Subprimal

In early 2002, the investment community is in a state of suspended animation. Share prices plummet as the “technology bubble” bursts, and corporate scandals fill every headline. Equities and debt become toxic with the fall of Enron, Global Crossings, WorldCom, Adelphia, and other high-flying corporate giants. Moving quickly, the Federal Reserve lowers key interest rates. Wary investors sit on cash and seek direction. A small glimmer of opportunity emerges. Limited in other investment opportunities, small investors trickle into speculative real estate investments and Wall Street test markets a repackaged mortgage-backed securities product. The trickle turns into a torrent and Wall Street leapfrogs into market preeminence in the world of real estate financing. Subprimal is that story. Against this backdrop, a small group of lenders, Wall Street deal makers, home builders, and real estate agents seize an opportunity to take advantage of this vacuum by creating a new real estate market backed by investors with limited investment alternatives. In business, this might be serendipity. In reality, these events touched off the largest financial meltdown in nearly a century. At its heart Subprimal exposes the concept of pyramid leveraging. Leveraging has been the root cause of most economic collapses, yet the economic collapse the world recently experienced is based on leveraging on multiple levels. To understand the crisis is to understand leveraging. To understand the risk of leveraging is to then be better prepared to avoid such events in the future. Subprimal is the story of the economic bubble that finally burst and which set off a chain of events felt in nearly every corner of the world. Subprimal is a story of opportunism, of greed, of powerful and avaricious people who happen to find themselves in the right place at the right time and of mindless followers who would ignore their own doubts and press forward in their quest for financial gain. Subprimal is the story of Wall Street firms who got carried away with their successes and excesses. Subprimal is the story of a governmental system of checks and balances that neither checked those excesses or balanced greed with responsibility. Subprimal is the story of buyers and sellers, of lenders and traders, of hustlers and shills, of suspect behavior and unsuspecting innocents. Subprimal is an American story with a global cast of characters. Subprimal takes these events and examines their origins. It objectively and dispassionately records the actions of the major players in this economic anomaly and does so in a way that the reader can truly understand its many facets and can more easily connect the many dots. Subprimal presents the reader with a deep understanding of the players in a way no contemporaneous article, story, documentary, or analysis can. Subprimal opens the reader’s eyes to the real world of finance, where greed and opportunity meet, and where only the very well-heeled survive. In the end, while truth may finally prevail, there is little left to rebuild a crumbled financial market but hope. Two great quotes are at the heart of Subprimal. The first is by William Shakespeare, also inscribed over the Library of Congress: “What’s past is prologue”. The second is by Albert Einstein: “To do the same thing over and over again and expect different results is insanity.”