All the Devils are Here

I am almost finished reading “All the Devils are Here,” written by Bethany McLean and Joe Nocera.

I decided to order it and read it after I saw the authors interviewed by Jon Stewart on the Daily Show.  The book has a lot of “financial theory” in it, which I struggled with sometimes, but you really don’t need to understand all of that stuff to become stunned and outraged by how the financial crisis happened.  Page after page I was shaking my head over the sheer greed and recklessness of all the players in this sorry saga.  I did take the time to go to other sources to get a “dumbed down” explanation of how certain things work like “selling short,” “margin calls,” and the like.  I even figured out how the whole “mortgage backed securities” market worked, which is the beast that ultimately cratered the economy.  The authors explain it in great detail, but because it is so “snake oily” it remained a bit fuzzy.  I poked around the Internet and found this chart, which made the mortgage backed securities flim flam more clear to me.   It is a good model as long as the lending standards and qualification are strictly controlled abided by.  If you maintain those standards the number of mortgages that can be produced is finite.   But these greed heads (a Lord Buckley term) wanted more, and more and more mortgages to feed the machine depicted in the chart.  So the standards gradually deteriorated until“subprime” loans were eventually being given to people who everyone knew were not going to be able to pay!  It blows my mind.

Anyway, I know this book will not be everyone’s cup of tea, but it’s certainly worth reading, and it is a hell of a good bad story.

~ Tom