Pizza Delivery Guys Made $20K a Week!

3

Last night I watched a sobering and fascinating (like watching a car crash in slow motion) television program on CNBC called “House of Cards.” In two hours, it told the story of how we got into our current credit crisis. Interviews with Alan Greenspan told of the confusing “collateralized Debt Obligations” or CDOs that even he was confused by. They were slapped with AAA ratings from rating agencies who had recent b-school grads believing that house prices would always rise 6-8 percent per year. Every year.

A woman in Compton CA talked about how wonderful it was in 2004 a fellow church member turned mortgage broker sold her a mortgage she couldn’t afford…some that even had reduced interest with the rest of the interest tacked onto the principal. She’s long since defaulted on the huge mortgage and moved out. Subject after subject who never should have bought a house in pricey California by the end of the show were answering the door to the sheriff, toting an eviction notice.

“There were guys who used to deliver pizzas making twenty grand a month,” said a man who once worked for a company called Quick Funding. Like everyone at the firm, he’s unemployed. Quick Funding’s owner was briefly famous for owning a Ferrari Enzo that was nearly totalled during a practice run for a movie promo. He said no matter how unqualified you were, he could sell your loan to Wall St., they’d in turn sell it to Asia or Europe with its AAA rating.

Even in Narvik Norway, town officials who bought CDOs from a Citibank offering have lost millions, and they’ve laid off firemen and other employees. “If it seems too good to be true, it probably is,” said a chagrined town official.

One man made more than a billion in profits, a hedge fund operator who bet against CDOs and the housing market. His fund went up 600% in less than a year, he told the show’s host. He figured out what was happening when he sat next to a banker who sold CDOs in Spain, and followed the trail, then bet big against the whole thing. He was a rare trader indeed.

A former CDO salesman said he doesn’t feel guilty about selling those worthless instruments. Today he runs a consulting business for former mortgage brokers. A former Bear Stearns broker admitted that he felt a little bad, that he was part of a chain that resulted in such a spectacular failure.