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All the Devils Are Here
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All the Devils Are Here (2010) (edit title/settings)

The Hidden History of the Financial Crisis

by Bethany McLean (Author), Joe Nocera (Author) (edit contributors)

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Description edit see section history

"Hell is empty, and all the devils are here." -Shakespeare, The Tempest As soon as the financial crisis erupted, the finger-pointing began. Should the blame fall on Wall Street, Main Street, or Pennsylvania Avenue? On greedy traders, misguided regulators, sleazy subprime companies,... read more

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Summary edit see section history

Business journalists Bethany McLean and Joe Nocera point fingers and name names in identifying the driving forces behind the United States' financial meltdown, including Alan Greenspan, AIG's Hank Greenberg, Goldman Sach's Lloyd Blankfein and Stan O'Neal of Merrill Lynch. Before becoming a... read more (warning: may contain spoilers)

Business journalists Bethany McLean and Joe Nocera point fingers and name names in identifying the driving forces behind the United States' financial meltdown, including Alan Greenspan, AIG's Hank Greenberg, Goldman Sach's Lloyd Blankfein and Stan O'Neal of Merrill Lynch. Before becoming a writer for Vanity fair, McLean worked in the investment banking division of Goldman Sachs. Joe Nocera is a business columnist for the New York Times.

Characters/People edit see section history

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Quotes edit see section history

  • “Here was the ultimate consequence of the delinking of borrower and lender, which securitization had made possible: no one in the chain, from broker to subprime originator on Wall Street, cared that the loans they were making and selling were likely to go bad. In truth, they were all taking on huge risks in granting these terrible loans. But they were all making too much money to see it. Everyone assumed that someone else would be left holding the bag.”
  • “The linkage between the mortgage originator and the secondary market must be built carefully and appropriately”
    Leon Kendall - Chairman Mortgage Guaranty Insurance Corporation (private fannie mae)
  • Popular Highlights from Kindle Customers
  • in dispersing risk so widely, derivatives were transferring risk from a single institution to the entire financial system.
    Highlighted by 28 Kindle customers
  • Historically, he noted, less than 2 percent of people lost their homes to foreclosure, because “what was good for the lending institution was also good for the borrower.” But the new securitization market threatened to change that, because once a lender sold a mortgage, it no longer had a stake in whether the borrower could make his or her payments.
    Highlighted by 25 Kindle customers
  • Fannie, however, was allowed to do several new things: it was allowed to buy conventional mortgages (ones that had not been insured by the government), and it was allowed to issue securities backed by mortgages it had guaranteed.
    Highlighted by 25 Kindle customers
  • What made Fannie and Freddie indispensable in the new mortgage market was one simple fact: the mortgages they guaranteed were the only mortgages investors wanted to buy.
    Highlighted by 23 Kindle customers
  • Ranieri named the process “securitization” because, as he described it at the time, it was a “technology that in essence enables us to convert a mortgage into a bond”—that is, a security.
    Highlighted by 22 Kindle customers
  • Alternative Mortgage Transaction Parity Act, which made it legal for lenders to offer more creative mortgages, such as adjustable-rate mortgages or those with balloon payments, rather than plain vanilla thirty-year fixed-rate instruments.
    Highlighted by 21 Kindle customers
  • In July 1999, the GSEs agreed that by 2001, 50 percent of the mortgages they guaranteed would be loans made to low- or middle-income Americans.
    Highlighted by 20 Kindle customers
  • According to the Wall Street Journal, total household debt in America doubled, from $7 trillion to $14 trillion, between 2000 and 2007. Debt related to housing was responsible for 80 percent of that increase.
    Highlighted by 15 Kindle customers
  • These new companies moved hard-money lending into the mortgage market, making loans that would eventually become known as subprime. They couldn’t sell to the GSEs, because, for a long time, the GSEs wouldn’t buy such risky mortgages. On the other hand, this influx of new lenders created exactly what Wall Street had been searching for: mortgage products it could securitize without Fannie and Freddie.
    Highlighted by 14 Kindle customers
  • Thus, one of Weatherstone’s first acts when he became CEO in 1990 was to persuade the Federal Reserve to allow the bank to begin trading securities in the United States. This was a huge shift in U.S. policy; ever since the Great Depression, the government had kept commercial banking and investment banking apart. (Glass-Steagall, the 1933 law that mandated this change, forced J.P. Morgan to spin off its investment banking arm, which was rechristened Morgan Stanley.)
    Highlighted by 11 Kindle customers
Show all 12 quotes from this book

Organizations edit see section history

  • Fannie Mae: Federal National Mortgage Association , a hybrid pubic company/government agency (GSE Government Sponsored Enterprise) tasked with purchasing residential home mortgages
  • Freddie Mac: Federal Commercial Mortgage Corporation - similar Fannie Mae for commercial property

First Sentence edit see section history

The seeds of financial disaster were sown more than thirty years ago when three smart, ambitious men, working sometimes in concert---allies in a cause they all believed in---and sometimes in opposition---competitiors trying to gain advantage over each other---created a shiny new financial vehicle called the mortgage-backed security.

Glossary edit see section history

  • Securitization: a technology that creates a bond from a mortgage or other firm of debt (eg auto or student loan) enabling it to be sold or traded
  • Tranching: A method of carving a mortgage bond into pieces with different levels of risk
  • Conforming Loans: Loans that could be sold to the GSE's because they complied withthe four C's : credit, capability, collateral, character

Series & Lists edit see section history

This book is in Financial Crisis. (community list)

Authors & Contributors edit see section history

  1. Bethany McLean (Author)
  2. Joe Nocera (Author)

First Edition edit see section history

Original Language: English
Publisher: Portfolio/Penguin
Country: USA
Publication Date: 2010
ISBN: 9781591843634
Page Count: 380

Classification edit see section history

  • Library of Congress: HB3717 2008 .M35 2010
  • Dewey: 330.9730931

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