All The Devils Are Here: Unmasking the Men Who Bankrupted the World

BOOK: All The Devils Are Here: Unmasking the Men Who Bankrupted the World
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All the Devils Are Here
 

‘Hell is empty, and all the devils are here’
William Shakespeare,
The Tempest

 

As soon as the financial crisis erupted, the finger-pointing began. Should the blame fall on greedy traders, misguided regulators, sleazy subprime companies, cowardly legislators or clueless home buyers?

According to Bethany McLean and Joe Nocera, two of America’s most acclaimed business journalists, the real answer is all of the above – and more. Many devils helped bring hell to the economy. And the full story, in all of its complexity and detail, is like the legend of the blind men and the elephant. Almost everyone has missed the big picture. Almost no one has put all the pieces together.

All the Devils Are Here
weaves the hidden history of the financial crisis in a way no previous book has done. It explores the motivations of everyone from famous CEOs, cabinet secretaries and politicians, to anonymous lenders, borrowers, analysts and Wall Street traders. It exposes the hidden role of companies including AIG, Goldman Sachs and Fannie Mae. It delves into the powerful American mythology of homeownership. And it proves that the crisis ultimately wasn’t about finance at all: it was about human nature.

Just as Bethany McLean’s
The Smartest Guys in the Room
was hailed as the best Enron book on a crowded shelf, so will
All the Devils Are Here
be remembered for finally making sense of the meltdown and its consequences.

ABOUT THE AUTHORS

 

Bethany McLean is a writer for
Vanity Fair
and the co-author of
The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron
. Before joining
Vanity Fair
, she wrote for
Fortune
for thirteen years (most recently as an editor at large) and spent three years working in the investment banking division of Goldman Sachs. She lives in Chicago.

Joe Nocera is a business columnist for
The New York Times
and a staff writer for
The New York Times Magazine
. He spent ten years at
Fortune
as a contributing writer, editor at large, executive editor and editorial director. He has won three Gerald Loeb awards for excellence in business journalism and was a finalist for a Pulitzer Prize in 2006. He lives in New York.

ALL THE DEVILS
ARE HERE
 
The Hidden History of the
Financial Crisis
 

Bethany McLean and Joe Nocera
 

PORTFOLIO PENGUIN

 

Published by the Penguin Group

Penguin Books Ltd, 80 Strand, London
WC2R 0RL
, England

Penguin Group (USA) Inc., 375 Hudson Street, New York, New York 10014, USA

Penguin Group (Canada), 90 Eglinton Avenue East, Suite 700, Toronto, Ontario, Canada
M4P 2Y3
(a division of Pearson Penguin Canada Inc.)

Penguin Ireland, 25 St Stephen’s Green, Dublin 2, Ireland (a division of Penguin Books Ltd)

Penguin Group (Australia), 250 Camberwell Road, Camberwell, Victoria 3124, Australia
(a division of Pearson Australia Group Pty Ltd)

Penguin Books India Pvt Ltd, 11 Community Centre, Panchsheel Park, New Delhi – 110 017, India

Penguin Group (NZ), 67 Apollo Drive, Rosedale, North Shore 0632, New Zealand
(a division of Pearson New Zealand Ltd)

Penguin Books (South Africa) (Pty) Ltd, 24 Sturdee Avenue, Rosebank, Johannesburg 2196, South Africa

Penguin Books Ltd, Registered Offices: 80 Strand, London
WC2R 0RL
, England

www.penguin.com

First published in the United States of America by Portfolio/Penguin, a member of Penguin Group (USA) Inc. 2010

First published in Great Britain by Portfolio Penguin 2010

Copyright © Bethany McLean and Joseph Nocera, 2010

The moral right of the authors has been asserted

All rights reserved

Without limiting the rights under copyright reserved above, no part of this publication may be reproduced, stored in or introduced into a retrieval system, or transmitted, in any form or by any means (electronic, mechanical, photocopying, recording or otherwise), without the prior written permission of both the copyright owner and the above publisher of this book

A CIP catalogue record for this book is available from the British Library

ISBN:
978-0-14-196989-3

For Sean, and Dawn

CONTENTS
 

Cast of Characters

 

Key Acronyms

 

   
Prologue

1 The Three Amigos

2 “Ground Zero, Baby”

3 The Big, Fat Gap

4 Risky Business

5 A Nice Little BISTRO

6 The Wizard of Fed

7 The Committee to Save the World

8 Why Everyone Loved Moody’s

9 “I Like Big Bucks and I Cannot Lie”

10 The Carnival Barker

11 Goldman Envy

12 The Fannie Follies

13 The Wrap

14 Mr. Ambassador

15 “When I Look a Homeowner in the Eye …”

16 Hank Paulson Takes the Plunge

17 “I’m Short Your House”

18 The Smart Guys

19 The Gathering Storm

20 The Dumb Guys

21 Collateral Damage

22 The Volcano Erupts

     
Epilogue: Rage at the Machine

Acknowledgments

 

Index

 
CAST OF CHARACTERS
 
THE MORTGAGE MEN
 

Ameriquest

 

Roland Arnall
Founder of ACC Capital Holdings, the parent company of Ameriquest. A subprime lending pioneer who became a billionaire. His first company, Long Beach Mortgage, spawned more than a dozen other subprime companies.

Aseem Mital
Ameriquest veteran who became CEO in 2005.

Ed Parker
Mortgage veteran hired in 2003 to investigate lending fraud in Ameriquest’s branches.

Deval Patrick
Assistant attorney general who led the government’s charge against Long Beach in 1996, only to join Ameriquest’s board in 2004.

Countrywide Financial

 

Stanford Kurland
President and COO. Long seen as Mozilo’s successor, he left the company in 2006.

David Loeb
Co-founder, president, and chairman. Stepped down in 2000.

John McMurray
Countrywide’s chief risk officer.

Angelo Mozilo
Co-founder and CEO until 2008. Dreamed of spreading homeownership to the masses. Became a billionaire in the process, but couldn’t resist pressure to enter the subprime mortgage business.

David Sambol
The head of Countrywide’s sales force. Aggressively pushed Countrywide to keep up with subprime lenders.

Eric Sieracki
Longtime Countrywide employee who was named CFO in 2005.

Primary Residential

 

Dave Zitting
Old-school mortgage banker who steered clear of subprime lending.

Ownit

 

Bill Dallas
Founder of Ownit, a subprime company in which Merrill Lynch held a 20 percent stake.

THE FINANCIAL INSTITUTIONS
 

American International Group (AIG)

 

Steve Bensinger
CFO under Martin Sullivan from 2005 to 2008.

Joe Cassano
CEO of AIG Financial Products from 2001 to 2008.

Andrew Forster
One of Cassano’s chief deputies in London.

Al Frost
AIG-FP marketer at the center of the multisector CDO deals that put AIG on the hook for $60 billion of subprime exposure.

Maurice R. “Hank” Greenberg
AIG’s CEO from 1968 to 2005. Forced to resign by Eliot Spitzer.

Gene Park
AIG-FP executive who noticed the early warning signs on multisector CDOs.

Tom Savage
CEO of AIG-FP from 1994 to 2001.

Howard Sosin
Founder of AIG-FP. Ran it from 1987 to 1993.

Martin Sullivan
Succeeded Greenberg in 2005. Forced out by the board in 2008.

Robert Willumstad
Sullivan’s successor as CEO until the financial crisis hit four months later.

Bear Stearns

 

Ralph Cioffi
Bear Stearns hedge fund manager. His two funds—originally worth $20 billion—went bankrupt in the summer of 2007 because of their subprime exposure.

Matthew Tannin
Cioffi’s partner. Cioffi and Tannin were tried for fraud and found not guilty.

BOOK: All The Devils Are Here: Unmasking the Men Who Bankrupted the World
9.83Mb size Format: txt, pdf, ePub
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