All the Devils Are Here [224]
All those years ago, Lew Ranieri captured the essence of today’s debate when he asked, at the very dawn of mortgage-backed securities, “What should the government do? What should it be allowed to win at?” When the government held an invitation-only conference on the future of housing finance in the late summer of 2010, Lew Ranieri was asked to participate. He—and we—have had three decades to watch the mortgage market evolve in ways that turned out to be terribly destructive. Maybe, thirty-plus years after the creation of mortgage-backed securities, we can get it right this time.
ACKNOWLEDGMENTS
First, a note on sourcing: In the course of researching this book, we spoke to several hundred people, including former and current Wall Street executives—from CEOs to risk managers in the trenches—as well as bankers, former and current employees of AIG, Fannie Mae and Freddie Mac, rating agency employees, executives at mortgage companies, loan officers, appraisers and fraud investigators, community activists, legislators, lobbyists, academics, and former and current officials at Treasury, the FDIC, the OCC, the OTS, and the Federal Reserve. Where possible, we have acknowledged our sources in the text of the book. But given the sensitivity, not to mention the ongoing investigations and lawsuits, the majority of people we spoke with did not want their names used. We are grateful for both their time and honesty, and for readers’ understanding.
We were also fortunate to be able to draw on the mountains (literally) of fine newspaper stories, magazine articles, books, and academic papers on subjects related to the financial crisis. We owe a particular debt to reporters who wrote about the problems in the subprime world before they were revealed by the financial crisis; one article that stands out is the exposé of Ameriquest published in the Los Angeles Times in 2005. In the text, we’ve cited articles from which we drew specific facts and incidents. More broadly, in writing about the three decades of financial change documented in this book, we relied on the great contemporaneous work by the New York Times, the Wall Street Journal, the Washington Post, and the American Banker, which we found particularly helpful in its in-depth coverage of regulatory skirmishes over capital requirements, as well as the political infighting that affected the financial industry during years when most people weren’t paying attention to such things.
There have been, of course, numerous books written about the financial crisis since the fall of Bear Stearns in the spring of 2008. We’ve cited a number of them in the text, but we would be remiss if we did not single out a handful that were particularly helpful to us. They include Gillian Tett’s Fool’s Gold, an account of the creation of credit default swaps; Liar’s Poker, Michael Lewis’s rollicking tale of Lew Ranieri and the rise of mortgage-backed securities; The Partnership, Charles Ellis’s history of Goldman Sachs; The Greatest Trade Ever, by Gregory Zuckerman, about John Paulson’s audacious decision to short the housing market; Panic, by Andrew Redleaf and Richard Vigilante, which persuasively argues that efficient market theory was at the root of the crisis; and Chain of Blame, by Paul Muolo and Mathew Padilla, a great source of insight about the birth and inner workings of the subprime mortgage machine. Janet Tavakoli’s Dear Mr. Buffett is a scathing exposé of the seamy underbelly of the derivatives and CDO businesses. Memoirs we relied on include The Age of Turbulence, by Alan Greenspan (and Peter Petre), In an Uncertain World,