And Then the Roof Caved In

CNBC's David Faber takes an in-depth look at the causes and consequences of the recent financial collapse

And Then the Roof Caved In lays bare the truth of the credit crisis, whose defining emotion at every turn has been greed, and whose defining failure is the complicity of the U.S. government in letting that greed rule the day. Written by CNBC's David Faber, this book painstakingly details the truth of what really happened with compelling characters who offer their first-hand accounts of what they did and why they did it.

Page by page, Faber explains the events of the previous seven years that planted the seeds for the worst economic crisis since the Great Depression. He begins in 2001, when the Federal Reserve embarked on an unprecedented effort to help the economy recover from the attacks of 9/11 by sending interest rates to all time lows. Faber also gives you an up-close look at where the crisis was incubated and unleashed upon the world-Wall Street-and introduces you to insiders from investment banks and mortgage lenders to ratings agencies, that unwittingly conspired to insure lending standards were abandoned in the head long rush for profits.

• Based on two years of research, this book provides deep background into the current credit crisis
• Offers the insights of experienced professionals-from Alan Greenspan to prominent bankers and regulators-who were on the front lines
• Created by David Faber, the face of morning business news on CNBC, and host of the network's award winning documentaries

From regulators who tried to stop this problem before it swung out of control to hedge fund managers who correctly foresaw the coming housing crash and profited from it, And Then the Roof Caved In shows you how the crisis we currently face came to be.

Acknowledgments xi

Prologue “On the Verge” 1

Chapter 1 Bubble to Bubble 11

Greenspan’s Shock and Awe 13

Houses Built on Cow Dung 19

Chapter 2 Home Sweet Home 23

Opening Doors 24

An Industry Is Born 27

Subprime Returns 29

Chapter 3 The Subprime Machine 33

From Delivering Pizza to Delivering Mortgages 41

Living the Dream 44

Diving into Deep Trouble 45

Chapter 4 Eyes Wide Shut 49

A Warning Unheeded 50

A Dream No More 55

Chapter 5 The Great Enabler 57

Fannie Mae and Freddie Mac

Hit the Scene 61

Fannie and Freddie Get a Timeout 63

Wall Street Takes Over 66

A Tsunami of Mortgages 71

From Ownit to Out of It 74

Back from the Grave 77

Chapter 6 Complicity 81

Moody’s the Money Maker 85

Repeat Customers 88

Chapter 7 The Securitization from Hell 95

The Making of a CDO 96

Tough to Kill 98

Turning “Crap into Triple-A” 101

From CDS to CDO 103

Insanity Sets In 106

Chapter 8 Narvik and Me 111

CDOs: An American Export 113

The Truth Revealed—But Does It Matter? 118

Chapter 9 Mortgaging Merrill’s Future 121

Climbing Out of Poverty 122

A Strong Start 124

The Secret Weapon 125

Raking It In 127

Taking Big Risks 130

Chapter 10 A House of Cards 135

Digging for Gold 136

Building a Case 139

The Investment of a Lifetime 147

Chapter 11 And Then the Roof Caved In 155

The Wheels Coming Off 157

The Call 159

A Crisis Begins 161

The CDO Blues 165

Lights Out 167

Epilogue 171

A Note on Sources 181

Resources from CNBC 183

Index 187

"David Faber is known as one of the cooler heads on financial news channel CNBC… True to his reputation, calm prevails through most of the book... Faber explains rather than rants about these mortgages, as well as securitizations and bogus credit ratings, making the case that greed and stupidity caused the financial crisis…"
—Lisa Von Ahn, Reuters

a" fantastic book on the housing meltdown . . .
—The Motley Fool

“CNBC’s David Faber delivers a clear-eyed look at the origins of the crisis. . . As an anchor of the Faber Report, the author was on the front lines of the financial crisis and spoke with many of its key players.
—Fortune magazine

"A slim yet substantial book based on Faber's riveting (and horrifying) CNBC special "House of Cards" that takes readers from the mosquito-ridden swimming pools of option-ARM ghost towns to a Norwegian town bankrupted by ill-advised investments in "synthetic" bonds on the mortgages left behind."
—NY Mag, Daily Intel

"…we wound up liking Faber’s book. He writes simply and well. He also uses real people to demonstrate the insanity of the housing boom. While this may not be the deepest book about the crash, it could be the most accessible."
—MoneySense magazine

DAVID FABER, an Emmy, Peabody, and duPont Award winner, is the anchor and coproducer of CNBC’s acclaimed original documentaries and long-form programming as well as a contributor to CNBC’s Squawk on the Street. He has been reporting on Wall Street and corporate America for over twenty-two years, sixteen of them as the foremost reporter at CNBC. Faber has broken numerous stories including the massive fraud at WorldCom and News Corp.’s hostile bid for Dow Jones. He was a founding member of CNBC’s signature morning show, Squawk Box. Faber also blogs at FaberReport.cnbc.com.

And Then the Roof Caved In painstakingly details what really happened to cause the greatest economic collapse since the Great Depression. Written by David Faber—the award-winning correspondent who has covered Wall Street for more than two decades—this compelling story is filled with the firsthand accounts of the bankers and regulators who unleashed this crisis on the world. They tell Faber what they did and why they did it.

Faber traces the lineage of the subprime industry and takes you back to the attacks of 9/11, after which Federal Reserve chairman Alan Greenspan embarked on an unprecedented effort to help the economy recover by sending interest rates to all-time lows. Faber details the precipitous drop in lending standards, which allowed people with marginal incomes to take on mortgages they could not afford, and explains how those mortgages came back to wreck the financial system.

And Then the Roof Caved In also reveals where this crisis was incubated—Wall Street—and introduces you to insiders from investment banks and mortgage lenders who fostered the boom and, in doing so, planted the seeds for such an astonishing economic collapse. Throughout the book, Faber weaves a narrative that takes you from subprime lenders like Quick Loan Funding and big investment banks like Merrill Lynch to regulators who tried to stop the crisis before it spiraled out of control and hedge fund managers who correctly foresaw the coming housing crash and profited from it.

Engaging and informative, And Then the Roof Caved In offers a definitive, up-close and personal analysis of the roots of this stunning worldwide economic failure.