The Big Short_ Inside the Doomsday Machine - Michael Lewis [44]
Even by the standards of Wall Street villains whose character flaws wind up being exaggerated to fit the crime, Cassano, in the retelling, became a cartoon monster. "One day he came in and saw that someone had left the weights on the Smith machine, in the gym," says a seventh source, in Connecticut. "He was literally walking around looking for people who looked buff, trying to find the guy who did it. He was screaming, 'Who left the fucking weight on the fucking Smith machine? Who left the fucking weight on the fucking Smith machine?'"
Oddly, Cassano was as likely to direct his anger at profitable traders as at unprofitable ones, for the anger was triggered not by financial loss but by the faintest whiff of insurrection. Even more oddly, his anger had no obvious effect on the recipient's paycheck; a trader might find himself routinely abused by his boss and yet delighted by his year-end bonus, determined by that same boss. One reason none of AIG FP's traders took a swing at Joe Cassano, before walking out the door, was that the money was simply too good. A man who valued loyalty and obedience above all other traits had no tool to command it except money. Money worked as a management tool, but only up to a point. If you were going to be on the other side of a trade from Goldman Sachs, you had better know what, exactly, Goldman Sachs was up to. AIG FP could attract extremely bright people who were perfectly capable of keeping up with their counterparts at Goldman Sachs. They were constrained, however, by a boss with an imperfect understanding of the nuances of his own business, and whose judgment was clouded by his insecurity.
Toward the end of 2005, Cassano promoted Al Frost, then went looking for someone to replace him as the ambassador to Wall Street's bond trading desks. The job, in effect, was to say "yes" every time some Wall Street trader asked him if he'd like to insure--and so, in effect, purchase--a billion-dollar pile of bonds backed by consumer loans. For a number of reasons, Gene Park was a likely candidate, and so he decided to examine these loans that AIG FP was insuring a bit more closely. The magnitude of the misunderstanding shocked him: These supposedly diversified piles of consumer loans now consisted almost entirely of U.S. subprime mortgages. Park conducted a private survey. He asked the people most directly involved in the decision to sell credit default swaps on consumer loans what percentage of those loans were subprime mortgages. He asked Gary Gorton, a Yale professor who had built the model that Cassano used to price the credit default swaps: Gorton guessed that the piles were no more than 10 percent subprime. He asked a risk analyst in London, who guessed 20 percent. "None of them knew it was 95 percent," says one trader. "And I'm sure that Cassano didn't, either." In retrospect, their ignorance seems incredible--but, then, an entire financial system was premised on their not knowing, and paying them for this talent.
By the time Joe Cassano invited Gene Park to London for the meeting in which he would be "promoted" to the job of creating even more of these ticking bombs, Park knew he wanted no part of it. If he was forced to take the job, he said, he'd quit. This, naturally, infuriated Joe Cassano, who accused Park of being lazy, of dreaming up reasons not to do the deals that would require complicated paperwork. Confronted with the new fact--that his company was effectively long $50 billion in triple-B subprime mortgage bonds, masquerading as triple-A-rated diversified pools of consumer loans--Cassano at first sought to rationalize it. He clearly thought that any money he received for selling default insurance on highly rated bonds was free money. For the bonds to default, he now said, U.S. house prices had to fall,