Power Failure: The Rise and Fall of an American Icon

by William D. Cohan

At first, the Wall Street investment banks bought the mortgages from the mortgage brokers and packaged them up into securities and then sold them off for big fees. The manufacture and sale of mortgage-backed securities was very, very big business on Wall Street in the years leading up to 2008. As demand rose for the securities and the supply of new mortgages began to dwindle, the quality of the mortgages packaged into securities began to slip, meaning that mortgages made to people who might not be able to pay them back were finding their way into mortgage-backed securities. To try to guarantee a steady supply of mortgages—the raw material of the mortgage-backed security—Wall Street banks began buying up mortgage brokers.