All the Devils Are Here: The Hidden History of the Financial Crisis
Beverly McLean and Joe Nocera, 2010
No single villain is responsible for the 2008 crash, they posit. Instead, the crash was a result of a wide systemic failure that encouraged—and was encouraged by—greed and carelessness.
The authors go back decades to when Wall Street and Fannie Mae began experimenting with mortgage backed securities. They were trying to make them work for investors—and work they did. Starting at almost zero in the late 1970's, the mortgage securities market reached $350 billion in 1981. By 2002 it hit $3.3 trillion!
Those securities, of course, were stuffed with subprime mortages. Subprimes had become the darling of Wall Street—even after the 1980s Savings & Loan debacle, in which they also played a prime role. Here's McLean and Nocera:
Over the course of nearly two decades, a giant money machine had been assembled that depended on subprime mortgages as its raw material. Wall Street needed subprime mortgages...and investors around the world wanted [them].
Then there are the infamous derivatives, like credit default swaps. Again—even after 3 previous derivative failures—no one wanted to stop the party. Oversight was "neither necessary nor desirable," said Fed Chairman Alan Greenspan.
It's all there—signs that were ignored, lessons unlearned, turf wars fought, ideology preached, and greed unchecked. There's plenty of blame to go around for everyone.
If you want to understand the roots of the financial crisis, this is your book. It's a long, sobering tale—told with absolute clarity and simplicity. Don't understand mortgage backed securities...or credit default swaps? You will by the time you finish this book.
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