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The Face of Wall Street’s Mortgage Mess

Please check out this great series of articles from Bloomberg this past week.  They profile the wall street mortgage machine by looking at the sensitization process through the eyes of the players.  They focus on a mortgage lender named Sadek who was pumping gas 5 years ago but somehow made tens of millions of dollars a year running a boiler room of mortgage sales people.  It follows Dan Lippman, the head of mortgage trading at Deutsche Bank, who assembled "The Group of Five" that would help setup the standards for most CDOs and helped create the ABX.  It follows how a hedge fund portfolio manager that went short the equity tranche of CDOs consisting primarily of sub-prime loans turned a $110Mn investment into $600Mn.  The fourth article makes the rating agencies look like fools.  It also profiles select home owners and recaps how the major investment banks were hit by the crisis or escaped.  These articles will really give the uninitiated a basic glimpse into what went so wrong in the mortgage lending industry.  This is by far the simplest explanation I have seen about what went wrong, why things spun out of control, and how all the parties faired.  I will be posting a longer article in a few days giving my thoughts on what Wall Street can learn from the mortgage crisis.  The articles also read like fiction since they really carefully capture the personalities that were caught up in the mortgage game.  Finally, I have to thank a friend of mine that sits on DB’s trading floor near Dan Lippman for turning me on to this series.  I hope my readers enjoy these articles as much as I did.

1) Subprime Securities Market Began as "Group of 5" Over Chinese

2) ‘Deal with Devil’ Funded Carrera Crash Before Bust

3) Bass Shorted ‘God I Hope You’re Wrong’ Wall Street

4) Rating Subprime Investment Grade Made ‘Joke’ of Credit Experts

5) Savannah Cries About Bicycle Left Behind in Rest of Subprime

 

 

 

 

 

 

 

 

 

 

 

Greg Lippman, Head of Deutsche Bank Mortgaging Trading

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

J. Kyle Bass, portfolio manager at Hayman Capital in Dallas

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sadek, from pumping gas to running a boiler room of mortgage sales people and making millions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sadek carrying his girlfriend, soap actress Nadia Bjorlin. to the movie premiere of the movie that he financed staring her called "Redline".  Sadek totaled two of his exotic cars to make the movie and let Eddie Griffith wreck his Ferrari Enzo as part of a publicity stunt for the movie.  Watch that below.

 

© 2007 Prince of Wall Street.