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Way Too Big to Fail: How Government and Private Industry Can Build a Fail-Safe Mortgage System Paperback – October 31, 2011
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Adam J. Levitin, Professor of Law, Georgetown University
From the Author
More About the Author
WILLIAM A. FREY is the Principal and CEO of Greenwich Financial Services (GFS). Bill began his career in the securitization industry on Wall Street in 1981 during the industry's infancy. After nearly fifteen years in various major firms, including Morgan Stanley, Smith Barney, and Bear Stearns, Bill founded GFS in 1995. At GFS, Bill structured and sold billions of dollars in MBS securities structured from various types of collateral. In 2003, recognizing that the US market was likely to undergo a substantial decline, Bill began evaluating MBS securitization opportunities in other countries. In 2005, GFS completed the first Russian securitization and then the first securitization of mortgage certificates in 2006. Both transactions won acclaim and industry awards.
Recently, Bill has emerged as the most vocal advocate for bondholder rights in the U.S. MBS market. The central theme of Bill's bondholder advocacy is that the legislative response to the current financial crisis and lack of support for the underlying contracts supporting MBS transactions will massively increase bondholder losses and devastate American credibility in the world financial markets. Bill has long argued that America's ability to re-establish a private mortgage finance system is critical to the recovery of the housing market and the resumption of overall economic growth. His work in helping mortgage investors enforce their contracts with banks has shown him to be one of the few members of the financial community with the courage to stand up to the nation's largest financial institutions and tackle this nation's mortgage problems.
Bill received his B.A from Cornell University and his M.B.A. from Carnegie Mellon University.
ISAAC GRADMAN is an attorney who was involved in some of the earliest litigation arising from the subprime mortgage crisis. He authors the law blog, The Subprime Shakeout and is the managing member of IMG Enterprises, an MBS consulting firm. Isaac received his B.A. in Political and Social Thought with Highest Distinction from UVA, where he was a Jefferson Scholar, an Echols Scholar and a member of the Raven Honor Society, and received his J.D. cum laude from N.Y.U. School of Law, where he was a Dean's Scholar. Isaac also clerked for two years for the Hon. Joan Lenard in the United States District Court in the Southern District of Florida.
Top Customer Reviews
One of the great tidbits of the book is back on page 264, a letter from Barney Frank acting as Chm of the House Committee on Financial Services and signed by 6 members. Most likely the letter was drafted by outraged banks whose blatant attempt at theft by government gift from the noteholders had been dragged into the light. The letter from Barney begins with "We are outraged...."and continues on to demand that Frey appear before the Committee to explain his crimes of free speech. Frey relates his amazement that during the pre appearance interviews, Barney's staff demonstrated time and again that they had no concept of how the securitization process worked or the content of the basic documents. In the end they decided that hauling Frey into the tv lights would simply prove what the public had come to suspect, they were idiots on the payroll of the perps.
Most of us are likely to finish the decade from 2005 to 2015 poorer than we started. OK our financial statements may not reflect the loss, but that's only because we do not carry our share of the national, state and local debt plus underfunded government pensions on our financial statements. The primary cause of this debacle was the widespread malfeasance and corruption in the real estate and securities industries during the middle of the last decade.
A few hours before starting the book I read an article on the California AG and the 49 state settlement in one of the national magazines.Read more ›
William A. Frey has distilled penetrating insights from his career in what may be the most comprehensive, accessible primer on residential mortgage securitization. (H even includes a glossary for further guidance.) Using lucid explanations and examples, he has written his book for policymakers and lay readers new to the subject, with the hope that legislators, regulators, and MBS participants will adopt his proposals.
Frey offers much more than a much-needed introduction to the complexities of mortgage securitization. He provides a short overview of the historical context for the mortgage crisis. He not only explains its causes and government failures to remedy it, but also proposes specific MBS reforms that rationally realign incentives of all participants in the MBS market. He finds that the crisis will continue unless the federal government stops interfering with MBS contracts and helps MBS investors resolve conflicts of interest among servicers and other MBS participants.
Frey's insights will help fill a gap in the public's understanding of the mortgage crisis, whether or not his reform proposals merit wider political support. In fact, in at least two of his proposed reforms, Frey appears to aim at the wrong target. He singles out the perceived risk-advantages of homeowners as a primary culprit in the crisis, without fully considering the role of systematic, regulatory failures, especially by the Federal Reserve.
Frey identifies large interest rate movements as a significant cause of both the savings-and-loan and MBS implosions.Read more ›
Way Too Big to Fail: How Government and Private Industry Can Build a Fail-Safe Mortgage System explains how Wall Street needed more and more mortgages so it could sell more and more high-profit mortgage-backed securities. The result was that mortgage standards fell and "nontraditional" loan products were introduced. Inevitably, the system came apart as soon as home prices stalled -- but not before huge profits were generated by loan originators as well as Wall Street banks, servicers and brokerages.
Frey provides a map of Wall Street, showing how a cascade of poor choices, broken contracts and big profits lead to the erosion of the financial system. But he also does something else, he explains how the system can be rebuilt to attract future investor capital.
And why should anyone care about getting money from investors? Very simple: If the US financial system is not restored the ability to get a mortgage will be closed off for huge numbers of potential borrowers -- and that will push down home values for a very long time.
Way Too Big To Fail is the best guide to explain how the mortgage system blew up, the role played by Wall Street and how the government has missed numerous opportunities to contain the damage and re-start the housing sector. You can easily see this book being used by financial experts, college instructors and government leaders to figure out what went wrong and why -- but there's another group that should also read it: anyone with a mortgage who wants to avoid being the victim of a system run amok.
Most Recent Customer Reviews
Way Too Big to Fail: How Government and Private Industry Can Build a Fail-Safe Mortgage System persuasively establishes that the a properly functioning mortgage market is critical... Read morePublished on May 16, 2012 by Robert L. Christensen, CPA
Way Too Big to Fail is an important book focusing on the vital issue of the (surprisingly large to many folks) securitization market. Read morePublished on February 7, 2012 by Jonathan M. Prober