Wing Chau just sued Michael Lewis and Steve Eisman for defamation because of the way he was depicted in Lewis’ book, The Big Short.
Chau says he’s portrayed as a villain.
In reality, Chau isn’t portrayed well, but he doesn’t look like a villain. He looks like the dummy.
The villains in the book are guys like John Paulson, the smart guys who walked away with billions. We doubt Chau would have minded being portrayed like that.
But he wasn’t.
What role did Chau play in the crisis, according to Lewis?
The end buyer aka the sucker.
The guys who would up buying CDOs were CDO managers like Wing Chau, President and founder of Harding Advisory, which would become the world’s biggest subprime CDO manager.
It was his job to buy the subprime bonds that served as collateral for CDO investors, like hedge fund manager John Devaney, who we introduced you to in the last slide.
Big investors hired him to vet the bonds. So it was also his job to monitor the hundred or so individual subprime bonds inside each CDO and replace the bad ones, before they went bad, with better ones.
All by himself, Wing Chau generated vast demand for the riskiest subprime mortgage bonds, for which there had been essentially no demand. This demand led to the supply of new home loans, as material for the bonds.