All The Devils Are Here: Unmasking the Men Who Bankrupted the World (75 page)

independent brokers, use of,
24

low-income persons, initiatives for,
36–37
,
49

no-down-payment loans,
300

presidents.
See
Kurland, Stanford
;
Sambol, Dave

profitability of,
24
,
26
,
144–45
,
220
,
229

refinancings by,
24

SEC fraud charges,
143
,
220
,
230–31

Spitzer investigation,
225

stock, decline of,
300–301

subprime mortgages,
36–37
,
142–45

underwriting guidelines, loosening,
225–27

Cox, Christopher,
347

Cox, Prentiss,
204–6
,
211
,
361–62

Credit default swaps

AIG-FP,
188
,
200–201

BISTRO as precursor to,
79–81

first,
62

mortgage-based.
See
Collateralized debt obligations (CDOs)

profitability of,
61–62

relationship to subprimes,
53

risk-management features,
52–53
,
58–61
,
64
,
258

tradable market, lack of,
78–79
,
258–59

Credit enhancements,
31
,
34
,
115

Credit risk, minimizing.
See
Derivatives

Cribiore, Alberto,
318
,
321

Cuomo Andrew,
49–50

Currency swaps,
54
,
63

Dallas, Bill,
88
,
181

Dallavecchia, Enrico,
182

Daurio, Jon,
27
,
135

Davis Square III,
338

Defaults, on subprimes,
239
,
251–52
,
257
,
297
,
362

Depository Institutions Deregulation and Monetary Control Act (1980),
29

D’Erchia, Peter,
296

Derivatives

of AIG Financial Products,
71–81

CDOs,
79–81
,
120–24
,
263–84

CDOs, multisector,
189–91
,
200–203

CDOs, synthetic,
263–84

credit default swaps,
52–53
,
58–62

currency swaps,
54
,
63

danger and warning about,
64–68
,
98
,
240–45
,
254–56
,
260–64
,
279
,
281–82
,
288–97

futures classification defeat,
63–66

high ratings, reasons for,
111–19
,
122–24
,
297–98

interest rate swaps,
54
,
63

of J.P. Morgan,
63–67

LTCM collapse,
96–98
,
106–8

netting out,
63

quants’ development of,
52–54
,
58–68

regulatory efforts,
63–68
,
102–9
,
247–49

structured investment vehicles (SIVs),
305

tranches of,
5–8
,
13
,
15–16

See also specific instruments

Deutsche Bank, ABS index,
259–60

Dimon, Jamie,
344

Dodge, Patti,
251

Donilon, Tom,
44

Dooley, Bill,
329
,
331

Drexel Burnham Lambert,
52
,
72
,
74

Dubrish, Robert,
34

Dugan, John,
148
,
250

Dunne, Jimmy,
304

Dynamic hedging,
73

Dyron, Dick,
184–85

Edper,
76

Edwards, Jeff,
237
,
309

Eichel, Scott,
279

Eisman, Steve,
299

Empiris LLC,
19

Enron,
119–20
,
176

European Bank for Reconstruction and Development (EBRD),
62

Evans, Gay,
68

Everquest,
292

Exception pricing system,
144

Exxon
Valdez
,
62

Fakahany, Ahmass,
235
,
318

Falcon, Armando, Jr.,
174–78

Fannie Mae

accounting fraud, investigation of,
177–81

Bush era war with,
174–81
,
175–76

CEOs.
See
Johnson, Jim
;
Maxwell, David
;
Mudd, Daniel
;
Raines, Franklin Delano

conforming mortgage market,
18
,
23
,
38

Countrywide mortgages sold to,
39
,
49
,
182

creation/functions of,
6–7

crisis of 1981,
9–10

crisis of 2007,
342–46
,
348–49
,
351–57

critics of,
11
,
39
,
45–46
,
50
,
172–75
,
343

debt acquisition, extent of (2007–2008),
342–43

government bailout,
353–57

implicit government guarantee,
9
,
18
,
46
,
60

investor trust in,
9
,
11–12
,
18
,
46
,
60

lobbying by,
41–45
,
175

losses (2008),
348–49
,
354–55

low-income persons, initiatives for,
11
,
40
,
42
,
48–49

mortgage stamping guarantee by,
47

OFHEO oversight.
See
Office of Federal Housing Enterprise Oversight

Paulson approach to crisis,
345–46

politicizing by,
41–44

profitability of,
19
,
38–39
,
48–49
,
170

regulatory efforts,
16–17
,
41–47
,
172–81
,
363

REMIC offerings,
16–17

restatement of earnings,
168

risky loans guidelines (2000),
50

Salomon deals with,
17

subprime portfolio of,
47–48
,
181–86

supporters during collapse,
342–43

Federal bailouts

AIG,
341
,
357

FDIC actions,
358–59

GSEs,
353–57

TARP,
359–61

Federal Deposit Insurance Corporation (FDIC)

and bailout,
358–59

predatory lending warning,
93

Federal government

actions during collapse,
358–64

bailouts.
See
Federal bailouts

blue sky laws exemption,
12–14

double-taxation exemption,
15–16

financial services corporations.
See
Government-sponsored enterprises (GSEs)

preemption policy,
146–48

REMIC law,
16–17

S&Ls, liquidation of assets,
31

usury caps, abolishing,
29

Federal Home Loan Bank Board,
16
,
19

Federal Home Loan Mortgage Corporation,
6

Federal Housing Finance Agency, and GSEs takeover,
355–56

Federal regulation/regulatory efforts

derivatives,
63–68
,
102–9

Fannie Mae,
16–17
,
41–47
,
172–81
,
363

Federal Reserve, lending authority,
85–86

Glass-Steagall,
54
,
109

Obama administration,
358

subprimes,
32–33
,
85–86
,
89
,
94–95

See also specific regulatory agencies

Federal Reserve

mortgage lending authority of,
85–86

See also
Greenspan, Alan

Felder, Eric,
349

Financial services corporations.
See
Government-sponsored enterprises (GSEs)

Fink, Larry

CMOs developed by,
13

Congressional testimony by,
30

MBSs developed by,
4–6

First Allance Mortgage Company (FAMCO),
34
,
86–87
,
204