The End of Wall Street
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The roots of the mortgage bubble and the story of the Wall Street collapse-and the government's unprecedented response-from our most trusted business journalist.
The End of Wall Street is a blow-by-blow account of America's biggest financial collapse since the Great Depression. Drawing on 180 interviews, including sit-downs with top government officials and Wall Street CEOs, Lowenstein tells, with grace, wit, and razor-sharp understanding, the full story of the end of Wall Street as we knew it. Displaying the qualities that made When Genius Failed a timeless classic of Wall Street-his sixth sense for narrative drama and his unmatched ability to tell complicated financial stories in ways that resonate with the ordinary reader- Roger Lowenstein weaves a financial, economic, and sociological thriller that indicts America for succumbing to the siren song of easy debt and speculative mortgages.
The End of Wall Street is rife with historical lessons and bursting with fast-paced action. Lowenstein introduces his story with precisely etched, laserlike profiles of Angelo Mozilo, the Johnny Appleseed of subprime mortgages who spreads toxic loans across the landscape like wild crabapples, and moves to a damning explication of how rating agencies helped gift wrap faulty loans in the guise of triple-A paper and a takedown of the academic formulas that-once again- proved the ruin of investors and banks. Lowenstein excels with a series of searing profiles of banking CEOs, such as the ferretlike Dick Fuld of Lehman and the bloodless Jamie Dimon of JP Morgan, and of government officials from the restless, deal-obsessed Hank Paulson and the overmatched Tim Geithner to the cerebral academic Ben Bernanke, who sought to avoid a repeat of the one crisis he spent a lifetime trying to understand-the Great Depression.
Finally, we come to understand the majesty of Lowenstein's theme of liquidity and capital, which explains the origins of the crisis and that positions the collapse of 2008 as the greatest ever of Wall Street's unlearned lessons. The End of Wall Street will be essential reading as we work to identify the lessons of the market failure and start to reb...
presentation given to him in the middle of the following year, Fannie’s managers observed that the company stood at a “strategic crossroads.”14 Essentially, it faced a choice between endorsing riskier mortgages, which were driving Wall Street’s growth, or seeing its market share erode further. Especially worrisome was the steady loss of business from Countrywide, Fannie’s most prized customer. Like Freddie, Fannie decided to increase its share of Alt A loans and of subprime loans. It also began
failure, but sorely overpaying him during his employ. Showing they had learned nothing, the directors gave the new CEO, John Thain, a signing bonus worth more than $40 million. Prince was overpaid for working and for quitting. Upon leaving Citi, he got $12 million “cash incentive” as well as free office space, secretarial and driver services, and the taxes thereon, for five years, all worth an estimated $10 million and all in addition to his accumulated stock. p A year later, the National
loan. The mortgages had been issued by a “nonbank lender” (possibly Countrywide) on the West Coast. The lender took the loans to a New York investment bank, which assembled the pool and brought the package to Moody’s. XYZ typified the exuberance of the age. Every one of the mortgages was subprime, and three-quarters of the mortgages were adjustable. Moreover, according to the spreadsheet that the investment bank supplied to Moody’s, 43 percent of the borrowers did not provide written
$43 billion in super-senior securities, the most protected pieces of CDOs. Citi’s bankers viewed CDOs (thanks to their higher yields) as an easy way of generating additional revenue. Citi’s risk managers, like AIG’s, believed that they were risk-free—but they did not consult the mortgage specialists at their own affiliate, who had come to a contrary conclusion about the underlying mortgages.6 While its position in mortgage securities mushroomed, Citi layered risk upon risk by extending big loans
Lehman’s bankers worried that the deal would seem like an act of desperation and turned it down. The tension between confidence and gnawing anxiety permeated the firm. At a senior management meeting in April, Scott Freidheim, Fuld’s cochief administrative officer, turned to the group and declared, “Bear’s gone. What’s obvious to everyone now is we’re the smallest.” Paolo Tonucci, Lehman’s young treasurer, felt that Lehman was a bigger and better firm than Bear, more likely to survive. Its credit