Book Review: All the Devils Are Here: The Hidden History of the Financial Crisis

Wall Street seems to float in an ether above Main Street
, ubiquitous but at the same time untouchable. So translating the fog behind the 2008 financial crisis into language everyone can understand is a daunting task. In their new book, All the Devils Are Here: The Hidden History of the Financial Crisis, veteran journalists Bethany McLean and Joel Nocera slam dunk this difficult project.

The authors turn CDOs into something that makes sense, CEOs into the fallible humans they are, and even transform the government into a place readers can picture. The result is a book not only on the causes of the financial crisis, but commentary on corruption, systemic hubris, and human nature itself.


All the Devils Are Here
offers a chronological overview of the three decades that fomented the financial crisis. It starts in the late 1970s and ends with the Obama administration’s 2010 financial reform bill.

Rather than going into detail about one firm’s collapse, the way other books do, Devils covers several major players through time. Every creatively-titled chapter (“I Like Big Bucks and I Cannot Lie,” for example) tells the story of one or more major players, from Fannie Mae to Goldman Sachs. The authors add color and personality to these players using anecdotes, quotes, and email excerpts.

The authors’ extensive research, apparent throughout the book, resulted in an overview of the crisis that made me take a step back from my previous assumptions.

For example, none other than the government first securitized mortgages. When derivatives made it to the international stage, governments around the world, meeting in the “Basel I” conference on international banking regulation, agreed that mortgage products weren’t risky. They decided that banks’ capital requirements should be lower if they held more of those “safe” mortgage derivatives.

The Fed fed into this delusion by assuming that derivatives like credit default swaps would let banks offload the risk of holding capital to other entities. With that risk passed on, the logic went, banks were less likely to fail in the traditional way–by making bad loans. Policymakers also saw no need to regulate derivatives, which they too saw as risk-free.

This lack of regulation, in turn, gave banks incentive to get creative with derivatives. Besides agreeing that mortgage-backed derivatives were safe, the financial world also thought innovations in general reduced risk. In reality, say the authors, they dispersed risk so widely that everyone was affected. This perceived lack of risk also led ratings agencies to give derivatives–and derivatives of derivatives, like credit default swaps–AAA ratings.

The risk hallucination kept growing. Lenders that there was zero risk of default, so they stopped caring if creditors could pay them back. Securitization eventually became the main way of funding mortgages. A Clinton-era push for increased homeownership increased the Wall Street subprime feeding frenzy. Meanwhile, Countrywide Mortgage’s bulldog CEO, Angelo Mozilo, starting pushing refinances in the early 1990s. Refinances eventually made up a whopping 82% of subprime mortgages.

The authors cover how the government, its GSEs, Merrill Lynch, Ameriquest, Goldman Sachs, JP Morgan, and AIG jumped on board and inflamed the economy. You learn about each company’s history, the personalities of its CEOs and top executives, and its relationship with the government. There’s also a skillful emphasis on how demagoguery, especially at AIG and Merrill, as well as a restrictive company culture induced disastrous results. Goldman Sachs, still the media villain du jour, actually had the most effective leadership and company culture of anyone in the book.

A Note on Fannie and Freddie

The stories that enlightened me most in the entire book had to do with Fannie Mae and Freddie Mac. Our GSEs, it turns out, aren’t as quaint and innocent as they sound.

Since inception, Fannie has been at odds with Wall Street and the government, protecting profits while neutering the law, write the authors. It owned its massive, lucrative 30-year-fixed mortgage market share with the help of lobbying (FNM and FRE spent $170 million between 1996-2006) and the belief by investors that the government would never let Fannie default.

Its job was to “supply liquidity when the housing markets needed it,” but Fannie forgot that and focused instead on generating ever-increasing profits and trying to keep pace with the private market. After subprime became mainstream and ate into their market share, our sweet-sounding, greed-infused GSEs jumped onto the subprime bandwagon. They bought in during 2005-7, the worst possible years to join, according to the authors. When the cards collapsed, their losses were massive.

Despite all of the GSEs’ hubris and corruption, the government still hasn’t decided what to do with Fannie and Freddie, which today back about 95% of homeowner mortgages.

The Authors’ Outlook

McLean and Nocera wrap up the book with a critical look at the Obama administration’s 2010 financial reform bill, saying that regulation is only as good as the regulators who enforce it. They also point out that despite putting several key financial crisis players on trial, the government can’t punish something that, while corrupt, isn’t considered a crime. I closed the book feeling the same way many people probably do these days: dubious, with a twinge of optimism.


McLean and Nocera line the story with such thorough, fascinating detail that I can’t begin to chronicle all the new facts that jumped out at me. Suffice it to say that I was pleased to get to know some of the main players in the financial crisis more personally.

Devils covers media whipping boys like Goldman Sachs and AIG in a more nuanced light, making readers understand how leadership and company culture contributed to the firms’ post-crisis fates. One of the book’s most valuable contributions, besides its coverage of Fannie and Freddie, was Roland Arnall’s Ameriquest. This corrupt company, heavy on cheating and cocaine, was one of the dirtiest players in the financial game. Yet the media and government–which ended up giving Arnall a post as US ambassador–continue to overlook it.

It’s easy to say “systemic hubris,” but much harder to describe what that looks like in real life. McLean and Nocera do this well. After finishing the book, I ended up with a big picture view of the financial crisis, of the humans whose greed built the straw house that burned in ’08.

I followed the financial crisis while it was happening, and frankly always felt like pieces were missing. The books that I read after the financial crisis covered certain bits in detail, but I still had no bird’s-eye view. Finally, All the Devils Are Here provided it. I highly encourage anyone who wants not only a chronology of the financial crisis, but a valuable look at human nature, to pick up this book.

Disclosure: We received a free preview copy of All the Devils Are Here.

Written by Drea Knufken

Currently, I create and execute content- and PR strategies for clients, including thought leadership and messaging. I also ghostwrite and produce press releases, white papers, case studies and other collateral.