How we cite our quotes: (Chapter.Paragraph)
Quote #4
In retrospect, their ignorance seems incredible—but, then, an entire financial system was premised on their not knowing, and paying them for this talent. (4.8)
In other words, bond traders have no incentive to be knowledgeable, because they can make tons of money without being knowledgeable. Why even bother at that point? This cycle of ignorance goes around and around until even Wall Street has no idea what's going on within their business. Great job, dudes.
Quote #5
Here was a strange but true fact: The closer you were to the market, the harder it was to perceive its folly. (4.16)
This fact gets proven true time and time again in The Big Short. It makes sense, too, when you think about: these guys are less than willing to critique the subprime market, because it makes them consider the possibility that they'll soon be dead broke.
Quote #6
In short, they performed the sort of nitty-gritty credit analysis on the mortgage loans that should have been done before the loans were made in the first place. (4.79)
Foolishness and laziness often go hand in hand, and Wall Street is no exception to this rule. Whether it's because they don't want to damage their relationships with big firms, or because they sincerely believe that these mortgage bonds are A-Okay, the big rating agencies totally fail to do their due diligence with the subprime market.