The Novel Experiment
Researching her book about a novelist-turned-trader, the author got a front-row seat at the financial meltdown
May 20, 2010
By Martha McPhee
I was propositioned by a Wall Street trader. Actually he was a manager of mortgage-backed-securities traders at a well-regarded investment bank. We were at a garden party in the country, and I noted that he had arrived in a chauffeured town car that waited for him. I knew he was a Wall Street type, and I was curious about what he did, and how he, by the look of the car sitting outside, made so much money. He generously explained the job of a mortgage-backed-securities trader and humbly suggested there was nothing to it. Traders were nothing more than used-car salesmen who understood supply and demand, he said. Anyone could do it. Instead of cars, they were selling mortgages, people’s puny mortgages bundled together into giant pools, then sold around the globe to insurance empires and pension funds, even foreign countries. This process, he said, had allowed interest rates to drop, making mortgages easier to get and providing a lot more people with the great American dream of homeownership.
I was fascinated. The idea of amassing the small debts of so many dreamers on a colossal scale—a scale bigger than the entire combined value of the U.S. stock markets, as it happened—and chopping them up and sending them around the world seemed like quite a plot. Swept up in my enthusiasm, he told me: “If you give me 18 months, I’ll turn you into a trader.” This was 2004.