All the Devils Are Here
The Hidden History of the Financial Crisis
By: Bethany McLean, Joe Nocera
Published: November 16, 2010
Format: Hardcover, 400 pages
ISBN-10: 1591843634
ISBN-13: 978-1591843634
Publisher: Portfolio/Penguin
"The birth of mortgage-backed securities didn't just change Wall Street and the GSEs. It changed the the mortgage business on Main Street, too", write acclaimed business journalists Bethany McLean and Joe Nocera, in their remarkable and important book All the Devils Are Here: The Hidden History of the Financial Crisis. The authors present in detail, and in an approachable and understanding way, the history of the 2008 financial crisis. They describe why the crisis was really about people and how they act in what they believe is their own self interest.
Bethany McLean recognize that the fundamental problem that led to the 2008 financial meltdown was an inability of anyone to see the big picture. The major players, whose individual actions combined to create a housing bubble that burst, were incapable of seeing beyond their own companies, and their own personal gain. The dots were all draw to be connected, but no one joined them with the necessary lines. The securitization of mortgages, into a complex and almost incomprehensible alphabet soup of structured financial instruments, formed one of the dots. Another huge dot, as the authors write, were the sub-prime mortgage lenders. They were connected to the GSEs including Fannie Mae and Freddie Mac, through their backing of the mortgages. The mortgages, bundled by Wall Street investment banks into securities, were given the AAA blessing by the bond rating agencies. These questionable investment vehicles were then marketed globally. The dots were all on the table, but no one made the critical connections.
Bethany McLean and Joe Nocera (both in photo left) paint vivid and compelling portraits of the CEOs, politicians, appointed officials, and regulators. The roles played by these people, and countless others are presented as interconnected, with the actions of one person or group affecting all of the other individuals and organizations. In effect, the housing bubble and the subsequent crisis were not about housing, but through individuals acting in their own self interest, while ignoring any evidence that their actions were leading to a dangerous precipice. The authors share stories of CEOs who didn't want to hear any bad news, and of how anyone attempting to sound an alarm were marginalized and ignored completely. The profits made from what were very often allegedly fraudulent were simply to great to be stopped or even slowed down. When the bubble began to burst, the first response of the actors was to do more of what they had been doing in the past. The end result of this self interest quest was disaster, that almost brought down the entire global economy.
For me, the power of the book is how Bethany McLean and Joe Nocera connect the people involved in the subprime crisis with their actions, and how that combination resulted in a near collapse of the economy. The authors put the pieces together, creating a systemic view of the events that led up to the crisis. The authors bolster their narrative with telling portraits of the main players involved in the crisis. The insight that the housing bubble wasn't really about housing, since the vast majority of subprime loans were for refinancing, brings a fresh perspective to the issue at the heart of the crisis. Housing had little to with the securitization of mortgages, the wildly inflated AAA ratings given to various structured financial instruments, and the race for profits from whatever means possible.
The authors present a very readable and engaging narrative of the events that created and ended the subprime bubble. The ideas put forward in the book, through describing the actions of the people involved, give the issues a life and depth of understanding for the reader. In the end, people and their actions move economic events, on both the micro and macro levels. The authors make certain that the reader recognizes that the participants were flawed individuals, who made enormous mistakes and even allegedly committed outright fraud. The actors in the financial crisis weren't so much devils, as they were all too human.
I highly recommend the important and thought provoking book All the Devils Are Here: The Hidden History of the Financial Crisis by Bethany McLean and Joe Nocera, to anyone seeking an informative and understandable analysis of the 2008 financial meltdown. The authors provide a good mixture of character sketches, technical descriptions of the complex securities involved, and the resulting collapse.
Read the eye opening and well researched book All the Devils Are Here: The Hidden History of the Financial Crisis by Bethany McLean and Joe Nocera, and receive a wake up call about how an idea as simple as the financial aspects of home ownership can spiral out of control, and almost destroy an entire economy. This book will make the reader think about their current ideas, and that makes the book a must read for everyone.
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