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4.0 out of 5 stars Mammon's reckoning, 24 May 2012
This review is from: All The Devils Are Here: Unmasking the Men Who Bankrupted the World (Paperback)
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Following golden threads of venality, stupidity, corruption, cowardice and a kind of corporate greed that would have made Gordon Gecko blush, McLean and Nocera here trace the roots of the our current financial dystopia, naming and shaming the devils as they go.
Starting at one of the `hit the fan' moments in 2007, when the CEO of Merrill Lynch is informed of the scale of his company's losses as one of the first dominoes to fall, we then rewind 30 years to the genesis of the financial products that were to mutate to the WMD that triggered financial apocalypse. So, we have the birth of Mortgage backed securities, using mortgage debt to sell on as financial product. Then, we have the beginnings of the Mortgage sub-prime market, i.e. less safe loans with trimmed down scrutiny and high interest rates that ostensibly were about increasing home ownership to those who previously could not afford it. As this Witches Cauldron bubbles, along come Fannie Mae and Freddie Mac, Government Sponsored Enterprises (GSE's), to give it a stir. These examples of corporate confusion and dysfunction are charged with fostering and promoting home ownership with government money, and giving a seal of approval to mortgage products that is taken as gospel.
We also have the paper tigers of the housing regulators. Stripped of political clout by the powerful advocates of the GSE's they were meant to be watching.
Over 30 years the cauldron stewed and bubbled. Mortgage backed securities and subprime were a recipe for something truly diabolical, developing together and becoming increasingly unsafe, as subprime lending became riskier and more venal. Where the debt originated from and went to became increasingly confused as the financial products became bigger, more complex and more `synthetic' culminating in products like `synthetic CDO's squared' (Collateralised Debt Obligations). These eventually led to trillions of debt that was impossible to unravel.
The inefficiency of ratings agencies, stamping ridiculous debt with `triple A' ratings led to a false sense of security (a terrible under-statement). This rating meant everything to Wall Street and to corporate finance, but it was a mistake based on a huge lie that was collectively bought into and believed, in large part because it led to riches, incredible pay-offs. The stakes kept rising. The government, because of the politics of huge fortunes and corporate America, looked the other way and colluded.
The melt-down happened, the chickens came home to roost, as they must, as they always do, incredulous yet uncomplaining about our crass stupidity and unwillingness to learn the lessons of history. The terrible injustice of government bail-outs for corporate America begun, setting a template for the rest of the Western world. The wreckers were rewarded. Not so the homeowners. Leave aside that many of these did not exercise their right not to jettison common sense in pursuing silly loans. Many were conned, in every sense of the word. Many we told about triple A. Many were told, `safe as houses.' The rage against the machine has just begun. We are only just coming to terms with this terrible legacy. This book set sit before us, and it is a sobering and upsetting read. The style of this work is one of diligent research and documentation, facts that speak for themselves, and a restrained anger that I would have liked to see actually break out into the prose, but which does not. It would have been good to have a bit more passion to tell this epic tragedy, a bit more of the rage against the machine in the writing. But the anger is ours, and what we do with it is down to us.
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Location: Dunton, United Kingdom

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