Book of the week: The Greatest Trade Ever: The Behind-the-Scenes Story of How John Paulson Defied Wall Street and Made Financial History

(Broadway, 295 pages, $26)

“As hedge fund managers go today, John Paulson is the man,” said Eric Jackson in TheStreet.com. A nobody in 2006, he’s now the seer who pocketed a fortune by betting against the U.S. housing market and every­body on Wall Street who believed that real estate values would never come down. In 2007, his fund made $15 billion and he personally banked more than $10 million a day—many times more than J.K. Rowling, Oprah Winfrey, and Tiger Woods combined. But even though a reader may know how this story ends, said Daniel Gross and Win Rosenfeld in Slate.com, Gregory Zuckerman’s The Greatest Trade Ever offers “a tension-filled narrative.” Paulson was one of several investors who foresaw the coming collapse. The others didn’t get the timing of their deals right, and that made all the difference.

The drama that Zuckerman uncovers is “a reminder how relatively little” is ever written about “the actual mechanics of finance,” said Robert Teitelman in TheDeal.com. Paulson and his ragtag band of associates clearly had “skill, insight, and guts.” But they were also “just stubborn enough not to be sucked in by the powerful conventional wisdom” that said Wall Street’s housing bets were immune to downturns. Paulson first had to figure out that the most efficient way to bet against housing: hoarding credit default swaps, a then little-understood form of insurance on debt. He then had to coax investment banks into repackaging more and more mortgages, so that he could bet against them. Most important, he eventually had to sell off his hoard without triggering a collapse in the market he was selling into.

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Zuckerman’s focus on details pays off, said James Pressley in Bloomberg.com. His “cinematic” account of a rare success story provides more insight into the economic collapse than any of the countless books published this year that have dealt with Wall Street’s many mistakes. Offering readers a courtside view of the games that hedge funds and investment banks play, The Greatest Trade Ever highlights “how opaque and illiquid some financial instruments are, how little Wall Streets executives understood them, and how difficult it was” for those who knew better to alert the herd that the U.S. housing market was an “emperor” who “had no clothes.”