All the Devils are Here

Wednesday, November 17, 2010

Business journalists Bethany McLean and Joe Nocera discuss the many problems that helped bring down the economy. The full story is like the legend of the blind men and the elephant—almost everyone has missed the big picture, and almost no one has put all the pieces together. Their book All the Devils are Here: The Hidden History of the Financial Crisis goes back several decades to explore the complex, hidden history of the financial crisis.


Bethany McLean and Joe Nocera

Comments [20]

tom from long island

I recall going to see one of these "lenders" advertising if "youre tired of paying rent, have a job, etc you can own a house" - and walking out thinking, "Wow, a lot of people are gonna get screwed and we're all pay'n for it." Thank god my parents didnt raise me to be a fool.

I saw the danger right away...I dont blame the borrowers so much, but when someone you DON'T know who is out to make a buck is telling you not to worry, its all good... you should run..!

Nov. 17 2010 07:54 PM
Eugenia Renskoff from Brooklyn

Hi, Leonard, Yes, numerous anonymous lenders had a hand in the mortgage crisis. Some of the culprits were the big banks, while others were people that nobody has ever heard of. In my case, the loan officer in Atlanta, GA gave me two terrible loans at 9.75% and 13%. These were so called 80- 20 loans. I did not know they were bad. My only goal was to get a house for myself. I had no other motive. Then, there was a two year prepayment penalty. At the time I did not realize this was bad either. And there was something else that was fishy with another aspect of the mortgage process. I found out too late that I had been duped. It was a total disaster for me and it is to this day. I lost my condo in Buckhead and I still miss it. I am waiting for justice and for the people involved (the realtor I was working with recommended the loan officer) to be punished. I do not want to have to wait forever. My money back would be only fair as well. My credit score went from excellent to nothing and my savings were gone. Eugenia Renskoff

Nov. 17 2010 03:13 PM
7eco from Germany

Early in 2007, when I first heard rumors about the looming "housing bubble" and the global economic crunch that might come with it, I remember imagining how such a crisis might be portrayed afterwards. (yeah, I do that sometimes...)

I actually imagined it being explained by Bethany McLean, the same way she narrated part of »Enron: The Smartest Guys in the Room« (book 2003, documentary film 2005).
I thought that many aspects that led to the downfall of Enron were still going on unmitigated and would lead to worse disasters again and again. (culture of greed, political corruption, deregulation, dereliction of ethical standards in face of perceived authority & success)

Now you can imagine the wonderment I felt upon happening to hear her very distinguishable voice on WNYC, doing exactly what I imagined 3 years prior, before that particular crisis was even widely acknowledged. (of course not knowing the details back then)

I'll be sure to get that book and hope that there'll be an equally brilliant documentary film as the Enron one. Hopefully people will honor & learn from the work of brave reporters like her and her co-authors.

Nov. 17 2010 01:31 PM
Godwin from Bayside

At the 24:30 minute mark they begin to talk about 27 states that tried to take action against sub-prime lending but were thwarted by the federal Office of the Comptroller of the Currency (under the doctrine of preemption). Does anyone know where I can get a list of these states?

Nov. 17 2010 01:30 PM
Ed from Queens NY

Freddy and Frannie unfair domination of the mortgage market is 100% responsible for housing bubble even thought the authors stated that FF did not start the sub prime business.

FF so distorted the market, with the implicit guarantees that it had from the government that Wall Street had to go around them in order to compete as stated by the authors.

Then when FF got into sub prime the bubble was started since with a government guarantee all bad loans become good since their risk is near zero.

This moral hazard is almost always caused by government with the best intentions.

Nov. 17 2010 01:23 PM
Edward D. Weinberger from Manhattan

Having worked on sub-prime mortgage backed securities, credit default swaps, etc., I am pleased to hear journalists that seem to understand the nuances of what actually happened. Especially encouraging were their comments that mortgage backed securities were an initially good idea that got out of hand. As they said, the basic math works, IF the underlying mortgages aren't junk, and it was only when people realized that NOBODY had a stake in the soundness of the mortgages that things went sour. But, sadly, the underlying premise of the book is also right --- that NOBODY in the business had clean hands.

Nov. 17 2010 12:51 PM
Truth & Beauty from Brooklyn

I work as a bookkeeper and one of the things I love about it is that numbers are always honest. No matter which way you approach them, if you put in the correct numbers and use the correct formulas, everything will work out in the end.

When numbers don't work out, it is usually due to human interference, which is exactly the problem with economics and finance in this country. When we try to do things with numbers that simply can't be done, the results always reveal themselves.

In the case of the mortgage situation, the numbers have spoken and revealed both the perpetrators of the fraudulent behavior - the banks and mortgage industry - as well as the numbers' intrinsic capacity to right themselves.

Nov. 17 2010 12:48 PM
Jack Jackson from Central New Jersey

Bush's only economic win was the growth in housing prices and stock prices. Each of these acted as a sink for keeping inflation in check. His stimulatory and wreckless fiscal policies should otherwise have caused a lot of inflation.

Dubya himself popped this bubble by letting gasoline hit (and stay) at $4/gallon for six months. Too many sub-primes (and other mortgage owners) were forced to choose between getting to work and paying for the place to come home to after work. Guess what won. Now the banks have been saved but the favor has not trickled down to homeowners still hurt by the bubble bursting.

The lesson is simple...Pay for the wars as you fight them; Don't cut taxes without cutting spending; there is no free lunch.

Nov. 17 2010 12:46 PM
Sophie from Poughkeepsie, NY

Joe from Brooklyn is right.

Anyway, subprime will some back, because it's all about making money, and as more an more Americans walk around with wrecked credit some "enterprising" institution will find a way to cash in.

Nov. 17 2010 12:45 PM

"I was surprised when I looked back.." blah blah blah. Well others paid attention at the time. Where the hell were the media. What about THEIR role in this in NOT doing their job of informing the public. Year's later though publishers can make money with these post-mortems.

Nov. 17 2010 12:37 PM
Nancy from Brooklyn

Given OCC's role in killing state legislation related to subprime lending, the prospect of OCC taking over supervisory responsibility for the institutions now supervised by OTS is frightening.

Nov. 17 2010 12:36 PM
Joe from Brooklyn

Also 1St Republic Mortgage Bankers in Floral Park Long Island

Nov. 17 2010 12:35 PM
Joe from Brooklyn

Leonard, please direct these guests to in NYC. 93.5FM NYC. They have been pushing subprime mortgages on several of their radiop shows for the past 5 years+ preying on peoples emotions. I have heard companies change names but use the same spokespersons on each shows segment. The West Indian Community in SE Queens and LI have been victimized by these lenders who advertise on these shows. I have contacted WBAI about them as well. Just tune in RIGHT NOW and you will hear them...

Nov. 17 2010 12:33 PM
Ralph from NYC

I'm surprised these two left out the civil rights era aspect of the creation of Fannie and Freddie.

Nov. 17 2010 12:32 PM
Steve from Brooklyn, NY

I've heard Fanny and Freddy are the real culprits so often from free market favoring commentators. How is it that your guests opinions, that F&F were followers not causes, and those who blame Fanny and Freddy can exist without the disagreement getting sorted out? Who should I believe?

Nov. 17 2010 12:24 PM
Susan from Manhattan

PLEASE ASK Mr. Nocera and Ms. McLean --
When I went to real estate investing seminars in the mid-2000's, the speakers would mention how after 9/11 investors pulled money out of Wall St. and put it into real estate. Wall St. wanted the money back, so that was part of the run-up in prices that ensued, and presumably part of the derivatives feeding frenzy. Any comment?

Nov. 17 2010 12:23 PM

Actually the book "CDS Delivery Option: Better Pricing of Credit Default Swaps" By David Boberski came out in 2009. And referenced the lobbying of Fannie to create a futures contract in the late 1990s

Nov. 17 2010 12:22 PM
kevin warren from westchester

jeeze, are these two really that dim?
seriously asked.
their book shows the grip on economics & finance that a middling seventh grader should have.
this piece is painful to listen to, but, i guess that you know your audience, and, well...
that is always what is scary about new york--how uneducated & unworldly people are.

Nov. 17 2010 12:22 PM

What is the role of Fannie and Freddie securities in maintaining the dollar's value? I was under the impression that foreign governments that have trade surpluses with the USA bought Fannie and Freddie for more yields.

Plus in the 1990's I remember reading in a book on Credit Default swaps by David Boberesky of UBS, that Fannie was trying to create a futures contract for it's paper similar to Treasuries when the USA was paying down it's treasury debt.

Nov. 17 2010 12:20 PM
Sophie from Poughkeepsie, NY

Yes, all this obsession with owning a home comes at the detriment of decent rental housing. Try to find a rental in a good neighborhood, close to work and schools and have it not cost over half of your salary. Currently my husband commutes 3 hours a day just so we can live in a good area with good schools. What's wrong with that picture?

Nov. 17 2010 12:14 PM

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