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Wall Street uncovered

Wednesday, 12th November 2008

Anyone trying to get a handle on the human story behind the financial meltdown should read Michael Lewis's characteristically vivid article in Portfolio. The author of the bestseller "Liar's Poker" dissects an industry where madness posed as high-tech commonsense:

The juiciest shorts—the bonds ultimately backed by the mortgages most likely to default—had several characteristics. They’d be in what Wall Street people were now calling the sand states: Arizona, California, Florida, Nevada. The loans would have been made by one of the more dubious mortgage lenders; Long Beach Financial, wholly owned by Washington Mutual, was a great example. Long Beach Financial was moving money out the door as fast as it could, few questions asked, in loans built to self-destruct. It specialized in asking home­owners with bad credit and no proof of income to put no money down and defer interest payments for as long as possible. In Bakersfield, California, a Mexican strawberry picker with an income of $14,000 and no English was lent every penny he needed to buy a house for $720,000.
[Thanks, C.]

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