Crashed: How a Decade of Financial Crises Changed the World

by Adam Tooze

Nor did European banks confine themselves to dealing in the securities. The Europeans went native, joining their American counterparts in integrating down the supply chain so as to control mortgage origination itself. After all, if a Wall Street investment bank could do it, why not a European bank with some experience in retail banking? From the mid-1990s banks like Britain’s HSBC aggressively bought into the American mortgage market. By 2005 HSBC could boast of having serviced 450,000 mortgages to a total value of $70 billion.10 Credit Suisse built an American mortgage-servicing department that fed one of the largest ABS CDO operations of the early 2000s.11 Deutsche Bank had close relationships with the giant mortgage-generating machines at Countrywide and AmeriQuest. In 2006 the German bank bought the subprime specialists MortgageIT Holdings and Chapel Funding LLC. As a Deutsche Bank press release glowed, ownership of these operations at the bottom of the US credit pyramid would “provide significant competitive advantages, such as access to a steady source of product for distribution into the mortgage capital markets.”12 From the point of view of generating high-yielding CDOs, it was precisely the bottom of the mortgage barrel that was most attractive.