Joe Nocera is an award winning business writer for the New York Times with extensive experience in business journalism. Bethany McLean is a contributing editor for Vanity Fair Magazine and has written extensively about business matters including a book on the collapse of Enron.
All the big names are here. AIG-FP, Countrywide Financial, Bear Sterns, Fanny Mae, Freddie Mac, and, of course, Goldman Sachs. As the title says, All the Devils Are Here except that they're not merely the names of companies and agencies, they're real people behaving like real people. We don't meet here the high-minded leaders of institutions that control our financial future. Rather, we encounter the ego driven motives of (mostly) men who are limited by their own needs, perspectives, understandings, and ego. These people are much like those Tom Wolfe describes as "Masters of the Universe" in his excellent novel The Bonfire of the Vanities. And that's where the important learnings this book has to offer occur. Alan Greenspan emerges not as the data-based savior of our economic system three presidents appointed, but as a vain political suck-up too influenced by Ayn Rand's rantings to be able to recognize the need for careful and powerful regulation of the system. One of the important principles emerging from this book is an understanding that government regulators were too easily influenced by political pressure from the legislative and executive branches and too much in awe of the supposed brains and money of the financial elites to do their jobs.
In case after case, people like Angelo Mozillo, founder of Countrywide, and Stan O'Neal, CEO of Merrill Lynch, were so blinded by their ambition and hubris they were unable to perceive the problems their policies were creating and unwilling to hear the bad news subordinates brought to them. In fact, people who tried to alert the top executives of the corporations involved in our financial disaster were almost uniformly relegated to positions where they had no influence and the ear of no one in a position to effect change or improve policy. Thus, the top men created environments where ambitious traders, happy to take home annual bonuses in the tens of millions of dollars, created huge risks only a few people in the back rooms recognized. The testosterone of the trading floor always trumped the conservative bankers' urge to assess risk carefully. This led voracious loan officers to sell mortgage products to potential home owners who could never understand them and whose obligations they could never meet. The loans were then cut up into financial instruments repeatedly and sold to investors around the world, building risk on risk that no one wanted recognize as dangerous. Complicit in all this were almost all those involved in placing mortgages and turning them into negotiable instruments that divorced the homes and homeowners from those who held the paper. The continual effort by some to blame the purchasers of no down payment mortgages they could never afford to pay off places the blame in exactly the wrong part of society. The homeowners were merely pawns in a game they could never understand.