Washington Post Book Reviews
For You
Sunday January 9, 2011
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ALL THE DEVILS ARE HERE: The Hidden History of the Financial Crisis
Bethany McLean and Joe Nocera
Portfolio/Penguin
ISBN 978-1591843634
380 pages
$32.95
Reviewed by Daniel Gross
You could load an iPad with all the books, documentaries, podcasts, slideshows and tweets that have been produced on the Great Financial Meltdown of 2008. So weary readers (and reviewers) could be forgiven for thinking that we need another financial crisis book like we need another website devoted to politics.
But we do need "All the Devils Are Here." Because even as the crisis still unfolds -- in December, charges were filed against accounting firm Ernst & Young for its alleged role in the collapse of Lehman Brothers -- some in Washington are engaged in willful attempts to misread events.
All four Republican-appointed members of the federal Financial Crisis Inquiry Commission last month voted against using words like "Wall Street" in the final report. And after the November elections, banking lobbyists began to scheme with the incoming 112th Congress to undo the lukewarm post-crisis reforms. In many ways, this highly readable and instructive history of the events and mindset that lit the kindling for the conflagration of September 2008 arrives just in time.
Bethany McLean and Joe Nocera, former colleagues at Fortune, take their title literally. The cast of characters listed at the beginning is a nice, round 100 devils. McLean, a contributor to Vanity Fair and Slate, and Nocera, a columnist for the New York Times, were willing to sacrifice speed and buzz for the sake of quality writing and a textured, multilayered story.
Unlike many of the quickie-books on the crisis, "All the Devils Are Here" is tightly written, methodical and unsensationalistic.
But its revelations are just as shocking as those contained in most of its less well-aged predecessors. Over the course of 30 years or so, mortgage-lending and the increasingly frenzied activities surrounding it came to infect and corrupt the whole system: banks, regulators, government-sponsored enterprises and politicians on both sides of the aisle.
There are good portraits of the devils we already know: Angelo Mozilo, the founder and life force of Countrywide Financial, a bundle of resentments, will-to-power and arrogance; Stanley O'Neal of Merrill Lynch, the first African-American chief executive of a big brokerage, who was impatient for his firm to rack up the profits earned by other Wall Street juggernauts; and Jim Johnson and Franklin Raines, the politically savvy chief executives of Fannie Mae, the giant government-sponsored mortgage company.
But the authors introduce us to some intriguing new actors whose exploits have until now remained largely hidden, such as Roland Arnall. "Though his companies never got the blame that would later be heaped on Countrywide, Arnall was the real subprime pioneer," the authors write. Born in Paris in 1939, Arnall sold flowers on the streets in California before starting his own businesses. Among them was Long Beach Mortgage, a subprime lender whose shoddy business practices brought federal scrutiny in the 1990s. Arnall cut a deal with Deval Patrick, a Clinton administration assistant attorney general, under which Long Beach denied the allegations and agreed to kick in $1 million to nonprofits that specialized in consumer education. After Long Beach faded away, Arnall founded a bunch of subprime lenders, including Ameriquest and Argent, which typified the worst practices in the industry: exploding products, boiler-room incentives to brokers, a callous disregard for regulatory requirements.
By 2005, Arnall, who kept his companies private, was worth $3 billion and ranked 73rd on the Forbes 400 list. He plowed some of this subprime lucre into politics, donating heavily to Republican causes and naming Patrick to a well-compensated corporate board post. In 2006, when Arnall's subprime empire again came under regulatory and journalistic scrutiny, it didn't stop him from getting funding from Citigroup or from being nominated by President Bush as ambassador to the Netherlands. A young African- American senator from Illinois was initially wary of supporting the nomination but noted: "I've got a letter from Deval Patrick, who actually is a good personal friend of mine." In February 2006, a month after Ameriquest announced a $325-million settlement with state attorneys general and four months before the company essentially shut down, Arnall was confirmed.
In theory, Arnall's companies were supposed to be working for the people and the government -- otherwise, how could they justify the enormous subsidies they received in the form of tax breaks and quasi-government-guaranteed funding? In reality, as McLean and Nocera demonstrate, the czars were working for the Cossacks. While the authors push back against the absurd right-wing meme that Fannie and Freddie were solely responsible for the subprime mortgage crisis, they show, in damning detail how the companies were able to fend off regulatory pressure. They convincingly argue that those charged with safeguarding the system remained willfully blind to the risks. (Alan Greenspan's memoir, they note, didn't contain the phrase "subprime mortgage" or "predatory lending." The system mobilized to smack down anyone who protested or raised tough questions.)
Arnall died in March 2008, but many of the devils are still with us. Their most diabolical act may be leaving behind problems that defy easy (or even difficult) solution. Noting that the Dodd-Frank financial reform bill did nothing to change the status of Fannie Mae and Freddie Mac, McLean and Nocera conclude: "The reason that the legislation makes no mention of (Fannie Mae and Freddie Mac) is that nobody can figure out what to do."
Like a book about Pearl Harbor that ends in late November 1941, "All the Devils Are Here" closes just before the action really starts. But it's very much worth reading for its damning conclusions and for its craftsmanship. McLean and Nocera weave seemingly unrelated strands of the story into a coherent tapestry. While chapters frequently begin like news magazine features -- "Stan O'Neal wanted to see him. How strange." -- this narrative was constructed by skilled professionals with great care and attention.
It's a shame the same can't be said for our mortgage industry.
Copyright 2010 Washington Post Writers Group
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COLONEL ROOSEVELT
Edmund Morris
Random House
ISBN 978-0375504877
766 pages
$35
Reviewed by Fred Kaplan
Reading Edmund Morris' "Colonel Roosevelt" is a rewarding journey, as it must also have been for its author, who concludes his three-volume saga begun in 1980 with publication of "The Rise of Theodore Roosevelt." "Theodore Rex" (2001) covered the middle years. "Colonel Roosevelt" begins with the ex-president in Africa, having, in 1908, installed in office his acolyte William Howard Taft. Roosevelt was prevented from running again by a pledge he had made in the 1904 campaign. Taft's mission was to advance Roosevelt's progressive blueprint.
After leaving the White House, Roosevelt was a world celebrity, traveling across Africa, slaughtering game for the Smithsonian (he never saw an animal he didn't wish to have the pleasure of killing), then lecturing to and being feted by European crowned heads. The volume ends in 1918 with his death at his home at Oyster Bay, Long Island, from heart failure at the age of 60, never again to fill a room or a platform with his aggressive energy, his inexhaustible charm, his irrepressible frankness and his cocksure advocacy.
Between Africa and annihilation, we have an almost real-time narrative of Roosevelt's attempt to reassert himself as a force in American politics and then to reclaim the presidency, in 1912, as the candidate of the newly formed Progressive Party.
Taft, Roosevelt believed, had betrayed his mentor's progressive vision. The Democrats, soon to be led by Woodrow Wilson , had swept the midterm elections of 1910. When the Republican bosses rejected Roosevelt and nominated Taft again, Roosevelt ran as an independent, split the Republican vote (there weren't many independents then) and put Wilson in office, a lesson on the limitations of the American two-party system: Third-party influence comes at the price of defeat. In this case, though he detested Wilson, Roosevelt's Bull Moose run made possible a Democratic presidency whose policies had more in common with Roosevelt's than with those of the business-oriented elite of his own party.
It is also a dispiriting journey, with touches of Greek tragedy, as if Theodore Rex had turned into Oedipus Rex. Much of it makes for sad reading, exemplifying the truism that virtues carried to extremes transform themselves into vices. Roosevelt had an unwarranted faith in his ability to control events, and up until 1912 attributed his political success to his energy, his vision and the good sense of the American people. Mark Twain, who detested Roosevelt, had another view. "Mr. Roosevelt is the most formidable disaster that has befallen the country since the Civil War," Twain wrote in his autobiographical dictations in 1907, "but the vast mass of the nation loves him, is frantically fond of him, even idolizes him. This is the simple truth.
It sounds like a libel upon the intelligence of the human race but it isn't; there isn't any way to libel the intelligence of the human race."
Twain had much more to say about Roosevelt, nothing of which appears in "Colonel Roosevelt." In a rapidly expanding mass-market culture, Roosevelt was easy to love, the well-born insider disguised as an all-American populist. What Twain saw in Roosevelt was the boaster, the bully, the demagogue, the reckless embodiment of the warrior ethic, the propagandist for the glorification of the Wild West, the embodiment of a gun culture who embraced war as the highest and best test of manhood. Twain, who was anti-war and anti-imperialist, died in 1910, while Roosevelt was in Africa, where Edmund Morris begins.
By August 1914, the Western world was about to enter a war that made Roosevelt's warrior ethic increasingly anachronistic, even repugnant.
His strongest desire was to lead a regiment and die gloriously on the battlefield, but the war office repeatedly turned him down. Encouraged by his father to do the manly thing, Roosevelt's least warrior-like son died in the air over France; another was seriously wounded in the trenches. "But what made this loss so devastating to him," Morris writes, "was the truth it conveyed: that death in battle was no more glorious than death in an abattoir." I'm not convinced that Roosevelt fully believed this.
Morris' trilogy ends with his Oedipus no closer to stoic wisdom -- or wisdom of any kind -- than at any other time in his life.
"Colonel Roosevelt" is compelling reading, and Morris a brilliant biographer who practices his art at the highest level. Minor flaws, yes. But he has the reader's interests at heart even in his proliferation of one-sentence paragraphs and short sections, which can be seen as an effort to manage the pace of his detailed narrative, an attempt to deal with the huge amount of biographical and contextual material. Sometimes the book relies at too great length on Roosevelt's own writings, and Morris' penchant for odd similes ("like a female ranger living near Old Faithful, Edith Roosevelt understood her husband's regular need to erupt") is both amusing and off-putting. But, mostly, the writing is vivid in its restraint, powerful in its precision and shapely in its structure and vision. Morris has a way of making aspects of Roosevelt's life and values relevant in both dark and bright ways. A moving, beautifully rendered account of Roosevelt's near death by assassination during the campaign of 1912 resonated for this reader with all the emotion of the assassinations of our recent history.
Fred Kaplan is at work on a biography of John Quincy Adams.
Copyright 2010 Washington Post Writers Group
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