The most striking thing about the list for me is that the best work during the entire period—stories that hit hard at abusive practices and established the critical link between bucket shops and their Wall Street funders and bundlers—was done early, from 2000 to 2003. Business Week’s Dean Foust, et al, explored Wall Street’s foray into the hard-money lending business, including subprime mortgages and payday lending (“Easy Money: Subprime lenders make a killing catering to poorer Americans. Now Wall Street is getting in on the act,” 4/24/00). A handy chart at the bottom of the story ranks subprime securitization leaders: Lehman was number one. Citigroup’s 2000 acquisition of Associates First Capital, a notoriously corrupt outfit (it employed a “designated forger,” ABC’s Prime Time Live reported in 1997) spurred The New York Times to publish “Along With a Lender, Is Citigroup Buying Trouble?” in October of that year. This fine 3,258-word story documented Associates’ execrable practices fairly well (though it couldn’t beat the anecdote from a 4/23/97 Journal story that described how an illiterate quarry worker who owed $1,250 for—get this, meat—discovered that this loan had been sold to Associates, which convinced the quarry worker to refinance ten times in four years until he owed $45,000, more than half of it in fees, with payments that took more than 70 percent of his income. He had signed each note with an “X”). The Times duly noted Citi’s promise to clean up its new acquisition by, among other things, holding upfront fees to a mere nine (!) points.

Business journalism during this period comes close to reaching the holy grail—the critical Wall Street/subprime connection—when The New York Times’s Diana Henriques, in a joint project with Lowell Bergman and ABC News (including, though he doesn’t have a byline, the underappreciated Brian Ross), published “Mortgaged Lives: Profiting From Fine Print With Wall Street’s Help” (3/15/00), linking another now forgotten but once powerful and rapacious subprime lender, First Alliance Corp., with Lehman Brothers and other Wall Street firms engaging in precisely the kind of practices that brought down the financial system. The story captures the boiler-room culture that was then overrunning traditional mortgage underwriting, here with a quote from a twenty-seven-page sales manual:

“Establish a common bond,” the loan officers were taught. “Find this early in the conversation to make the customer lower his guard.” The script listed good bond-building topics (family, jobs, children, and pets) and emphasized, “It’s really important to get them laughing.”

The piece goes on to describe the Wall Street connection in some detail: “No Wall Street investment bank had a bigger share of that reviving 1999 [subprime] market than Lehman Brothers, Wall Street’s fourth-largest brokerage house.”

This story and others were based on groundbreaking litigation in California that, importantly, would hold a Wall Street firm responsible for the practices of its lender-clients. Had that principle stood up (an Orange County jury found for the borrowers in 2003 but the award against Lehman, $5 million, was small), there would have been no mortgage crisis. The Los Angeles Times, led by E. Scott Reckard, also dogged the litigation, recognizing the journalism opportunity for what it was.

John Hechinger of The Wall Street Journal also wrote fine warning stories, including one about how brand-name lenders were convincing the poor to refinance zero-percent loans from the government and Habitat for Humanity (!?) with rates that reset to the mid-teens and higher (“Best Interests: How Big Lenders Sell a Pricier Refinancing to Poor Homeowners—People Give Up Low Rates to Pay Off Other Debts . . .” 12/7/01). The dishonor roll is here:

Some of the nation’s biggest subprime lenders have refinanced zero-interest and low-interest loans from Habitat, including Countrywide, units of Citigroup Inc., Household International Inc., Ameriquest Mortgage Co. and a unit of tax giant h&r Block Inc.

Meanwhile, the Journal’s Jess Bravin and Paul Beckett painted a devastating portrait of a compromised Comptroller of the Currency (“Friendly Watchdog: Federal Regulator Often Helps Banks Fighting Consumers—Dependent on Lenders’ Fees, OCC Takes Their Side Against Local, State Laws” 1/28/02). And Forbes did a beat-down on Household (“Home Wrecker,” 9/2/02).

Dean Starkman , CJR's Kingsford Capital Fellow, runs The Audit,'s business desk. Megan McGinley, a CJR intern, and Elinore Longobardi, an Audit staff writer, provided research. This story and the two following were supported with a grant from the Investigative Fund of The Nation Institute, for which we are deeply grateful.