Jason Hart gets literary on episode #337 of The Creating Wealth Show when he interviews “Ghosts of Manhattan” author, Doug Brunt about writing, his wife – Fox News personality Megyn Kelly – and the mortgage industry collapse.
Doug Brunt Under the Hood
Doug Brunt is the former CEO of Authentium and author of, “Ghosts of Manhattan.” In his new book, he transports readers back to the extravagant times before Bear Stearns collapsed, exposing a culture with boundless bonuses, where the company expense account was routinely used for bar tabs, visits to strip clubs, and worse. He even throws in some comical stories.
Brunt offers a withering view of life on Wall Street from the perspective of an unhappy insider, run-down by the corrosive lifestyle which is jeopardizing his marriage, who is too hooked on the money to find a way out. He is married to Fox News anchor, Megyn Kelly, who has helped him edit his books. Brunt describes their relationship and why he gave up a lucrative career as an Internet security entrepreneur.
Probably more than anything else, Doug Brunt is known now as the author of “Ghosts of Manhattan.” He describes it as a fictional setting but historically accurate look at the life of a Bear Stearns bond salesman in the years (2005-06) immediately preceding the mortgage industry collapse.
From the Amazon.com blurb: “It’s 2005. Nick Farmer is a thirty-five-year-old bond trader with Bear Stearns clearing seven figures a year. The novelty of a work-related nightlife centering on liquor, hookers, and cocaine has long worn since worn thin, though Nick remains keenly addicted to his annual bonus. But the lifestyle is taking a toll on his marriage – and on him.”
The book reached bestseller status almost immediately following release, propelled by the same combination of money, wretched excess, and appealing story-line that powered the book and movie, Wolf of Wall Street, to similar heights.
Is This Really How Wall Street Works?
By now, anyone who has been paying even a smidgen of attention to this journey through life should realize there’s a reason so many books and movies portray Wall Street life with such visceral depravity. In short, some of it must be true!
Regular listeners to The Creating Wealth podcast have long heard Jason decry Wall Street as the modern version of organized crime. Brunt concurred, though did offer the caveat that not everyone involved in securities trading was terrible, but there are people who live the life exactly as depicted in the book.
And it’s a mad, mad world. According to Brunt, fresh-out-of-college graduates have no real idea of how the game works until they’re in the middle of it. Does $300,000 sound like a nice salary? If that’s all you make by the time you hit your late 20’s, there’s something seriously wrong. That’s loser pay for a thirty-year-old trader.
At first it’s fun, partying more than you did in college, but by the time you’re into your 30’s, the life collides with marriage and family values.
Breaking Down the Mortgage Industry Collapse
As a former Wall Street Insider, Doug Brunt had a ringside seat to the mortgage implosion. He lists five specific steps that led to the worst financial disaster since the Great Depression:
- Everybody Deserves a Home: The seeds of the mortgage industry collapse trace back to the Clinton presidency, specifically laws passed during 1994 and 1995 when the government propagated the idea that everyone deserves a home. Whether or not you agree with the sentiment, the problem arises that not everyone can pay for a home. It was during these years the government started to pressure banks to loosen lending restrictions in order to dramatically increase homeownership.
- Everybody Gets a Loan: With the federal government whispering in their ears to “loan, loan, loan,” banks started giving out mortgages to practically anyone, ignoring the risks of borrowers who had little or no income to come up with the monthly payment. Sure, payments often weren’t due for two years, but when they did arrive, trouble.
- Wall Street Bundles: At this point, Wall Street, never one to shirk from the opportunity to bundle a bunch of crappy stuff into a new financial security and sell it, did just that, tossing thousands of mortgages together. Keep in mind these are crappy mortgages. Brunt describes them as bombs ready to blow up. It wasn’t a matter of if but when.
- A Solid A Rating: Incredibly, ratings companies like Moody’s and Standard & Poor gave these hideous securities an A rating without even taking a close look at them. All they noted was that there were thousands of loans in them, so they must be incredibly diversified and safe. Since they didn’t take the time to do a proper examination, they had no way of predicting that 30-40% of these mortgages would collapse and fall on their foreclosed rear end, leaving the poor saps who bought the mortgages bundles in a world of hurt.
- The Wonderful World of Credit Derivatives: Credit derivatives were the cherry on top of the mortgage industry collapse. These are nothing more than insurance that the security will not fail. AIG was a major player in the derivative market, wildly selling them like hotcakes. Sometimes the same mortgaged house went into 10 different derivatives, a practice Brunt likens to having 10 homeowner’s policies on a single house that is burning down. AIG (of course) didn’t have the cash reserves to pay claims when the mortgages began to implode.
An excellent book and movie on this topic is The Big Short, written by Michael Lewis. The movie version starred Christian Bale, Brad Pitt, and Steve Carrell (among others) and received many kudos during the 2016 Oscar season.
Brunt’s most recent book, The Means, has nothing at all to do with the mortgage industry collapse and everything to do with politics. An American presidential campaign, in particular. You can learn about his books and more at www.DouglasBrunt.com .
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