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Chain of Blame: How Wall Street Caused the Mortgage and Credit Crisis Hardcover – July 8, 2008
Based on seven years of reporting from over a dozen countries, writer Tom Wainwright takes you on an extraordinary journey into the business of being a drug lord. Learn more.
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"Muolo and Padilla examine just who was to blame for the crisis and find that it is not just cowboy operators." (CEO Middle East, September 2008)
“…a level-headed book…the anecdotal style is easy-going...much the best book on the mortgage industry”. Fund Strategy 1 September 2008
“…a ripping piece of reporting… The authors know their stuff.”Bloomberg News Monday 28 July 2008
From the Inside Flap
Americans are losing their homes at a rate not seen since the Great Depression. Prices continue to fall sharply despite the reassurances of just a few years ago that all was rosy on the housing front. Many factors have been blamed for this crisis, but who is really responsible? And perhaps more importantly, why was everyone so taken by surprise?
In Chain of Blame, acclaimed financial reporters Paul Muolo and Mathew Padilla go behind the headlines to tell the inside story of why Wall Street's established investment banks bear much of the blame for the events that have cost millions of Americans their homes. They show in detail how, from 2000 to 2007, executives from Merrill Lynch, Bear Stearns, Lehman Brothers, and others financed non-bank mortgage lenders that eagerly sold their mortgages to consumers through loan brokers. Wall Street then sold bonds backed by subprime mortgages to overseas investors in Europe and Asiawhich led to financial difficulties there as well.
The authors build their compelling story around the key players in this tragedy, first and foremost being Angelo Mozilo, founder and CEO of Countrywide Financial, America's largest home mortgage lender. From Mozilo's July 2007 conference call with a group of top Wall Street equities analystswhich marks the true beginning of this fiascoto his congressional rebuke in 2008, Chain of Blame chronicles the crisis in detail, showingreaders what happened, who is responsible, and what lies ahead.
As the dust settles around these life-shattering events, the blame game has begun. But as Muolo and Padilla show with stunning clarity, there is really no single entity or individual to point the finger at. It was a mix of factors and participantsthe world's largest investment banks, homeowners, lenders, credit rating agencies and underwriters, and investorsthat precipitated the current subprime mess.
Chain of Blame ultimately reveals how human behavior and greed drove the demand, supply, and the investor appetite for these types of loansand how Wall Street was all too willing to satisfy the desires of those who should have known better.
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Top Customer Reviews
However, the book is way too long. Some whole paragraphs are repeated almost verbatim in different chapters. Each paragraph chronicles the life and times of another major mortgage company. While this concept is ok for telling stories about the individuals involved in the business, it makes for highly repetitive reading, as the mistakes made by one company are often made by others. The first 150 pages is a tough slog of similar people and similar stories, but the book picks up steam in the final 150.
Finally, while this book does a great job of explaining the mortgage industry and their role in the financial crisis, the authors make a cursory explanation of what truly happened on the Wall Street side of things. (This isn't too unexpected because the authors are mortgage experts.) For example, there is basically no mention of the subsequent credit crunch that was precipitated by the sub-prime mortgage disaster.
For a good explanation of what went wrong on the Wall Street side of things, I recommend 'The Trillion Dollar Meltdown: Easy Money, High Rollers, and the Great Credit Crash'. That book is not an easy read, because the author expects the reader to have a solid understanding in Wall Street lingo. But 'Chain of Blame' is a useful primer.
The book is well written and lucid. Nonspecialists can understand it well. I heard talking heads on TV and radio described tranches, REITs, "liar loans," "warehouse line of credit," and so on. The authors describe these terms--and others--clearly and in such a way that the reader can begin to see what had happened--and why the meltdown in the mortgage world should not be seen as so surprising.
It is also the story of clever businessmen and women, who could develop new tools for investment from subprime loans. Subprime loans, simply, are (Page 325): "A loan originated by a lender that is A- to D in quality. Consumers with the best credit ratings. . .are considered 'A' credit quality." In short, loans are being made to purchasers who carry some to a lot of risk. If they can't keep paying their mortgages, the house of cards can fall down. And that is, in short, what happened (although the story is quite a bit more complex than that).
Among the innovators were pioneers such as Roland Arnall (of Ameriquest and Argent) and Bill Dallas (of Ownit Mortgage Solutions). Then, those who adopted practices of the innovators, such as Angelo Mozilo of Countrywide.
The book makes pretty clear that a number of factors contributed to the mortgage problem. Regulators didn't get involved; Wall Street firms ignored the volatile nature of subprime loans in a desire to realize enormous profits; banks bought into the profitable business.
Anyway, if the reader wants a well written, if not overly deep, analysis of the mortgage crisis, this is not a bad place to start.
(Bad Money).Warren Brussee's 2004 book,though mistitled,is the first full scale treatment of the sub prime loan problem.
I have deducted 1 star because the authors do not provide any historical overview that would enable the reader to see that this problem is a systemic one that repeatedly occurs over and over again throughout history whenever financial ,short run, profit maximizing(sales maximizing)companies are allowed to engage in speculative activity that is financed by the banks themselves.Read more ›
Most Recent Customer Reviews
great read. Put names and faces on the rush to ruin the nation's banking system. Some were driven by competition to be the biggest, others driven by competition to be greedy. Read morePublished 24 months ago by Larry Dieli
These authors were clearly ahead of their time.
Clear description of how the 2008 real estate fiasco happened.
Very sad tale, but necessary to understand.
The book was in very good shape, except for a few notes written throughout by the previous owner. Not too far along, but it seems as though it is the typical liberal slant on what... Read morePublished on October 20, 2013 by Tim Morgon
My brother gave me this book for Christmas this year after it languished on my Amazon wish list for months. Read morePublished on January 13, 2013 by M.Jacobsen
Co-author Paul Muolo wrote in the Introduction to this 2008 book, "A million or so people had lost their homes to foreclosure. Read morePublished on November 15, 2012 by Steven H Propp
Having spent 17 years in the industry this covers a lot of the sub prime scene well. A lot missing but still a good overview.Published on January 27, 2011 by JL