All the Devils Are Here
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survival after collapse
Morrice, Brad
Mortgage-backed securities (MBS)
blue sky laws exemption
CMOs
Fannie Mae portfolio of
first issue
laws expanding growth of
profitability of
rating of
rationale for
REMICs
risk weighting
of subprimes. See Subprime mortgage-backed securities (subprime MBS)
tranches
Mortgage Bankers Association
Mortgage Guaranty Insurance Corporation
Mortgage originators
Ameriquest
Countrywide Financial
crisis of 1998
going public
hard-money lenders
write-downs
Mortgages
adjustable rate
conforming
to credit risks. See Subprime mortgages
Federal Reserve authority over
first- and second-lien
prepayment risk
securities based on. See Derivatives; Mortgage-backed securities (MBS); Subprime mortgage-backed securities (subprime MBS)
Mozilo, Angelo
biographical information
and Countrywide collapse
exit package
homeownership as mission
SEC fraud charges
style/personality of
subprimes, view of
See also Countrywide Financial
Mozilo, Mark
Mudd, Daniel
during collapse
Fannie under
on Johnson era
Multisector CDO
National Association of Affordable Housing Lenders
National Community Reinvestment Coalition
Nationally Recognized Statistical Ratings Organization (NRSROs)
National Predatory Lending Task Force
Nayden, Denis
Netting out
Nevins, Lou
New Century
New Century Financial
collapse of
fraud, view of
Goldman deals
growth of
Merrill buyout plan
Nicolaus, Stifel
Norell, Lars
Norma
Northern Rock
Noto, Tom
Obama, Barack
Arnall supported by
regulatory actions
Off-balance sheet investments
Office of Federal Housing Enterprise Oversight (OFHEO)
establishment of
under Falcon
Fannie, regulatory weakness
Fannie accounting fraud investigation
and GSEs collapse
See also Federal Housing Finance Agency
Office of the Comptroller of the Currency (OCC)
preemption policy
subprime crackdown
Office of Thrift Supervision (OTS)
Long Beach discrimination case
preemption policy
subprime guidelines
subprimes, neglect of issue
O’Neal, Stan
biographical information
and CDO collapse
CDO exposure, ignorance about
Kronthal firing
leaves Merrill
Merrill Lynch under
Patrick/Zakaria firing
risk encouraged by
and sale of Merrill
Semerci hired by
style/personality of
See also Merrill Lynch
O’Neill, Sandler
Option One
Orkin, Michael
Overcollateralization
Ownit
Parekh, Ketan
Park, Gene
Parker, Ed
Partnership offices
Patrick, Deval
Patrick, Tom
Paulson, Henry, Jr.
and Bear Stearns buyout
during collapse
compensation from Goldman
derivatives, regulatory efforts
Goldman Sachs under
GSEs, approach to
and Lehman collapse
style/personality of
and TARP
Paulson, John
Pay As You Go (PAUG)
Pay option ARMS
Pelosi, Nancy
Pension funds, MBS, buying
Phillips, Dan
Phillips, Gene
Pickens, T. Boone
Pierce, Samuel
Political contributions, by Fannie Mae
Pomeroy, Earl
Pope, Claude, Jr.
Pratt, Dick
Predatory lending, subprimes
Preemption
Prepayment penalties
PricewaterhouseCoopers
Primary Residential
Prince, Chuck
Procter & Gamble
ProPublica
Prough, Stephen
Quality Mortgage
Quants/qualitative methods
of AIG FP
derivatives
of J.P. Morgan
operation of
Value at Risk (VaR)
Quental, Greg
Rackson, Randall
Raines, Franklin Delano
biographical information
and Fannie fraud investigation
leaves Fannie
Rand, Ayn
Ranieri, Lewis
and MBS-related legislation
MBS developed by
on subprime industry faults
Ratings, bonds. See Bond ratings; Moody’s; Standard & Poor’s
Reagan, Ronald
Real estate investment trusts (REITs)
Redleaf, Andrew
Refinancing, by subprime companies
Regulation. See Federal regulation
Reich, John
REMIC (Real Estate Mortgage Investment Conduit)
Repo market
Residuals
Resolution Trust Corporation
Rhinebridge
Ribicoff, Abraham
Ricciardi, Chris
Risk-layered loans
Risk management
and bond ratings
capital reserves for
credit enhancements
and derivatives
Goldman systems
Greenberg/AIG system
J.P. Morgan systems
mark-to-market accounting
quants’ efforts
risk weightings
and securitization
Rosner, Josh
credentials of
on OFHEO
subprimes, warning about
Rotella, Steve
Rubin, Howard
Rubin, Robert
biographical information
“Committee to Save the World,”
derivatives, negative view of
derivatives regulation, opposition to
at Goldman
and GSEs lack of regulation
style/personality
Russia, economic crisis
Ryan, Tim
St. Denis, Joseph
Salomon Brothers
Fannie deals with
MBS profitability
Sambol, Dave
biographical information
Countrywide loan production by
Countrywide under
SEC fraud charges
style/personality of
Samuels, Sandor
Sandefur, Jennifer
Sarbanes, Paul
Savage, Tom
AIG-FP under
biographical information
Savings & loan banks (S&Ls)
assets, liquidation of
destabilization of
housing differential
and REMICs
Schumer, Charles
Schwartz, Alan
Secondary Mortgage Market Enhancement Act (S
MMEA)
Second-lien mortgages
Securities and Exchange Commission (SEC)
Broker-Dealer Lite
Countrywide fraud charges
Goldman fraud charges
holding companies, lack of regulation
Mozilo, Sambol, Sieracki fraud charges
See also Greenspan, Alan
Securitization
negative consequences of
process of
risk transfer in
See also specific products
Seidman, Ellen
Semerci, Osman
firing of
hired by O’Neal
and Merrill CDOs
Senior/subordinated bonds
Shelby, Richard
Sieracki, Eric, SEC fraud charges
Simpson, Robert
Sinha, Gyan
Smiechewicz, Walter
Smith, Josh
Snow, John
Société Générale
Sorkin, Andrew Ross
Sosin, Howard
AIG-FP under
biographical information
-Greenberg relationship
role as quant
Sparks, Dan
Spector, Warren
Spitzer, Eliot
AIG investigation
Countrywide investigation
Standard & Poor’s
CDOs, downgrading
CDOs, rating
establishment of
Starr, C. V.
Starr International Company (SICO)
States
attorneys general, Ameriquest investigation
preemption policy
Steel, Bob
Stein, Kevin
Stockman, David
Structured investment vehicles (SIVs)
Citigroup acquisition of
failure of
operation of
Subprime mortgage-backed securities (subprime MBS)
development of
first
ratings, manipulation of
Value at Risk (VaR) applied to
Wall St. and increase in
See also Derivatives
Subprime mortgage market collapse
AHMIC collapse
Ameriquest
Countrywide
crisis of 1998
crisis of 2006-2007
First Magnus
IndyMac
New Century
and synthetic CDOs
Subprime mortgages
consumer complaints/lawsuits
credit enhancements
dangers and warnings about
defaults, rise in
development of
Greenspan neglect of
increase in 1990s
lenders of. See Hard-money lenders; Mortgage originators
liar loans
low down-payment
no down-payment (HLTV loans)
number issued (1998-2006)
pay option ARMs
prepayment penalties
to prime loan borrowers
reemergence of (2004)
as refinancing
regulation, lack of
risk-layered loans
securities based on. See Derivatives; Subprime mortgage-backed securities (subprime MBS)
2/28 loan
Sullivan, Martin
and AIG collapse
AIG under
leaves AIG
See also American International Group (AIG)
Sumitomo
Summers, Larry
“Committee to Save the World,”
derivatives regulation, opposition to
on Fannie regulation
Super-senior tranche
Swaps. See Derivatives
Swecker, Chris
Swenson, Michael
Synthetic CDOs
dangers of
downturn and rebound
features of
Goldman Sachs
Merrill Lynch
safety, facade of
Tannin, Mark
and Bear hedge fund collapse
indictment of
Tanoue, Donna
Tavakoli, Janet
Taxation
double, MBS exemption
write-downs
Tax Reform Act of 1986
Taylor, John
Taylor, Lisa
Tett, Gillian
Thain, John
Thomas, Jason
Thompson, Kennedy
Thrifts. See Savings & loan banks (S&Ls)
Timberwolf
Tourre, Fabrice
Tranches
of CDOs
of CMOs
double-taxation exemption
features of
profitability of
ratings, manipulation of
super-senior
of synthetics
Treasury Secretary. See also Paulson, Henry, Jr.
Trop, Cecile
Troubled Asset Relief Program (TARP)
Turtlebaum, Alan
Tyco
Usury caps
Value at Risk (VaR)
Van Solkema, Steve
Vartanion, Tom
Vigilante, Richard
Viniar, David
Volker, Paul
Wachovia
and Merrill buyout
Wells Fargo acquisition of
Waldorf, Michael
Walling, Greg
Wall Street
ABX subprime index
Basel Committee rules
CDOs
competition with GSEs
correlation trading
credit default swaps
foreclosures, plan to prevent
MBS
Obama era regulation
quants/quantitative analysis
and REMICs
securitization
subprimes, encouraging
synthetic CDOs, development of
See also specific investment firms; specific types of securities
Wall Street Reform and Consumer Protection Act (2010)
Warehouse lines
Warner, Ernestine
Warrack, Tom
Warren, Christopher
Washington Mutual
J.P. Morgan acquisition of
Long Beach acquired by
OTS subprime guidelines
subprimes by
Weatherstone, Sir Dennis
biographical information
derivatives report by
risk management by
See also J.P. Morgan
Weinberg, Sidney
Wells Fargo, Wachovia acquisition by
West, Christal
Whitebox Advisors
Whitehead, John
Willumstad, Robert, AIG under
Witt, Gary
WMC
WorldCom
Write-downs, by mortgage originators
Yu, Mabel
Zakaria, Arshad
Zitting, Dave
Zuckerman, Gregory
1
The rest of the story shows the other side of Greenberg. After the shah fell, Shabani spent a year in an Iranian prison, and on several occasions his Iranian guards pretended they were about to execute him. According to Fallen Giant by Ronald Shelp with Al Ehrbar, Greenberg personally took charge of the effort to free him. Although he was finally released from jail, he was still not permitted to leave the country. Greenberg did not give up, however; eventually, AIG managed to smuggle Shabani out of the country, at a cost to the company of about a million dollars.
2
Rackson sued because he claimed that he alone was never paid by Sosin.
3
ACC calls Parker a “disgruntled former employee” and notes that an arbitrator decided against his claim for wrongful dismissal. The arbitrator did not opine on Parker’s allegations of fraud. But he wrote that “there is no evidence that anything that happened to Parker in terms of his employment was connected” to his
reporting of problems.
4
The case was scheduled to go to trial in October 2010, shortly before the publication of this book.
5
In response, Fannie hired a telemarketing company, which blanketed the Hill with tens of thousands of letters protesting the bill. Some of them turned out to be from dead people. When asked how much the campaign cost, Fannie said that information was “proprietary.”
6
It should be noted that although both Spitzer and the SEC would soon bring charges against Greenberg, he has never gone to trial for any alleged wrongdoing. Although five people were convicted in the Gen Re case, including an AIG executive, Greenberg was not a part of that case, even though he was an unindicted coconspirator. And although Greenberg eventually settled with the SEC, neither admitting nor denying guilt, as of this writing he has yet to settle with the New York attorney general’s office. Throughout, Greenberg has consistently denied any wrongdoing.
7
Through his attorney, Frost denies being upset, and says that he was “part of the process.”
8
YSP stands for yield spread premium. Ostensibly it means a deal in which the borrower agrees to a higher interest rate in return for lower up-front costs. But during the bubble, YSPs were horribly abused, and the phrase YSP came to refer to the rebate that brokers got for putting borrowers into higher-interest loans. Elizabeth Warren, the Harvard law professor and well-known financial consumer advocate, calls them “hidden kickbacks.”
9
Countrywide later paid $600 million to settle the suit, while denying the allegations.
10
A Gissinger defender says that this is inaccurate, and that Gissinger and McMurray had a professional working relationship.
11
In that same memo, Mozilo noted that while purchase loans—loans used to actually purchase a house—had increased from 19 percent of Countrywide’s subprime business in 2001 to 33 percent in 2006, the other two-thirds of its subprime loans were refinancings. In other words, even at Countrywide, this wasn’t really about putting people in homes.
12
Ironically, First Franklin had been founded by Bill Dallas, who later started Ownit, the mortgage lender in which Merrill owned a 20 percent stake.
13
According to a former government official, one of the biggest cheerleaders for the CSE program was SEC commissioner Annette Nazareth. In fact, the CSE program was based on something called Basel II, an update of the original Basel rules, which was being widely implemented in Europe and which allowed banks to lower their capital requirements significantly, resulting in a much higher leverage ratio. But Basel II never went into effect in this country, despite the urging of the big banks and the Federal Reserve, largely because of resistance from the FDIC. According to this same former official, the “chief proselytizer for Basel II” at the Fed was Federal Reserve vice chairman Roger Ferguson. As it happens, Ferguson and Nazareth are married.
14
Three New Century executives later settled with the SEC, neither admitting nor denying guilt, over charges that they failed to disclose important negative information.
15
Washington Mutual executives also worried about Goldman Sachs. E-mails exchanged between WaMu CEO Kerry Killinger and other executives in late 2007, when the thrift was looking for an investment banker, offer a perfect snapshot of the modern Goldman Sachs. Todd Baker, WaMu’s executive vice president, wanted to bring in Goldman.