General Electric or General Motors, for instance) with a big financial-services division-anyone who touched American finance. An insurance company backed him with $50 million, a paltry sum. “Basically, we tried to raise money and didn’t really do it,” Eisman says. 

Instead of money, he attracted people whose worldviews were as shaded as his own-Vincent Daniel, for instance, who became a partner and an analyst in charge of the mortgage sector. Now 36, Daniel grew up a lower-middle-class kid in Queens. One of his first jobs, as a junior accountant at Arthur Andersen, was to audit Salomon Brothers’ books. “It was shocking,” he says. “No one could explain to me what they were doing.” He left accounting in the middle of the internet boom to become a research analyst, looking at companies that made subprime loans. “I was the only guy I knew covering companies that were all going to go bust,” he says. “I saw how the sausage was made in the economy, and it was really freaky.” 

Danny Moses, who became Eisman’s head trader, was another who shared his perspective. Raised in Georgia, Moses, the son of a finance professor, was a bit less fatalistic than Daniel or Eisman, but he nevertheless shared a general sense that bad things can and do happen. When a Wall Street firm helped him get into a trade that seemed perfect in every way, he said to the salesman, “I appreciate this, but I just want to know one thing: How are you going to screw me?”

Heh heh heh, c’mon. We’d never do that, the trader started to say, but Moses was politely insistent: We both know that unadulterated good things like this trade don’t just happen between little hedge funds and big Wall Street firms. I’ll do it, but only after you explain to me how you are going to screw me. And the salesman explained how he was going to screw him. And Moses did the trade.

Both Daniel and Moses enjoyed, immensely, working with Steve Eisman. He put a fine point on the absurdity they saw everywhere around them. “Steve’s fun to take to any Wall Street meeting,” Daniel says. “Because he’ll say ‘Explain that to me’ 30 different times. Or ‘Could you explain that more, in English?’ Because once you do that, there’s a few things you learn. For a start, you figure out if they even know what they’re talking about. And a lot of times, they don’t!”

At the end of 2004, Eisman, Moses, and Daniel shared a sense that unhealthy things were going on in the U.S. housing market: Lots of firms were lending money to people who shouldn’t have been borrowing it. They thought Alan Greenspan’s decision after the internet bust to lower interest rates to 1 percent was a travesty that would lead to some terrible day of reckoning. Neither of these insights was entirely original. Ivy Zelman, at the time the housing-market analyst at Credit Suisse, had seen the bubble forming very early on. There’s a simple measure of sanity in housing prices: the ratio of median home price to income. Historically, it runs around 3 to 1; by late 2004, it had risen nationally to 4 to 1. “All these people were saying it was nearly as high in some other countries,” Zelman says. “But the problem wasn’t just that it was 4 to 1. In Los Angeles, it was 10 to 1, and in Miami, 8.5 to 1. And then you coupled that with the buyers. They weren’t real buyers. They were speculators.” Zelman alienated clients with her pessimism, but she couldn’t pretend everything was good. “It wasn’t that hard in hindsight to see it,” she says. “It was very hard to know when it would stop.” Zelman spoke occasionally with Eisman and always left these conversations feeling better about her views and worse about the world. “You needed the occasional assurance that you weren’t nuts,” she says. She wasn’t nuts. The world was.

By the spring of 2005, FrontPoint was fairly convinced that something was very screwed up not merely in a handful of companies but in the financial underpinnings of the entire U.S. mortgage market. In 2000, there had been $130 billion in subprime mortgage lending, with $55 billion of that repackaged as mortgage bonds. But in 2005, there was $625 billion in subprime mortgage loans, $507 billion of which found its way into mortgage bonds. Eisman couldn’t understand who was making all these loans or why. He had a from-the-ground-up understanding of both the U.S. housing market and Wall Street. But he’d spent his life in the stock market, and it was clear that the stock market was, in this story, largely irrelevant. “What most people don’t realize is that the fixed-income world dwarfs the equity world,” he says. “The equity world is like a fucking zit compared with the bond market.” He shorted companies that originated subprime loans, like New Century and Indy Mac, and companies that built the houses bought with the loans, such as Toll Brothers. Smart as these trades proved to be, they weren’t entirely satisfying. These companies paid high dividends, and their shares were often expensive to borrow; selling them short was a costly proposition.

 Enter Greg Lippman, a mortgage-bond trader at Deutsche Bank. He arrived at FrontPoint bearing a 66-page presentation that described a better way for the fund to put its view of both Wall Street and the U.S. housing market into action. The smart trade, Lippman argued, was to sell short not New Century’s stock but its bonds that were backed by the subprime loans it had made. Eisman hadn’t known this was even possible-because until recently, it hadn’t been. But Lippman, along with traders at other Wall Street investment banks, had created a way to short the subprime bond market with precision. 

Here’s where financial technology became suddenly, urgently relevant. The typical mortgage bond was still structured in much the same way it had been when I worked at Salomon Brothers. The loans went into a trust that was designed to pay off its investors not all at once but according to their rankings. The investors in the top tranche, rated AAA, received the first payment from the trust and, because their investment was the least risky, received the lowest interest rate on their money. The investors who held the trusts’ BBB tranche got the last payments-and bore the brunt of the first defaults. Because they were taking the most risk, they received the highest return. Eisman wanted to bet that some subprime borrowers would default, causing the trust to suffer losses. The way to express this view was to short the BBB tranche. The trouble was that the BBB tranche was only a tiny slice of the deal. 

But the scarcity of truly crappy subprime-mortgage bonds no longer mattered. The big Wall Street firms had just made it possible to short even the tiniest and most obscure subprime-mortgage-backed bond by creating, in effect, a market of side bets. Instead of shorting the actual BBB bond, you could now enter into an agreement for a credit-default swap with Deutsche Bank or Goldman Sachs. It cost money to make this side bet, but nothing like what it cost to short the stocks, and the upside was far greater.  

The arrangement bore the same relation to actual finance as fantasy football bears to the N.F.L. Eisman was perplexed in particular about why Wall Street firms would be coming to him and asking him to sell short. “What Lippman did, to his credit, was he came around several times to me and said, ‘Short this market,’ ” Eisman says. “In my entire life, I never saw a sell-side guy come in and say, ‘Short my market.’ ” 

And short Eisman did-then he tried to get his mind around what he’d just done so he could do it better. He’d call over to a big firm and ask for a list of mortgage bonds from all over the country. The juiciest shorts-the bonds ultimately backed by the mortgages most likely to default-had several characteristics. They’d be in what Wall Street people were now calling the sand states: Arizona, California, Florida, Nevada. The loans would have been made by one of the more dubious mortgage lenders; Long Beach Financial, wholly owned by Washington Mutual, was a great example. Long Beach Financial was moving money out the door as fast as it could, few questions asked, in loans built to self-destruct. It specialized in asking home­owners with bad credit and no proof of income to put no money down and defer interest payments for as long as possible. In Bakersfield, California, a Mexican strawberry picker with an income of $14,000 and no English was lent every penny he needed to buy a house for $720,000. 

More generally, the subprime market tapped a tranche of the American public that did not typically have anything to do with Wall Street. Lenders were making loans to people who, based on their credit ratings, were less creditworthy than 71 percent of the population. Eisman knew some of these people. One day, his housekeeper, a South American woman, told him that she was planning to buy a townhouse in Queens. “The price was absurd, and they were giving her a low-down-payment option-ARM,” says Eisman, who talked her into taking out a conventional fixed-rate mortgage. Next, the baby nurse he’d hired back in 1997 to take care of his newborn twin daughters phoned him. “She was this lovely woman from Jamaica,” he says. “One day she calls me and says she and her sister own five townhouses in Queens. I said, ‘How did that happen?’ ” It happened because after they bought the first one and its value rose, the lenders came and suggested they refinance and take out $250,000, which they used to buy another one. Then the price of that one rose too, and they repeated the experiment. “By the time they were done,” Eisman says, “they owned five of them, the market was falling, and they couldn’t make any of the payments.”

 In retrospect, pretty much all of the riskiest subprime-backed bonds were worth betting against; they would all one day be worth zero. But at the time Eisman began to do it, in the fall of 2006, that wasn’t clear. He and his team set out to find the smelliest pile of loans they could so that they could make side bets against them with Goldman Sachs or Deutsche Bank. What they were doing, oddly enough, was the analysis of subprime lending that should have been done before the loans were made: Which poor Americans were likely to jump which way with their finances? How much did home prices need to fall for these loans to blow up? (It turned out they didn’t have to fall; they merely needed to stay flat.) The default rate in Georgia was five times higher than that in Florida even though the two states had the same unemployment rate. Why? Indiana had a 25 percent default rate; California’s was only 5 percent. Why?

Moses actually flew down to Miami and wandered around neighborhoods built with subprime loans to see how bad things were. “He’d call me and say, ‘Oh my God, this is a calamity here,’ ” recalls Eisman. All that was required for the BBB bonds to go to zero was for the default rate on the underlying loans to reach 14 percent. Eisman thought that, in certain sections of the country, it would go far, far higher.

The funny thing, looking back on it, is how long it took for even someone who predicted the disaster to grasp its root causes. They were learning about this on the fly, shorting the bonds and then trying to figure out what they had done. Eisman knew subprime lenders could be scumbags. What he underestimated was the total unabashed complicity of the upper class of American capitalism. For instance, he knew that the big Wall Street investment banks took huge piles of loans that in and of themselves might be rated BBB, threw them into a trust, carved the trust into tranches, and wound up with 60 percent of the new total being rated AAA. 

But he couldn’t figure out exactly how the rating agencies justified turning BBB loans into AAA-rated bonds. “I didn’t understand how they were turning all this garbage into gold,” he says. He brought some of the bond people from Goldman Sachs, Lehman Brothers, and UBS over for a visit. “We always asked the same question,” says Eisman. “Where are the rating agencies in all of this? And I’d always get the same reaction. It was a smirk.” He called Standard & Poor’s and asked what would happen to default rates if real estate prices fell. The man at S&P couldn’t say; its model for home prices had no ability to accept a negative number. “They were just assuming home prices would keep going up,” Eisman says. 

As an investor, Eisman was allowed on the quarterly conference calls held by Moody’s but not allowed to ask questions. The people at Moody’s were polite about their brush-off, however. The C.E.O. even invited Eisman and his team to his office for a visit in June 2007. By then, Eisman was so certain that the world had been turned upside down that he just assumed this guy must know it too. “But we’re sitting there,” Daniel recalls, “and he says to us, like he actually means it, ‘I truly believe that our rating will prove accurate.’ And Steve shoots up in his chair and asks, ‘What did you just say?’ as if the guy had just uttered the most preposterous statement in the history of finance. He repeated it. And Eisman just laughed at him.”

“With all due respect, sir,” Daniel told the C.E.O. deferentially as they left the meeting, “you’re delusional.” 
This wasn’t Fitch or even S&P. This was Moody’s, the aristocrats of the rating business, 20 percent owned by Warren Buffett. And the company’s C.E.O. was being told he was either a fool or a crook by one Vincent Daniel, from Queens.

A full nine months earlier, Daniel and Moses had flown to Orlando for an industry conference. It had a grand title-the American Securitization Forum-but it was essentially a trade show for the subprime-mortgage business: the people who originated subprime mortgages, the Wall Street firms that packaged and sold subprime mortgages, the fund managers who invested in nothing but subprime-mortgage-backed bonds, the agencies that rated subprime- mortgage bonds, the lawyers who did whatever the lawyers did. Daniel and Moses thought they were paying a courtesy call on a cottage industry, but the cottage had become a castle. “There were like 6,000 people there,” Daniel says. “There were so many people being fed by this industry. The entire fixed-income department of each brokerage firm is built on this. Everyone there was the long side of the trade. The wrong side of the trade. And then there was us. That’s when the picture really started to become clearer, and we started to get more cynical, if that was possible. We went back home and said to Steve, ‘You gotta see this.’ ”

Eisman, Daniel, and Moses then flew out to Las Vegas for an even bigger subprime conference. By now, Eisman knew everything he needed to know about the quality of the loans being made. He still didn’t fully understand how the apparatus worked, but he knew that Wall Street had built a doomsday machine. He was at once opportunistic and outraged. 

Their first stop was a speech given by the C.E.O. of Option One, the mortgage originator owned by H&R Block. When the guy got to the part of his speech about Option One’s subprime-loan portfolio, he claimed to be expecting a modest default rate of 5 percent. Eisman raised his hand. Moses and Daniel sank into their chairs. “It wasn’t a Q&A,” says Moses. “The guy was giving a speech. He sees Steve’s hand and says, ‘Yes?’”

  ”Would you say that 5 percent is a probability or a possibility?” Eisman asked.

A probability, said the C.E.O., and he continued his speech. 

Eisman had his hand up in the air again, waving it around. Oh, no, Moses thought. “The one thing Steve always says,” Daniel explains, “is you must assume they are lying to you. They will always lie to you.” Moses and Daniel both knew what Eisman thought of these subprime lenders but didn’t see the need for him to express it here in this manner. For Eisman wasn’t raising his hand to ask a question. He had his thumb and index finger in a big circle. He was using his fingers to speak on his behalf. Zero! they said.

 ”Yes?” the C.E.O. said, obviously irritated. “Is that another question?”

“No,” said Eisman. “It’s a zero. There is zero probability that your default rate will be 5 percent.” The losses on subprime loans would be much, much greater. Before the guy could reply, Eisman’s cell phone rang. Instead of shutting it off, Eisman reached into his pocket and answered it. “Excuse me,” he said, standing up. “But I need to take this call.” And with that, he walked out. 

Eisman’s willingness to be abrasive in order to get to the heart of the matter was obvious to all; what was harder to see was his credulity: He actually wanted to believe in the system. As quick as he was to cry bullshit when he saw it, he was still shocked by bad behavior. That night in Vegas, he was seated at dinner beside a really nice guy who invested in mortgage C.D.O.’s-collateralized debt obligations. By then, Eisman thought he knew what he needed to know about C.D.O.’s. He didn’t, it turned out. 

Later, when I sit down with Eisman, the very first thing he wants to explain is the importance of the mezzanine C.D.O. What you notice first about Eisman is his lips. He holds them pursed, waiting to speak. The second thing you notice is his short, light hair, cropped in a manner that suggests he cut it himself while thinking about something else. “You have to understand this,” he says. “This was the engine of doom.” Then he draws a picture of several towers of debt. The first tower is made of the original subprime loans that had been piled together. At the top of this tower is the AAA tranche, just below it the AA tranche, and so on down to the riskiest, the BBB tranche-the bonds Eisman had shorted. But Wall Street had used these BBB tranches-the worst of the worst-to build yet another tower of bonds: a “particularly egregious” C.D.O. The reason they did this was that the rating agencies, presented with the pile of bonds backed by dubious loans, would pronounce most of them AAA. These bonds could then be sold to investors-pension funds, insurance companies-who were allowed to invest only in highly rated securities. “I cannot fucking believe this is allowed-I must have said that a thousand times in the past two years,” Eisman says.

His dinner companion in Las Vegas ran a fund of about $15 billion and managed C.D.O.’s backed by the BBB tranche of a mortgage bond, or as Eisman puts it, “the equivalent of three levels of dog shit lower than the original bonds.” 

FrontPoint had spent a lot of time digging around in the dog shit and knew that the default rates were already sufficient to wipe out this guy’s entire portfolio. “God, you must be having a hard time,” Eisman told his dinner companion.

“No,” the guy said, “I’ve sold everything out.” 

After taking a fee, he passed them on to other investors. His job was to be the C.D.O. “expert,” but he actually didn’t spend any time at all thinking about what was in the C.D.O.’s. “He managed the C.D.O.’s,” says Eisman, “but managed what? I was just appalled. People would pay up to have someone manage their C.D.O.’s-as if this moron was helping you. I thought, You prick, you don’t give a fuck about the investors in this thing.”

 Whatever rising anger Eisman felt was offset by the man’s genial disposition. Not only did he not mind that Eisman took a dim view of his C.D.O.’s; he saw it as a basis for friendship. “Then he said something that blew my mind,” Eisman tells me. “He says, ‘I love guys like you who short my market. Without you, I don’t have anything to buy.’ ”

That’s when Eisman finally got it. Here he’d been making these side bets with Goldman Sachs and Deutsche Bank on the fate of the BBB tranche without fully understanding why those firms were so eager to make the bets. Now he saw. There weren’t enough Americans with shitty credit taking out loans to satisfy investors’ appetite for the end product. The firms used Eisman’s bet to synthesize more of them. Here, then, was the difference between fantasy finance and fantasy football: When a fantasy player drafts Peyton Manning, he doesn’t create a second Peyton Manning to inflate the league’s stats. But when Eisman bought a credit-default swap, he enabled Deutsche Bank to create another bond identical in every respect but one to the original. The only difference was that there was no actual homebuyer or borrower. The only assets backing the bonds were the side bets Eisman and others made with firms like Goldman Sachs. Eisman, in effect, was paying to Goldman the interest on a subprime mortgage. In fact, there was no mortgage at all. “They weren’t satisfied getting lots of unqualified borrowers to borrow money to buy a house they couldn’t afford,” Eisman says. “They were creating them out of whole cloth. One hundred times over! That’s why the losses are so much greater than the loans. But that’s when I realized they needed us to keep the machine running. I was like, This is allowed?” 

This particular dinner was hosted by Deutsche Bank, whose head trader, Greg Lippman, was the fellow who had introduced Eisman to the subprime bond market. Eisman went and found Lippman, pointed back to his own dinner companion, and said, “I want to short him.” Lippman thought he was joking; he wasn’t. “Greg, I want to short his paper,” Eisman repeated. “Sight unseen.” 

Eisman started out running a $60 million equity fund but was now short around $600 million of various ­subprime-related securities. In the spring of 2007, the market strengthened. But, says Eisman, “credit quality always gets better in March and April. And the reason it always gets better in March and April is that people get their tax refunds. You would think people in the securitization world would know this. We just thought that was moronic.” 

He was already short the stocks of mortgage originators and the homebuilders. Now he took short positions in the rating agencies-”they were making 10 times more rating C.D.O.’s than they were rating G.M. bonds, and it was all going to end”-and, finally, the biggest Wall Street firms because of their exposure to C.D.O.’s. He wasn’t allowed to short Morgan Stanley because it owned a stake in his fund. But he shorted UBS, Lehman Brothers, and a few others. Not long after that, FrontPoint had a visit from Sanford C. Bernstein’s Brad Hintz, a prominent analyst who covered Wall Street firms. Hintz wanted to know what Eisman was up to. “We just shorted Merrill Lynch,” Eisman told him.

“Why?” asked Hintz.

“We have a simple thesis,” Eisman explained. “There is going to be a calamity, and whenever there is a calamity, Merrill is there.” When it came time to bankrupt Orange County with bad advice, Merrill was there. When the internet went bust, Merrill was there. Way back in the 1980s, when the first bond trader was let off his leash and lost hundreds of millions of dollars, Merrill was there to take the hit. That was Eisman’s logic-the logic of Wall Street’s pecking order. Goldman Sachs was the big kid who ran the games in this neighborhood. Merrill Lynch was the little fat kid assigned the least pleasant roles, just happy to be a part of things. The game, as Eisman saw it, was Crack the Whip. He assumed Merrill Lynch had taken its assigned place at the end of the chain. 

There was only one thing that bothered Eisman, and it continued to trouble him as late as May 2007. “The thing we couldn’t figure out is: It’s so obvious. Why hasn’t everyone else figured out that the machine is done?” Eisman had long subscribed to Grant’s Interest Rate Observer, a newsletter famous in Wall Street circles and obscure outside them. Jim Grant, its editor, had been prophesying doom ever since the great debt cycle began, in the mid-1980s. In late 2006, he decided to investigate these things called C.D.O.’s. Or rather, he had asked his young assistant, Dan Gertner, a chemical engineer with an M.B.A., to see if he could understand them. Gertner went off with the documents that purported to explain C.D.O.’s to potential investors and for several days sweated and groaned and heaved and suffered. “Then he came back,” says Grant, “and said, ‘I can’t figure this thing out.’ And I said, ‘I think we have our story.’ ” 

 Eisman read Grant’s piece as independent confirmation of what he knew in his bones about the C.D.O.’s he had shorted. “When I read it, I thought, Oh my God. This is like owning a gold mine. When I read that, I was the only guy in the equity world who almost had an orgasm.” 

On July 19, 2007, the same day that Federal Reserve Chairman Ben Bernanke told the U.S. Senate that he anticipated as much as $100 billion in losses in the subprime-mortgage market, FrontPoint did something unusual: It hosted its own conference call. It had had calls with its tiny population of investors, but this time FrontPoint opened it up. Steve Eisman had become a poorly kept secret. Five hundred people called in to hear what he had to say, and another 500 logged on afterward to listen to a recording of it. He explained the strange alchemy of the C.D.O. and said that he expected losses of up to $300 billion from this sliver of the market alone. To evaluate the situation, he urged his audience to “just throw your model in the garbage can. The models are all backward-looking.

The models don’t have any idea of what this world has become…. For the first time in their lives, people in the asset-backed-securitization world are actually having to think.” He explained that the rating agencies were morally bankrupt and living in fear of becoming actually bankrupt. “The rating agencies are scared to death,” he said. “They’re scared to death about doing nothing because they’ll look like fools if they do nothing.”

On September 18, 2008, Danny Moses came to work as usual at 6:30 a.m. Earlier that week, Lehman Brothers had filed for bankruptcy. The day before, the Dow had fallen 449 points to its lowest level in four years. Overnight, European governments announced a ban on short-selling, but that served as faint warning for what happened next. 

At the market opening in the U.S., everything-every financial asset-went into free fall. “All hell was breaking loose in a way I had never seen in my career,” Moses says. FrontPoint was net short the market, so this total collapse should have given Moses pleasure. He might have been forgiven if he stood up and cheered. After all, he’d been betting for two years that this sort of thing could happen, and now it was, more dramatically than he had ever imagined. Instead, he felt this terrifying shudder run through him. He had maybe 100 trades on, and he worked hard to keep a handle on them all. “I spent my morning trying to control all this energy and all this information,” he says, “and I lost control. I looked at the screens. I was staring into the abyss. The end. I felt this shooting pain in my head. I don’t get headaches. At first, I thought I was having an aneurysm.”

Moses stood up, wobbled, then turned to Daniel and said, “I gotta leave. Get out of here. Now.” Daniel thought about calling an ambulance but instead took Moses out for a walk. 

Outside it was gorgeous, the blue sky reaching down through the tall buildings and warming the soul. Eisman was at a Goldman Sachs conference for hedge fund managers, raising capital. Moses and Daniel got him on the phone, and he left the conference and met them on the steps of St. Patrick’s Cathedral. “We just sat there,” Moses says. “Watching the people pass.” 

This was what they had been waiting for: total collapse. “The investment-banking industry is fucked,” Eisman had told me a few weeks earlier. “These guys are only beginning to understand how fucked they are. It’s like being a Scholastic, prior to Newton. Newton comes along, and one morning you wake up: ‘Holy shit, I’m wrong!’ ” Now Lehman Brothers had vanished, Merrill had surrendered, and Goldman Sachs and Morgan Stanley were just a week away from ceasing to be investment banks. The investment banks were not just fucked; they were extinct. 

Not so for hedge fund managers who had seen it coming. “As we sat there, we were weirdly calm,” Moses says. “We felt insulated from the whole market reality. It was an out-of-body experience. We just sat and watched the people pass and talked about what might happen next. How many of these people were going to lose their jobs. Who was going to rent these buildings after all the Wall Street firms collapsed.” Eisman was appalled. “Look,” he said. “I’m short. I don’t want the country to go into a depression. I just want it to fucking deleverage.” He had tried a thousand times in a thousand ways to explain how screwed up the business was, and no one wanted to hear it. “That Wall Street has gone down because of this is justice,” he says. “They fucked people. They built a castle to rip people off. Not once in all these years have I come across a person inside a big Wall Street firm who was having a crisis of conscience.” 

Truth to tell, there wasn’t a whole lot of hand-wringing inside FrontPoint either. The only one among them who wrestled a bit with his conscience was Daniel. “Vinny, being from Queens, needs to see the dark side of everything,&#