What we read while not taking pictures with Donald Sterling’s girlfriend…
What we read while finding all these free eggs…
What we read while Warren Buffett slept soundly…
What we read while not watching ice dancing…
What we read while somehow getting the six seed in the AFC…
We’re up to Part VI, which means we’re over halfway through the breakdown of financial crisis literature. Today John S looks at what might be the best book about the crisis, and what might be the most fun.
All the Devils Are Here: The Hidden History of the Financial Crisis
by Bethany McLean and Joe Nocera, 2010
If I had to recommend just one book about the financial crisis, it would probably be All the Devils Are Here. It’s not necessarily the best-written or most thrilling book on the subject, but it’s the most comprehensive, and perhaps the only book that captures just how nuanced the causes of the crisis were. Instead of focusing on one bank or one cause or one period of time, McLean and Nocera trace the origins of the crisis back decades, and examine precisely how things evolved.
One thing they illustrate well is how Wall Street tends to create something useful, and then, in the course of trying to find new ways to make money off it, turns it into a weapon of wealth destruction. In the 1980s, for example, mortgage-backed securities seemed like a great idea. Grouping mortgages together into one security allowed investors to introduce capital to the industry without being subjected to the inefficiencies or risks inherent in one mortgage or even one region. They also helped the GSEs’ bottom lines, of course.
But as time went on, these securities changed the mortgage market itself. Wall Street’s demand for mortgages to securitize lowered lending standards and increased shady lending practices, like ARMs and NINJAs. Continue reading