Crashed: How a Decade of Financial Crises Changed the World

by Adam Tooze

The third group of actors in the mortgage boom of the early 2000s was already in the business in the 1990s. They were banks like Washington Mutual, a survivor of the savings-and-loan disaster, and specialized mortgage lenders like Countrywide.37 As feeders to the GSEs they were restricted to mortgage origination. But why limit their ambitions? Why not integrate the entire chain? By the late 1990s and early 2000s all three groups of banks—investment banks, commercial banks and mortgage lenders—were following this logic. Rather than organizing their mortgage business around the GSEs, they set out to build integrated mortgage securitization businesses. Countrywide expanded from origination to securitization. A giant bank like Citi could envision itself as a provider at every stage, originating, securitizing, selling, holding and dealing in MBS. Even more remarkable was the evolution of investment banks like Lehman and Bear Stearns that had previously defined themselves through their remoteness from ordinary retail customers. Already in the 1990s Bear added the mortgage