Editor's note: This story appears in the current issue of HousingWire Magazine, hitting subscribers' mailboxes this week. Compared to the breaking-news and opinions on HW online, HousingWire Magazine provides a more in-depth look at the issues, data and people that live in the unique space where finance meets mortgage banking.
Click here to subscribe to HW Magazine.
Most action-packed thrillers tend to have their fair share of villains, and the bigger-than-life egos, fast cars, expensive clothes that tend to accompany ill-gotten gains. But usually, these same stories have a hero — a paragon of virtue and possessing other-worldly strength, not to mention some dashing good looks — that can fend off the forces of evil, and save a helpless world from an unfathomable doom.
But what happens if there is no hero? What if nobody ever comes riding in on that white horse? What if everyone ends up being a villain? Well, in that case, you don’t need to look much further than the current financial mess, where an unregulated mortgage lending and funding field essentially ran roughshod over morality in the name of market share and profit. And no hero emerged to stop it.
The current crisis has grown to become much larger than just mortgage lending, to be sure, but to understand where it all began, Paul Muolo and Mathew Padilla’s Chain of Blame
(Wiley, July 2008) is a scintillating account of the personalities — some might even say villains — that drove subprime mortgage lending into the very heart of the nation’s financial system.
That this book is meant to be read as a thriller-gone-awry is clear from the outset, with the authors even outlining a "cast of characters" before the book even begins. The cast ranges wide, too, netting the treasurer of Cuyahoga County, Ohio and Roland Arnall, the founder of Ameriquest Mortage.
No character, however, is more central to this book than is former Countrywide co-founder, chairman and CEO Angelo Mozilo. Much of the book is dedicated to the inner workings of the lending machine, and associated lapses in judgment that took place, at the Calabasas-based lender as its CEO sought to build the biggest, baddest mortgage company on the planet.
Much of that is because Countrywide did eventually end up becoming just what its CEO had hoped it would be. It’s also because Muolo, who has long edited weekly trade rag National Mortgage News
, has developed as strong a relationship with Mozilo as anyone in the financial or trade press, and along with Padilla — who covers mortgage banking at the Orange County Register
, once a hotspot for the industry — paints a conflicted picture of a man obsessed with Wall Street every bit as much as he despises it.
The book is not intended to be analytical; instead, it’s a rapid-fire read of insider accounts telling the story of a lending system that grew largely unchecked by, and out of sight of, federal regulators. It weaves its stories in the sort of rapid-fire way that only well-experienced journalists know how to accomplish, and colors events with insider accounts from more than 200 interviews conducted by the authors. One source suggests, for example, that Countrywide’s wholesale broker strategy wasn’t too hard to fathom. There were 44,000 brokers in the U.S., she says, and "38,000 of them were signed up to do business with Countrywide."
Mozilo isn’t the only character taken to task in the book. So, too, is Eric Billings of Friedman Billings Ramsey, for his "REIT road show" that the authors said ended up dooming many lenders when the market went sour. But no group is put more into the blame basket than Wall Street lenders, however, the independent investment banks that helped fund the astronomical growth of the subprime lending boom.
Missing from the story is the role of borrowers in this mess, but that’s not the point here — Chain of Blame
is less about finding a dead horse to beat than it is about describing the forces that helped make subprime lending what it was: a sort of Wild West, with no sheriff in sight.
If there’s any shortcoming in this book, it’s that the authors at times seem to get sidetracked, discussing minutiae around their characters’ personalities. But if you’re looking for a rollicking account of subprime’s heyday and how the house of cards eventually fell, you’ll find none better.
Paul Jackson at email@example.com
Editor's note: Chain of Blame is available at Amazon.com and other online bookstores, as well as at local bookstores nationwide.