All the Devils are Here: The Hidden History of the Financial Crisis

All the Devils are Here: The Hidden History of the Financial Crisis Hell Is Empty, And All The Devils Are Here Shakespeare, The TempestAs Soon As The Financial Crisis Erupted, The Finger Pointing Began Should The Blame Fall On Wall Street, Main Street, Or Pennsylvania Avenue On Greedy Traders, Misguided Regulators, Sleazy Subprime Companies, Cowardly Legislators, Or Clueless Home Buyers According To Bethany McLean And Joe Nocera, Two Of America S Most Acclaimed Business Journalists, The Real Answer Is All Of The Above And Many Devils Helped Bring Hell To The Economy And The Full Story, In All Of Its Complexity And Detail, Is Like The Legend Of The Blind Men And The Elephant Almost Everyone Has Missed The Big Picture Almost No One Has Put All The Pieces Together All The Devils Are Here Goes Back Several Decades To Weave The Hidden History Of The Financial Crisis In A Way No Previous Book Has Done It Explores The Motivations Of Everyone From Famous CEOs, Cabinet Secretaries, And Politicians To Anonymous Lenders, Borrowers, Analysts, And Wall Street Traders It Delves Into The Powerful American Mythology Of Homeownership And It Proves That The Crisis Ultimately Wasn T About Finance At All It Was About Human NatureAmong The Devils You Ll Meet In Vivid Detail Angelo Mozilo, The CEO Of Countrywide, Who Dreamed Of Spreading Homeownership To The Masses, Only To Succumb To The Peer Pressure And The Outsized Profits Of The Sleaziest Subprime Lending Roland Arnall, A Respected Philanthropist And Diplomat, Who Made His Fortune Building Ameriquest, A Subprime Lending Empire That Relied On Blatantly Deceptive Lending Practices Hank Greenberg, Who Built AIG Into A Rube Goldberg Contraption With An Undeserved Triple A Rating, And Who Ran It So Tightly That He Was The Only One Who Knew Where All The Bodies Were Buried Stan O Neal Of Merrill Lynch, Aloof And Suspicious, Who Suffered From Goldman Envy And Drove A Proud Old Firm Into The Ground By Promoting Cronies And Pushing Out His Smartest Lieutenants Lloyd Blankfein, Who Helped Turn Goldman Sachs From A Culture That Famously Put Clients First To One That Made Clients Secondary To Its Own Bottom Line Franklin Raines Of Fannie Mae, Who Like His Predecessors Bullied Regulators Into Submission And Let His Firm Drift Away From Its Original, Noble Mission Brian Clarkson Of Moody S, Who Aggressively Pushed To Increase His Rating Agency S Market Share And Stock Price, At The Cost Of Its Integrity Alan Greenspan, The Legendary Maestro Of The Federal Reserve, Who Ignored The Evidence Of A Growing Housing Bubble And Turned A Blind Eye To The Lending Practices That Ultimately Brought Down Wall Street And Inflicted Enormous Pain On The CountryJust As McLean S The Smartest Guys In The Room Was Hailed As The Best Enron Book On A Crowded Shelf, So Will All The Devils Are Here Be Remembered For Finally Making Sense Of The Meltdown And Its Consequences

Bethany McLean is a contributing editor to Vanity Fair magazine, and known for her work on the Enron scandal She had been an editor at large and columnist for Fortune magazine.McLean grew up in Hibbing and received her BA in English and mathematics at Williams College in 1992 After college and prior to joining Fortune, she worked as an investment banker for Goldman Sachs.

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  • Hardcover
  • 380 pages
  • All the Devils are Here: The Hidden History of the Financial Crisis
  • Bethany McLean
  • English
  • 28 October 2018
  • 9781591843634

10 thoughts on “All the Devils are Here: The Hidden History of the Financial Crisis

  1. says:

    Along with Michael Lewis The Big Short this is a must read if you want to understand the recent financial crisis The authors also did The Smartest Guys in the Room about the Enron scandal, and I found that book both enlightening and interesting The story paints a picture of a true financial bubble Anyway, maybe I finally understand CDOs and derivatives Maybe It s a chilling story, and I found myself horrified many times The worst was reading about synthetic CDO s, which were like zombie derivatives They were derivatives of derivatives and allowed investors to either go long betting the product would increase in value or short betting it would go down Unbelievable.The biggest thing I learned was don t trust anyone These guys were constantly saying, everything s all right when they knew or should have known, it wasn t And, worse yet, none of this stuff was illegal It just wasn t regulated The story jumps around a bit, introducing players and situations in different companies and organizations as it works toward the inevitable crash Several thoughts from my reading 1 The whole situation was a boiled frog one It kept building little by little No one got caught, so they kept doing and bad stuff.2 This was a failure of regulation Shame on Greenspan, who didn t believe in any regulation, ever And this is one time Congress should have stepped in, but they were convinced by the financial people that they knew what they were doing How do you know a financial person is lying His lips are moving.3 Bubbles happen They ve been going on since tulips in Holland in the 1700s This bubble never looks like the last one, so we don t believe they will happen this time One very important comment was that they happen when greed overcomes fear Good point, well illustrated in the book.4 I kept thinking, How in the world could the average investor have known what was going to happen I do know several people who pulled out just before the crash, but they are in the minority Most of us lost at least 30% of our savings I m heading toward the finish but wanted to share my thoughts If you really want to know what happened, this is the book to read Don t worry it s really interesting as well as informative.

  2. says:

    Once upon a time, not so long ago, really it was 1999 there was a group of three exceedingly smart men whom Time Magazine called The Committee to Save the World In fact, these three men Alan Greenspan, Larry Summers, and Robert Rubin seemed to think they were the smartest people in the whole wide world Together, they had put in place the economic policies of the Clinton Administration, and, boy, did things look rosy then, back in 1999, with a big budget surplus and the Dow Jones averages heading for Neptune So, here we are, in the closing days of 2010 a good time to reassess those three men in light of the economic events of the past three years The result, of course, is that they don t look so smart any But, guess what Larry Summers has yet to exit the Obama White House, where he s been the driving force behind this Administration s economic policymaking and Robert Rubin is reported to be on the short list to replace him Of the three men, only Alan Greenspan, now retired as head of the Federal Reserve Bank after serving under Ronald Reagan, Bill Clinton, and two generations of Bushes, has actually apologized after a fashion for his stubborn refusal to face economic facts that were obvious at the time to anyone well versed in finance who wasn t blinded by greed, willful incompetence, stupidity, or right wing ideology The other two men Well, we haven t heard so much as a hint of an admission of responsibility from them.So, what did The Committee to Save the World do to lay the foundations for the 2008 financial crisis As best I can tell, collectively they made three fateful errors 1 they engineered the repeal of consumer protections put in place during the Great Depression the Glass Steagall Act 2 they routinely deferred to Wall Street when shaping economic policy, paying special attention to the effect of their actions on the bond market where the really big money is to be found and 3 they stubbornly refused to recognize the dangers in the alarming growth of the unregulated derivatives market If you don t understand what a derivative is, don t sweat it Nobody else does, either, not really Not so incidentally, these same three geniuses were also instrumental in fashioning The Washington Consensus that guided the work of the International Monetary Fund and the World Bank and caused tens of millions of people to starve in dozens of developing nations over the last decade and a half But back to Topic A the financial crisis.We ve identified three of the principal culprits But, in fairness to Greenspan, Summers, and Rubin, there were many other characters who played leading roles in this still unfolding tragedy Some of their actions merely reflected changes set in motion years before And nobody in any government position, including the Oval Office, calls all the shots But the buck stops somewhere When it comes to the public policy that foreshadowed the financial crisis, the committee that saved the world bears a lot of the blame.Now about those other leading characters in this modern immorality play Chief among them, as best I can tell, were a mixed bag of people both in and out of government On Wall Street, there were dozens of senior executives at such financial powerhouses as Goldman Sachs, Merrill Lynch, Lehman Brothers, Bear Stearns, AIG, Citibank, and many others whose shared delusion that money is life s greatest good helped set the course for economic ruin Some of these men and a very few women were brilliant and found ways to make lots of money even when conditions were really, really bad Others were well, not to put too fine an edge on things downright stupid Their firms principally, Bear Stearns, Lehman, AIG, and Merrill Lynch either disappeared entirely in a whirlwind of worthless paper or took refuge under someone else s wing By contrast, the champion money maker, Goldman Sachs, racked up billions in profits by victimizing some of its biggest clients Being Goldman Sachs, of course, none of its partners faced criminal charges, as they clearly would have done in a marketplace guided by reason and fairness On Main Street, there were also dozens of co conspirators For the most part, these were the people who ran the non bank financial companies like Countrywide and other firms that sold mortgages to people who couldn t possibly afford them Some were outright crooks running fly by night operations, many of them classic bucket shops, others simply self deluding or again that word stupid Most of them got filthy rich, though, at least for a time Dozens should have gone to jail, but did they What do you think Back in our nation s capital, two institutions unfamiliar to most of the American public found themselves in the middle of the maelstrom the two quasi private mortgage repositories, Fannie Mae and Freddie Mac Don t feel sorry for them, though, because, to cop a phrase from an earlier practitioner of misdirection, mistakes were made The leadership of both institutions grabbed at opportunities to make a quick buck They succeeded, for a time, but only until the profits disappeared and we taxpayers are now footing the bill to the tune of hundreds of billions of dollars Don t forget George W Bush The decider in chief may not have played a meaningful role in economic decision making if only because it s highly doubtful he had a clue about what was going on But, dazzled by the argument that the free market would regulate the financial sector all by itself, Bush II deliberately appointed to key regulatory positions such world class ignoramuses as Christopher Cox to head the Securities and Exchange Commission It wasn t enough that the regulatory agencies teeth had dulled considerably over the years and that the powers that were in the Clinton Administration had refused to sharpen them No, George W Bush insisted on appointing financial regulators whose stated intention was not to do their jobs.So, what does all this bloviating have to do with All the Devils Are Here This is, after all, ostensibly a book review It s simple, really Bethany McLean and Joe Nocera s superb book brought into high relief the roots of the financial crisis like no other book I ve read and made it possible for me to untangle in my mind the complex interrelationships among Wall Street, Main Street, the Fed, and the Treasury Department In previous months, I d read Too Big to Fail The Inside Story of How Wall Street and Washington Fought to Save the Financial System and Themselves by Andrew Ross Sorkin, The Big Short Inside the Doomsday Machine by Michael Lewis, The Devil s Casino Friendship, Betrayal, and the High Stakes Games Played Inside Lehman Brothers by Vicky Ward, and others, all of them excellent books But McLean and Nocera s treatment of the crisis from a long term perspective, with its roots in the evolution of housing policy as well as greed and excess on Wall Street, put the whole question into perspective If you re looking for the best way to begin understanding the financial meltdown of 2007 2008 that came close to tanking the global economy, start with All the Devils Are Here.

  3. says:

    Shakespeare wrote Hell is empty, and all the Devils are here I m going to zombify this sentiment just a tad by saying what I know to be true There is no room in Hell, and the Devils now walk the earth. Oh yesthey do Is there any doubt Little ones and big ones, all spread out like an infection And if there s a cure to wiping them off the face of the planet and sending them back to Hell it s yet to be implemented because apparently it takes balls and brains and a pretty reliable moral compass all of which are in very short supply at the top where it matters most Here are a few things I ve come to understand and firmly believe Greed for lack of a better word is not good Greed in fact, turns people into out and out sociopaths if they weren t already Greed makes people cheat and lie and break the law If the stakes are high enough, greed can and will topple global financial institutions It can perpetuate a form of terrorism that should leave us quaking in our beds at night because the kind of sickly, lustful, unchecked greed which motivated sub prime mortgage lending, the deregulation of banks, the stratospheric rise of predatory lending, unregulated derivatives, CDOs and credit default swaps is the kind of greed which cost millions of people their jobs, homes and pensions not just in the United States, but all over the world We re talking pandemic here In the interconnected global world market, the reality is these days no one is safe Everyone is in bed with everyone else, and nobody is wearing a condom Here s something else the free market is not self disciplined or self regulating You know why Because it is an artificial construct made by humans to self serve humans It can be manipulated in a thousand million different ways The free market does not exist beyond the domain of the evil that men and women do It is vulnerable to illusion and delusion It can be infected by greed And it can crash, splinter, implode and bring the whole world down with it Unfortunately, sensible solutions to addressing free market vulnerabilities with things like regulation are seen as ham stringing, anti capitalist, anti American, liberal or worst of all smacking of socialism this is where you re supposed to spit put tooey If anything on god s green earth should be regulated it has to be banks, mortgage lenders and credit rating agencies These institutions represent a sacred public trust Gigantic loopholes and unfettered restraint should not be realized upon which greed can flourish and evil deeds thrive for a toxic brew of sub prime contagion to be concocted in the labs of Main St and Wall St USA and shipped to the rest of the world like the deadliest of viruses But this did happen, and will likely happen again for two reasons humans have short memories and all the Devils are still here With nary a slap on the wrist and HUNDREDS OF MILLIONS of untaxed dollars lining their pockets I could vomit If you really want to get to the heart of the 2008 financial crisis in America you could do a lot worse than this book It is a very frank, well researched assessment filled with cogent arguments and incisive observations and all things considered, a rather sane, sensible look at the how Rome wasn t built in a day, and neither were the seeds of the financial crisis sewn in a week It took about a decade, not all that long all things considering There were those who saw the writing on the wall and did nothing There were those that tried, and failed But far outnumbering the naysayers, was a group made up of fervent capitalist ideologues, free market believers, and most of all Devils with power driven by their unquenchable thirst for cash It was this group spread out across all sorts of institutions banks, CRAs, mortgage brokers, insurance companies, Wall Street traders and into the highest reaches of government who paved the way for deregulation of banks and for the rise of derivatives, CDOs, and credit default swaps at the heart of which was the immoral practice of extortionist predatory lending and sub prime mortgages What you had in fact were sociopaths motivated by greed who with the help of deregulation became medieval alchemists transforming lead into gold Game players took Product A not worth anything and turned it into Product B now worth everything and credit agencies were right there, with their hand out, willing and able to give these new products a Triple A score This was a crucial step to the alchemical process Wall Street could securitize but it was the CRAs who legitimized these products with their ratings which made the questionable products safe and secure and which meant pension plans could now legally buy them.I think the better informed we all are on this subject, the better off we ll be in the long run We have to start demanding better protection from such dubiously legal economic practices We have to start demanding transparency and accountability, and than anything else, we have to start demanding regulation Even after the worst has happened not the least of which was the grotesque yet necessary bailouts , regulation has been slow to come It s being fought against in a ferocious battle by the same people who fucked us all pardon my French the first time and if things don t change will likely fuck us all again This isn t just an American story about the sins of Wall Street and the complete and utter lack of integrity represented by a Lehman Brothers before its fall what happens in America doesn t just stay in America not any Their economy is its largest export and we are all at the table gobbling it up If the food is laced with arsenic or Ebola, I for one want to know Better yet, how about strictly regulating the food so that the worst blemish it s going to have is a bit of mold on the edges of the bread That I can pick off myself and it s not going to kill me Guess what Regulation is not going to kill you either It won t equal death to capitalism or the free market It s simply adding responsible checks and balances into a system that s gotten far too big and complicated for its own good where the lunatics are running the asylum dressed in Armani suits and spouting economical equations that us little people just can t possibly understand Fuck you The last thing I ve learned Nothing is too big to fail so you better have a Plan B Inside Job 2010 Meltdown The Secret History of the Global Financial Collapse All four parts available on YouTube Part I Part II Part III Part IV

  4. says:

    I re read this one because I think I ll be assigning it in my class I m worried we forgot about the stupidity, greed, and hubris that led to the crisis with the gov t, GSEs and banks all sharing the blame There are a lot of good financial crisis books out there I like this one better than most because it focuses on mortgage backed securities and has about Fannie and Freddie than others I also love 13 bankers which I assign So I guess I m saying everyone should read this book again especially if you re a gov regulator or work in finance.

  5. says:

    The companies involved in the financial crisis Countrywide, AIG, Merrill Lynch, Ameriquest, Lehman Brothers, and Bear Stearns, didn t simply sprout horns and tails one night The elements personified in the title are instead a list of financial tools, events, and attitudes that didn t just coalesce but rather evolved in almost predictable though unintended ways Their growth was part of a monstrous symbiosis.Readers with a non finance background should not be dismayed by the parade of ever complex financial tools described in this book Tranches, derivatives, collateralized debt obligations CDO s , CDO s squared, credit enhancements, and credit default swaps McLean and Nocera direct their explanations at the general reader However, as with any accounting technique, one can really only begin to understand these instruments within the context of specific numbers and scenarios The broader picture they paint is of techniques to manage risk Risk management such as practiced by the quants at J.P Morgan evolves into risk dilution tranching, and hedging , which leads all too easily to merely the appearance of risk reduction the role of the ratings agencies, passing risk on to 3rd parties as if it were a hot potato, and ultimately, the inability to even identify where the risk lay in the layers of repackaged shadow securities It s interesting to learn that when Merrill Lynch was in crisis, several of its board members began requesting tutorials on CDO s So again, don t be intimidated by the financing terms The first half of the book deals with these elements in the context of the Savings and Loan crisis, rising interest rates, changing banking legislation, an ideology of non regulation, and a political agenda of increasing the numbers for home ownership It is startling to learn that the authors chart the seeds of the crisis 30 years back in time History, not specific villains, is the focus here Most fascinating, perhaps, is the interplay between Wall Street and the political clout of Fannie Mae This segment even peaks with a punchline we learn what a fannie pack is The second part of the book follows specific characters AIG, Countrywide, Ameriquest and Merrill Lynch It is striking that the guiding human emotion in these stories was not greed but envy Companies and leaders feared that their competitors might pull away from the pack, and that fear motivated the drive toward expansion and risk Despite the fact that the focus is not on blame, it is clear that McLean and Nocera are ardent skeptics of the self regulation credo the financial community has so long espoused Greenspan and like minded economists at the Federal level failed in their duty to protect the public, even when regulators and consumer advocates at the state and local level were pointing to problems None of these people have yet shown any public remorse for the mistakes that were made Somehow, an admission of Oops doesn t seem to suffice The assessment of Goldman Sachs is problematic The authors emphacize that Goldman Sachs was despised, not so much for its lack of ethics, as for its success in execution of its game plan This book serves as an introduction to a much closer scrutiny of the investment industry ALL THE DEVILS ARE HERE is the first book I have read on the financial crisis It won t be the last It is definitely well written and cohesive, and will encourage readers to delve further.

  6. says:

    This is a good survey of the 2007 08 financial meltdown and the events leading up to it The world of mortgage finance is arcane and to begin with, and it was made even arcane by Wall Street s groovy new inventions Joe Nocera NY Times business reporter and Bethany McClean The Smartest Guys in the Room, Enron. take on the task of transforming that world into a compelling story and succeed, mostly.My only criticism of the book would be that it never takes a step back from the events to take a broader economic or historical view The reader is left with the sense of doom How will we ever construct a useful credit system in the US when all the players are corrupt or incompetent I think a bit of historical context would have been useful here For one thing, the climax of the story is a classic banking panic as the authors themselves observe In June 2007 Bear Stearns creditors tried to get their money all at once, and couldn t There was no market for the debt As the author s put it, it was a classic run on a bank except those racing to pull their money out weren t depositors They were bankers Not mentioned is the fact that banking panics on this scale had not been seen in the United States for 80 years Before that panics were common 1857, 1873, 1893, 1907, 1929 all years of financial panic followed by economic collapse Somehow we got the banking sector under control for several decades after that Maybe we can do it again.

  7. says:

    I pulled this off the bookshelf to go through again because it seems that we re heading for another one The 2008 one was the mortgage bundling What is happening now is car loans are lapsing at an extremely high rate And many of the rules put in place after 2008 are being tossed out by this administration The fact former lobbyists are now running agencies that are supposed to police the very industries they lobbied for is not a good sign.It appears we do not learn from history.

  8. says:

    I must profess at the outset that I have a bit of a nerdy girl crush on Bethany McClean She is everything I wish I could be Intelligent, articulate, well versed on topics of financial and economic complexity, and a respected journalist She s also very beautiful, but I am what I am so far as that is concerned I continue to read as much as I can about the Crisis of 2008 Maybe it s because I am unemployed and grow and bitter with each day Maybe I d like to be able to rail against Wall Street with some arguments rooted in substance There s a little bit of that, but mostly, I m fascinated, utterly and completely fascinated, by the complexity and outrageousness which went into creating the most disastrous financial disaster of my lifetime There is than enough blame to go around for than one party Truth be told, it s next to impossible to blame just one party But the drama s usual players are to be found here Subprime mortgage, derivatives, lax regulation, greed Even so, McClean and Nocera do a fine job of revealing a few little known tidbits For example, how many people know that than half of the subprime loans given during the lead up to the crisis were not even for first time home buyers Most of the loans went to people seeking to purchase second homes or looking to get loans to make improvements on their current homes Conservatives in denial and also in the pocket of Wall Street contributors like to place the blame on borrowers taking out loans they knew they could not afford That was a significant problem, but this didn t stop mortgage officers from falsifying applications or slacking on underwriting because they were being told that Wall Street needed loans to put into the hot new instrument Collateralized Debt Obligations making everyone rich Feed the Beast This didn t stop mortgage companies from pushing applicants who could have qualified for prime loans into subprime loans Why Because subprime loans offered in the ways of fees and compensation And then there were the credit ratings agencies agreeing to offer the best ratings to securities they knew were junk It s hard to refuse the request of the very banks upon whom you are dependent for your survival, isn t it This book is dense, but well worth the effort I m not a finance mind and there was enough history and profile type writing in this book to make it approachable for an intelligent reader McClean and Nocera are equal opportunity in that they don t politicize this story It s easy to want to, but as mentioned, there is plenty of blame to go around for anyone.

  9. says:

    I ve read a number of books on the financial crises and, for a layperson, think I have a pretty good grasp of what exactly happened However, it never really clicked until I read this one I had the vocabulary but it still seemed abstract The Big Short was easy to understand but too anecdotal To Big To Fail was an amazing play by play of the actual crisis but pretty scant on the underlying causes 13 Bankers was somehow forgettable though in fairness, I read it start to finish on a plane to London This one nailed it It s not shrill It s not an anti Wall Street screed, but it s also not an apologetic It s soundly argued and well written, knowing when to get broad and when to focus nearer Most importantly, it cemented what I knew and made me aware of what I don t understand I can t quite get my head around synthetic CDO s, as yet This is an amazing book, and one I imagine I ll return to.

  10. says:

    I liked the book for its comprehensive set up of why the financial crises happened Could have been written a little engaginglz for example I thought sorkins too big to fail was much entertaining,

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