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Book review: It Takes a Pillage, by Nomi Prins

By Holden Lewis · Bankrate.com
Tuesday, May 11, 2010
Posted: 4 pm ET

Nomi Prins was an investment banker for Bear Stearns and Goldman Sachs, then quit and became a muckraking reporter. (I like to imagine that she met the Devil at a crossroads to buy back her soul.) Prins's banking career accounts for the strengths and the weaknesses of her book, "It Takes a Pillage," an explanation of why the mortgage-related financial meltdown happened and how to prevent a repeat.

Prins clearly believes that Wall Street is run by sociopaths (although she avoids using that loaded term). During her time with Bear and Goldman, she attended "meetings that centered on strategizing about lying." Investment bankers are power-hungry and amoral, and it's the federal government's job to protect ordinary Americans from them, Prins believes.

In the acknowledgments, Prins explains that she wrote this book in four months, and the haste is apparent in the unorganized first half of "It Takes a Pillage." The first few chapters convey the feeling of walking into a friend's family reunion, where newly introduced people settle scores.

The best nugget in this first part of the book is a quote from former Sen. Phil Gramm, an archconservative from Texas who opposed curbs on predatory mortgage lending. "Some people look at subprime lending and see evil," Gramm said in August 2001. "I look at subprime lending and I see the American dream in action."

Prins's indignation finds better organization in the book's second half. She describes how the financial crisis emerged from a blend of lax regulation, right-wing ideology, cynical banking practices and the revolving door between industry and regulators.

Those toxic elements came together in repeal of Glass-Steagall, the law enacted after the Depression that separated commercial banks from investment banks. Robert Rubin, former cochairman of Goldman Sachs, was "hell-bent on removing barriers to banking activities," Prins writes, and urged repeal of Glass-Steagall while he was Treasury secretary.

Rubin argued that mergers within the financial services industry would somehow bring fiercer competition, even with fewer competitors. After Glass-Steagall's repeal, Rubin resigned as Treasury secretary and went to work for Citigroup, where he was paid handsomely.

Another blow to the economy was the relaxation of the net capital rule, in 2004. Prins deftly describes how the relaxation of this rule (with little debate) encouraged banks to take the big risks that led to their multitrillion-dollar bailout.

The financial crisis brought forth a parade of books, few of which contain any moral judgments. Prins's volume is filled with moral outrage. She quotes Vikram Pandit, CEO of Citigroup, as saying that "the old model no longer works and the old rules no longer apply." To which Prins replies: "Don't count on Pandit and his friends to take a new model and new rules that in any way benefit you, however."

"It Takes a Pillage: Behind the Bailouts, Bonuses, and Backroom Deals from Washington to Wall Street," By Nomi Prins. John Wiley & Sons, 296 pages. $25.95

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1 Comment
Marvin Von Renchler
May 13, 2010 at 12:06 pm

Through ignorance or politics the press has not come close to giving the true picture to the public. The people were played. Its almost the same picture as the stock market fiasco. Most Americans are ingnorant sheep, following whoever has a title. We lost retirement money through the stock market but at least had real estate equity. Now that equity is lost for so many, the nation has millions of NEW POOR, who have no way of surviving their later years without government assistance. Will there be enough?

TTo bottom line the entire mortgage 'perfect storm', we ran out of qualified borrowers. The lenders had one decision --- close the doors now or create dangerous new programs, talk others into buying them and probably close the doors later when the loans go bad. You see the result. Mortgage brokers have been blamed for 'predatory lending' and many types of fraud. The banking industry pushes it off on brokers, forgetting that THEY developed the programs, underwrote them and sold them to other entities.

We have seen major actions that I hope will be lessons learned for our children. The Hunt brothers manipulation of the metals market, the stock market crash and now this mortgage/real estate crash.

As long as we humans do not evolve past our current stage, someone will always be screwing another for profit. Its the human way.