Michael W Hudson’s book-length investigative journalism piece on the subprime meltdown, The Monster, is both a brilliant example of skeptical business journalism done right, and a brilliant example of the storyteller’s art. Hudson combines his meticulous, exhaustively documented research with a novelistic approach to telling the story that strips away all the financial jargon and the cosy justifications and rationalizations and lays bare the heart of the story: greed, depraved indifference, fraud, and a howling moral vacuum that swallowed up people at all levels of finance and financial regulation.
The Monster starts with the S&L crisis, and the fraudsters who destroyed the finances of the ordinary people who’d trusted them, and shows how the worst of the S&L conmen moved on to subprime, founding companies like Ameriquest and FAMCO. People like Richard Arnall, who became a billionaire, was the prime financier behind George W Bush’s 2004 presidential bid, and actually served as the US ambassador to the Netherlands, even as he built an empire built on outright, deliberate swindling.
And swindling it was. Hudson leaves no room for doubt here. You may have heard that the subprime collapse was caused by greedy homeowners fudging the facts about their income in order to secure easy credit, but Hudson shows that in the vast majority of cases, the “liar” in the “liar loan” was usually a banker, a mortgage broker, an underwriter, a bond-rater, an appraiser. These are the people who went into poor neighborhoods where vulnerable, poorly educated people had scrimped and saved all their lives to buy their homes and conned them into taking out brutal, lopsided second mortgages, lying to them, bilking them out of 20% (or more!) in upfront fees, lying some more, forging documents, and then handing off the mortgages to Wall Street to launder out as toxic bonds.
The depravity is bottomless. From small lies to big lies, from hiding documents to robbing developmentally disabled seniors. Stealing from widows by slipping in extra documents after their reading glasses were off. Using sexual harassment and even hired thugs to drive away anyone in the company with a shred of decency, anyone who raised the smallest objection. Coked up millionaires in SUVs, gouging good working people out of everything with a con designed and refined so ensnare people with so much debt that their houses were inevitably forfeit. The subprime outfits literally used the movie Boiler Room as a training film, requiring new hires to watch it in order to learn how to conduct their working lives.
But lest you think that the problem was just the con-artists at the bottom, Hudson shows you how regulators (all the way up to Alan Greenspan), Lehman and the other big Street firms, and politicians all the way up to the President of the United States were all in on it, that there was no way they couldn’t have known that they were participating in a once-in-a-century scam that was destroyed millions of good peoples’ lives as well as the planet’s economy, and how they all sat idly by and collected their share of the wealth rather than speak up. From lobbyists to campaign contributions, dirty tricks and massive media campaigns, bribery and intimidation, the men behind the subprime crisis were not merely expressing some historical abstraction, playing a part in a nebulous “business cycle.” They were deliberately, personally participating in something that they had to know would result in terrible consequences for innocents all around them.
Hudson’s book is a model for excellent investigative journalism. It’s a book that should be required reading for anyone who says that the economic crisis was caused by greedy mortgage-takers who spent too loosely with their credit cards.
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