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

I read this book from cover to cover in three days, when I was supposed to be working. I feel that it was time well spent!

After a gripping prologue, the book begins slowly enough, setting out all the players and riders. And if you just happen to not be an investment banker, you may need to keep a page open on Wikipedia, to remind yourself now and then just exactly how does a Credit Default Swap work and what is the difference between a Collateralised Debt Obligation and a synthetic CDO. But trust me, nearly every non-investment banker I have spoken to, did not know what a CDO and a CDS was until 2007. Then we all got to learn this stuff in a hurry!

The further you get into this book, the better it gets. The pace picks up and gets faster and faster, until, right at the end, we get to disaster after disaster, as deluded CEOs desperately try to wriggle this way and that, in a glorious 'dance macabre' as the dominoes fall.

This truly gripping yarn of delusion, foolishness, incompetence, hysteria, fraud and utter, unbridled avarice explains how we went from well-intentioned moves to provide safe investments and finance for affordable housing, to a world in which one company discovered that 30% of its loans were grossly inflated and going to dilapidated houses that nobody was moving into and nobody wanted. This exciting book tells us how mortgage companies and banks bundled debts into these CDOs, typically each CDO being worth about a billion Dollars and sold them off in bundles. We learn how the strange mathematics and the even stranger logic of taking a huge pile of very bad debt and, by lumping it together in these giant CDOs, the rating agencies could be paid to rate this stuff as triple-A! CDOs that were supposed to be just 10% sub-prime mortgages, the rest being safe mixed debt, from commercial to credit cards, turned out to be 85% sub-prime junk papers.

If there has to be a criticism of this book, it has to be that no mention is made of the madness that was happening in the rest of the World. France, Germany, Spain, Italy, Australia and of course the UK all had their own versions of this credit bubble. In the UK, houses were sold at up to thirty times annual earnings and based on the lunacy of self-assessment and in some areas, valuations increased by 400% in ten years. The Germans have stricter mortgage laws, so they had to import the madness from the US. In the UK, huge banks folded or (e.g. Lloyds and RBS) had to be taken into government ownership. Perhaps that could be a new chapter in a second edition?

But this is the pure American story of how giants, such as Ameriquest, Countrywide, AIG and Fannies Mac and Mae were brought to their knees by their own greed, whilst smaller fry, Bear Sterns, Merrill Lynch, Lehman Brothers and many, many small mortgage brokers, fell in a giant game of dominoes.

This is the story of the day the banks fell for their own Ponzi scheme!

Just buy this book. If you can't buy it, borrow it - but you can't have mine, as there's already a line waiting to read it!

All the Devils are here is the latest offering from Bethany Mclean & Joe Nocera, the team that bought you The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron that was subsequently adapted into a brilliant documentary.

What follows is a dramatical description of the workings that allowed the financial crisis of 2008 (still propagating today) to occur. Who the movers and shakers were that lobbied congress for reviews of mortgage laws and the CEOs that lobbied for increased independence and fought to 'securitize' mortgages on a wholesale scale. It lays out the precedents throughout financial history that culminated in the near-collapse of the global economy. It's extremely well written and reads much like a financial drama, with Mclean & Nocera relaying interviews with the main proponents who all seem to blame each other whilst accepting none themselves.

The blurb claims that "no-one has assigned blame for the financial crisis...until now" which is a big claim as I truly have no idea about the veracity of all of the facts with the majority of the information being based on interviews with people that are known for their duplicity. Aside from this, this is a highly informative and educational read, coupled with high-stakes financial drama that will illuminate the murky corporate structures of Fannie Mae, Freddie Mac & Countrywide in a way that wasn't immediately clear to me. Recommended.

The authors have indeed done extensive interviewing and told a complex story well. Yes indeed, the book is excellently researched, comprehensive and authoritative. For these seeming achievements the book certainly appears to deserve 5 stars.

A superb reprise at the start of chapter 18 explains: "...the creation of CDOs was the apotheosis of the previous 25 years of modern finance. They were stuffed with risk yet...large chunks of them were considered as safe as Treasury bonds...[even though] they existed solely to make complex bets on securities that existed somewhere else in the system (which, as often as not, were themselves bets on securities that existed somewhere else in the system).

"The...rating agencies'...profits depended on stamping these complex bets with a triple-A rating...They were made possible by the invention of the credit derivative, the most glittering innovation in finance. And their raw material - the debt upon which everything else was built - was mortgages, quite often poorly underwritten subprime mortgages. The stew was now complete.

"On another level, synthetic CDOs were a classic example of how things never really changed on Wall Street. The sellers of synthetic CDOs had a huge informational advantage over the buyers, just as bond sellers have historically had an advantage over bond buyers. Buying a synthetic CDO was like playing poker with an opponent who knew every card in your hand. Conflicts abounded...Just as a cash CDO was the perfect mechanism for laundering risky mortgages, so was a synthetic CDO the perfect vehicle for laundering positions a firm wanted to get off its books." Plenty of traders were aware that their subprime holdings were junk.

In chapter 22: "...as the mortgage market descended into utter chaos [during that awful summer of 2007] and decades of wrongheaded policies, craven behavior, foolish mistakes, and misguided beliefs had come together to create a financial volcano that was beginning to stir" - the authors imply there wasn't really any conspiracy, just bad luck.

The book does repeatedly place blame but seems to deliberately point only at the patsies. A few pages later it does (inadvertently?) reveal some truths: "the banks' dirty little secret was now out in the open. It wasn't just Fannie [Mae] and Freddie [Mac] that had been creating moral hazard all these years. So had the nation's big banks. They had taken on terrible risks, built up immense leverage [bets], and created such tight interconnections with their derivatives books that the failure of any one of them could bring down all the others. When things got bad, they assumed they had an "implicit government guarantee..."

The book would have you believe that many originally unrelated and tiny acorns of corrupt practices proliferated - by chance - into mighty oaks of fraud and that all these just happened to intertwine into a cataclysmic debacle (about which Obama claims "no laws were broken" - thereby condoning the widespread deceptive sales practices). Where they cannot be totally swept under the carpet, a few of the more major manipulators are mentioned, but mainly in passing and with forgiving descriptions. Greenspan, for example, is repeatedly excused because of his "free market" views. For this whitewash, throughout the book, it really deserves zero or even negative stars, so my 3 stars are on the generous side.

Repeatedly it excuses the national government at every level, the government regulators (considered "a joke" by Wall Street, which had spent hundreds of millions to achieve that outcome), the Federal Reserve and even Wall Street generally. Why no mention of the fact that the US Federal Reserve is no more federal than Fedex and has no reserves but is the single most profitable business in the US?

Why no mention that the so-called Federal Reserve - and our own Bank of "England" - is fully owned by private banks, the very financial terrorists who created the meltdown covered in this book and to whom this so-called Federal Reserve (as discovered since the publication of this book) then handed over 12 TRILLION - without conditions! (search on "the world's biggest scam" for more, just in case you missed this towering inferno of a crime, which has also - of course - gone unpunished) [later note: staggering as this amount is, David Wilcock explains that it is now 26 trillion - search on Wilcock + "26 trillion"]

Why such scant coverage by mainstream media (msm) of this theft of 12 TRILLION? Why no mention of the huge gap between the off-ledger or shadow banking system and the on-the-books banking system (only the masses are unaware that off-balance sheet activities and separate conduit vehicles have created a second shadow banking system as large as the visible system)? Day in and day out the msm deflect our attention to the odd burglary or murder or (briefly) to rioting (while denying that riots have anything to do with the increasing poverty).

The City of London's hypothecation and rehypothecation practices have recently come into the lime light, via MF Global and JPMorgan, and it may come as a surprise to many that the City, along with Washington D.C. and the Vatican, are not in practice subject to the laws of the country in which each is situated. The real degree of supervision is minimal at best so it's an economy that rewards only insider trading, which is why the British government is so keen to avoid outside control. This book, focused on Wall Street, fails to address how this enables and encourages much of the still-continuing and massive crime spree, but perhaps a future edition might, as the story is still far from over?

In the meantime, some ad hoc suggestions:
"Currency Wars" by James Rickards, who is famous, among other things, for his ability to accurately predict the Fed's moves ahead of time
"Treasure Islands" by Nicholas Shaxson reveals much about offshore tax havens
"Creating Wealth" by Hallsmith & Lietaer is a practical and comprehensive guide for everyone who wants a vibrant local economy without destroying the planet, and its people, in the process
"Natural Capitalism" is another great book on future possibilities, based entirely on existing successes, with overview case studies of these provided as uplifting examples.