Gross gains

WASHINGTON-Michael Lewis' book on the handful of eccentrics who prophesied and profited from the financial crisis, The Big Short (W.W. Norton & Company), came out in March this year. Two months later, the Senate passed a financial regulatory reform bill-and Democrats cited Lewis' book more than a dozen times in hearings and floor speeches leading up to the bill's passage, repeatedly recommending it. In May Lewis met with Senate Democrats privately, following a meeting he had with Republicans months earlier.

Lewis himself has said he is not the expert on the financial crisis. He told Politico that when politicians or Hill staffers approach him for advice on financial regulation, he responds, "I'm not Jesus, I'm Brian." (He's referring to Monty Python's Life of Brian, where some mistake the lead character for a messiah.) But Lewis has credibility because his first book, Liar's Poker, based on his time working for the Salomon Brothers on Wall Street, was the definitive insider piece on Wall Street in the 1980s.

The Big Short created a Harry Potter-like craze among Democrats on the Hill, but with immediate real-world impact. The Senate's bill would ban a practice Lewis hammered in his book: proprietary trading, where a firm uses its investors money to make high-risk bets on its own assets. The Senate wants to prevent firms from selling financial products with their left hand and then betting on the success of those products with their right hand. The House passed its version of financial regulatory reform last year, and now the two chambers will work to hash out a final bill. Both bills impose new regulations on the off-the-books derivatives market that Lewis examines closely; the Senate's regulations would be more heavy-handed.

Lewis-author of two other must-read bestsellers, Moneyball and The Blind Side-is one of the best storytellers around today, and one of the best at finding stories that no one has told. In The Big Short he introduces several obscure investors who foresaw the subprime tsunami and decided to cash in: Michael Burry, a one-eyed hedge fund manager who has Asperger's syndrome, and Steve Eisman, a money manager so rude he once told the president of a Japanese real estate firm that his financial statements were "toilet paper. Translate that."

Lewis also introduces us to another ruthless investor, Gregg Lippmann, who told a critical bank colleague that he was "short his house," meaning he was betting that the colleague would default on his home loan. We meet Jamie Mai and Charlie Ledley, both 30, who built a multimillion dollar investment operation in just a few years out of a shed in a friend's back yard. Burry's fund, betting against the subprime and derivatives market, made gross gains of 726 percent over an eight-year period in which the S&P 500 rose just over 2 percent.

Lewis doesn't provide or claim to provide a full and conclusive picture of the causes of the crash, but he does paint a picture of an incompetent and malicious culture on Wall Street leading to billions upon billions in losses to the economy. But Wall Street banks weren't the only ones guilty of greed and conniving-greed and conniving are present everywhere in the American economic system, according to Lewis.

Leading the bad guys is Goldman Sachs. The firm, according to Lewis, made buckets of cash without taking the risk of the subprime loans, and bet against the success of the subprime loans it was packaging and reselling in complex financial products. Now the Securities and Exchange Commission is investigating Goldman Sachs for fraud in such practices. Sen. Ted Kaufman, D-Del., cited The Big Short several times on the floor in April as he excoriated the firm.

Financial professional David Bahnsen praises The Big Short but points out a contradiction in Lewis' analysis: Firms like Goldman Sachs can't epitomize both "greed/evil genius" and "utter stupidity and incompetence." He writes: "One cannot have it both ways. Lewis cannot claim, as he astonishingly and explicitly does, that Goldman Sachs made AIG write credit default swaps on the subprime mortgage industry, guaranteeing AIG's demise and Goldman Sachs' flourishing, but then on the other hand claim that the firms had no idea what they were doing."

Bahnsen also notes that "Lewis does not use his 264-page book to even apply one word-not one single utterance-against the malignant government policies behind much of this malaise." The Office of Thrift Supervision, which oversees savings and loan institutions, and the Office of the Comptroller of the Currency, which oversees banks, each failed in their mission-and Bahnsen points out that government policies often promoted recklessness.

The pervasiveness of greed and incompetence should come as no surprise to readers of the Bible. What's to be done? A 24-year-old Harvard graduate, A.K. Barnett-Hart, who Lewis credits in his acknowledgements, wrote her thesis in 2009 on Wall Street's failures and now works for a Wall Street bank. She wrote to The Wall Street Journal, "How would Wall Street ever change, I thought, if the people that work there do not change?"

Another untold story: HeLa lives on

Let's leave the world of credit default swaps and floating interest rates for the story about cell cultures and petri dishes told in The Immortal Life of Henrietta Lacks by Rebecca Skloot (Crown, 2010). Henrietta Lacks, the great-granddaughter of a slave and slave owner, died of cervical cancer in 1951, but while she underwent radiation treatment, a doctor took a slice of her cancerous tissue without her knowledge and sent it to his lab for experimentation. It became the first cell line to grow continuously in culture, useful for research that developed the polio vaccine and gene mapping, cells cited everywhere as simply HeLa.

Not until 20 years later did the Lacks family find out that companies were selling batches of this immortal cell line to labs all over the world and making millions. Given the history between the medical community and African-Americans-think of the Tuskegee experiments that began in the 1930s, where researchers recruited black men with syphilis to watch how they died, even after treatment became available-Lacks' family was livid. The story is so good, bursting with themes of death, resurrection, betrayal, and redemption, you can't believe so many years have passed before someone like Skloot, a contributing editor at Popular Science magazine, told it.