|
| 
 enlarge | Authors: Paul Muolo, Mathew Padilla
Publisher: Wiley
Category: Book
List Price: $27.95
Buy New: $15.51
You Save: $12.44 (45%)
New (46) Used (9) from $14.72
Rating:  27 reviews
Sales Rank: 10302
Media: Hardcover
Number Of Items: 1
Pages: 352
Shipping Weight (lbs): 1.2
Dimensions (in): 9.1 x 6.3 x 1.2
ISBN: 0470292776
Dewey Decimal Number: 332.720973
EAN: 9780470292778
ASIN: 0470292776
Publication Date: July 8, 2008
Availability: Usually ships in 1-2 business days
|
| Customer Reviews:
 Chain of Blame August 4, 2008
5 out of 6 found this review helpful
This book points fingers and names names and it is high time someone did that. The authors know their subject and the book is well researched and readable. I recommend this, even to someone who is new to the topic.
 A well written book about nothing July 31, 2008
9 out of 14 found this review helpful
Although well written, this book does not really hold a candle to Kevin Phillip's BAD MONEY, or Charles Morris's TRILLION DOLLAR MELTDOWN, in terms of analyzing the causes of the current economic crash. It is more a biographical sketch about some of the principal promoters of the housing bubble. Most of them it turns out were rather mediocre, unimaginative and uninteresting people who would not only not be fun to work for but would probably not be interesting to spend time with either, unless you were being paid. It that sense, the rise and fall of the financial industry is more a story of the guilibility of the victims than the genius of the perpetrators. These were bottom feeders who believed their own propaganda, who contributed nothing of any real or lasting value and who in their own arrogance and stupidity left trails of emails (like Nixon's recordings), which will probably send many of them to jail.
Fantastic read! July 30, 2008
1 out of 2 found this review helpful
This book is excellent and very enjoyable. As an industry veteran for nearly 20 years, you spelled out in great detail many of the transgressions we have faced. Additionally, I've loved reading your columns in NMN.
The detail would be difficult in many cases to follow, but the fluid, smooth and well-explained process makes it easy even for someone brand new to mortgage finance and lending.
Necessary to have in your own Library if you're in the industry! July 28, 2008
2 out of 4 found this review helpful
Got my copy from amazon.com just this past Saturday, finished it completely this afternoon. Having been a 'subprimer' for 40+ years myself, I found this an easy read and very well done, since it was authored by people who were not eye witness, insiders themselves, or actually in these battles ... but very good story tellers. It's a complex mess, what's happened to our industry, sort of like a 10,000 piece puzzle. Particularly if you're involved in the industry, the picture they put together is excellent, especially since I myself, know several dozens of the players they mention. Since you can't get these players to tell you face to face - for many many hours each - this book is the next best thing ... it belongs in your library; I'm glad it's now in mine.
 It was all about Volume, Volume, Volume, Volume, Volume July 26, 2008
24 out of 31 found this review helpful
From a quantitative perspective, to sort through the current "mortgage mess" would take an intense effort, requiring a large number of researchers and computer time. No one has performed this kind of analysis as of yet, but there have been quite a number of individuals who have given anecdotal and semi-historical accounts of the turmoil in the credit/mortgage markets in the last few years. This book is an example, and within its covers the reader will discover a purely narrative account of the mortgage markets, with most of the pages devoted to those individuals that the authors believe played a major role in moving or even dominating these markets. There is of course an obvious danger in giving such a narrative account: it imputes market expertise to these individuals at a level that cannot be justified, given the complexities of the financial markets. No individual, whether a low-level analyst or the chief executive officer of a major mortgage firm, has the intellectual capacity or market savvy to describe or move the markets to a degree that is typically reported in the popular and financial press. Such individuals may think they do, and their actions and boasting reflect the mental confabulation that they have fallen prey to, but at best they have a limited picture of financial dynamics, and whatever monetary success they have is due to events that are completely out of their control. Many authors and reporters though have succumbed to an unjustified admiration as regards the senior management of financial firms, wherein they have assumed, falsely, that those who occupy the top echelons of the company hierarchy have special insight or knowledge into financial events that others do not. Frequently these managers are given accolades and awards for this expertise, thus exacerbating the excess of veneration devoted to them. And some managers assume that their orders or advice is followed to the letter, forgetting that those lower in the hierarchy typically follow their own ways of doing things, even though they give the impression that they are following these orders in the exact form in which they are given. The effect of all this is to muddy the waters as to whose expertise is really responsible for the success of the firm: in reality it is due to the actions of many workers and managers whose judgments and workflow become entangled with each other (or "synergistic" as many sociologists say), thus making it very uncertain as to what factors or decisions played the predominant role.
But in spite of the uncritical adulation sometimes shown towards individuals such as Angelo Mozilo, Henry Paulson, and Stanley O'Neal in this book and others, its authors have given readers a good general overview of how the mortgage business functions and how in the last few years the character of its operations have departed dramatically from the past. Indeed, the reader will learn about loan origination, mortgage-backed securities, and the most important credit risk variables. Readers who have not worked in the mortgage business may be very surprised to learn of the processes that can actually occur from loan origination till the time the loan is packaged into a mortgage portfolio to be sold in the secondary market. Readers will also obtain a better understanding of the role played by brokers and "correspondents" in bringing loans to life and the possible impact they had on the current difficulties in the mortgage markets.
A mere chronology of the mortgage markets of the last few years might prove boring to some readers, so to make the book more entertaining the authors chose to give brief biographies of some of the chief executives of the mortgage companies and to describe some of the reward systems that were put in place to recognize those account executives (AEs) that brought in a large volume of loans (regardless of their risk quality). Cars and gifts of every sort were given along with drunken parties on tropical cruises. Apparently drinking oneself into a stupor on one of these cruises was considered a desirable reward for bringing in new mortgage business to the firm. In addition, the authors can't help but mention how the mortgage broker population was predominantly female and how "attractive" they were, and pointed out that two executives of one mortgage firm divorced their wives and married two of these "attractive" female employees. One wonders to what degree these over-painted broker-nymphs were responsible for the eventual credit losses in the firms in which they did business with.
Pointing out this kind of frivolous hiring practice does have value for the reader however, as it grants insight into just how lackadaisical some of the management was before the heavy losses began to occur in the third quarter of 2006. As another example of this which is not discussed in the book, in the home equity division of one major bank an individual with over thirty years of experience in quantitative modeling was interviewing for a position in credit loss forecasting and modeling some months before the bad news started pouring in: at a time when profit margins were soaring and there was giddiness about the future. The head of this division dismissed the need for such experience and ranted on about how his group did not really do modeling, the emphasis instead being on developing new marketing ideas for the bank. He then went on a tirade about how he thought the makers of Yellow Tail wine had the most brilliant marketing campaign in history. The modeling of mortgage credit risk was not even discussed at all. The interviewee was then given an IQ test, as if his involvement in thirty years of mathematical modeling was not suitable proof of his ability. He was not hired, but instead, someone with two years experience in the economics of dairy cows filled the position (and he was not required to take the IQ test).
These anecdotes illustrate the "take nothing seriously" attitude that was prevalent in this bank in the months preceding the onslaught of huge credit losses in mortgage portfolios. Readers of this book who have worked in the mortgage industry will be familiar with this silliness and the false confidence displayed by management at this time. Some have reported their experiences in a few of the Web sites that the authors mention in the book. Some of what the authors include in the book, along with that reported on these Web sites, is just gossip and no doubt serves as a catharsis for frustrated and conscientious employees, but it does grant the reader insight into the mood of the mortgage business in the last few years. The authors also report historical parallels of these attitudes, such as those prevailing before the savings and loan fiasco in the late 1980's. One such attitude is that of Ronald Reagan where he is reported as saying that "I think we've hit the jackpot" when signing the Garn-St Germain bill. It is very disconcerting to learn that the president of the United States views economic transactions as essentially gambling, with the consequent rush in emotions when one "hits the jackpot." But Reagan's happy-go-lucky attitude and his phony commitment to deregulation and laissez-faire economics was exposed just a few years later: the U.S. government bailed out the savings and loan sector while Reagan was still in office.
The authors use the savings and loan fiasco as an example of how things can go completely amok when an economic sector is suddenly deregulated, and how the Washington peddlers of influence can pretend to be in favor of free markets but instead game the system to favor themselves and a few others in their cabal. The authors report the savings and loan fiasco as costing the taxpayers $150 billion: tax dollars extracted from them coercively by those in government at the time who preached about the moral and economic superiority of the "free market". They love "free markets" as long as they do not cost them money. If they do, they quickly use government resources and regulation to "help" the consumer and "stabilize" the economy, masking their real intentions of protecting their economic status and that of their financially incompetent buddies. Put out on their own to compete in a truly free market without the arbitrary and capricious assistance of the federal government, this gang of moochers would fall flat on their faces.
And then there are the mortgage brokers: those individuals who earn a fee by bringing loans to the lending institution. They work in symbiosis with the "account executives" of the lending institution, the latter of which are rewarded according to the volume of the loans they bring in. And as the authors give much anecdotal evidence for, the word "volume" encapsulated the predominant lending philosophy in the months and years before the heavy losses began to occur. The risk characteristics of each loan that the broker presented to the account executive were for the most part completely ignored. There was no coherent risk management policy except one: Volume, Volume, Volume, Volume, Volume.
The authors allude in passing to the need for a way of judging the goodness or badness of a broker. There are many ways to do this, and these methods are commonly called "broker scores" in analogy to the credit score that is routinely assigned to credit consumers. In one major U.S. bank for example, such a broker score was developed and presented to the management of the home equity division and to representatives of the OCC, the latter of which viewed it favorably. The sales force, which judged a broker's worth by the volume of home equity loans they brought to the door, dismissed it however as "too subjective." They preferred to accept the loans as they were, ignoring completely their risk characteristics. The broker scoring methodology was presented in January 2007, and only eleven months later, due to the astronomical losses exhibited by broker loans, the entire broker channel was dismissed from the home equity division of this bank. Most of the sales force and account executives followed them to the streets, where many, a large volume in fact, are still pounding the pavement looking for employment.
The authors have thus given a good narrative, albeit supported by anecdotal evidence, of the events behind the current mortgage and credit crisis. At the present time, Fannie Mae and Freddie Mac are due to be bailed out by the federal government of the United States, and IndyMac has been taken over by the FDIC (and the latter institution it has been learned engaged in a little speculative activity in a past takeover of another bank). The subprime pool of mortgages has dried up, and structured securities have been blamed as a major culprit in the crisis. Housing prices in many locales are plummeting, and a mortgage bailout bill is likely to pass the House and Senate. So will any lessons be learned from these events and the narrative given in this book? This seems unlikely now as it was after the savings and loan crisis. It would take a gargantuan effort from the members of the populace to rid themselves not only of the irrational individuals who populate the governmental hierarchies and monetary regulatory agencies, but also to once and for all rid themselves of the excess of veneration paid to those who head the financial centers of the world. The authors of this book were correct when they wrote that Angelo et al could not do anything about the mortgage meltdown when it started occurring. They cannot do anything about it when times are bad nor should they be asserted to be financial wizards when times are good. They are ordinary human beings who do not possess any special insight into the vastly complex financial markets of the twenty-first century.
|
|
|
The Outpost Network | |
