To business reporters of a certain age, boiler rooms are associated with the notorious stock swindlers of the late nineties—A. R. Baron, Stratton Oakmont—criminal enterprises all. But all the elements of the bucket shops of the past—the cold calling, the hard sell, the bamboozling of over-their-head civilians, not to mention the outright lying, forgery, and fraud in its purest form—were carried out on a massive scale and as a matter of corporate policy by name-brand lenders: IndyMac, Countrywide, Citi, Ameriquest.

“It got to the point where I literally got sick to my stomach,” a former New Century underwriter was quoted in Chain of Blame (Wiley, 2008), an early and strong effort at mortgage-crisis history by Paul Muolo and Matthew Padilla.

Of course, many individual borrowers knowingly inflated their incomes and otherwise participated in what would be their own undoing. And it is beyond question that a class of speculators took advantage of the loose lending environment and committed outright loan fraud to make leveraged bets on the housing market. Some say the borrower-shysters bear as much as 10 percent of the responsibility.

Let’s concede all that, because it’s true. My point is merely that a year into the credit crisis, the evidence is becoming overwhelming of a profound structural shift in the U.S. lending industry—one that institutionalized widespread deceptive practices and outright fraud perpetrated on borrowers. I think conservative critics of the so-called debt culture should at least factor this record into their thinking. As the business press is confronted with incredibly complex crises roiling the secondary market, it is important that this basic fact not get lost.

Though I have been critical of my former colleagues in the business press, it is important to recognize that there has been some stellar reporting that shows how the boiler-room frenzy noted above was underwritten and driven from Wall Street. Again, reporter Mike Hudson, this time at The Wall Street Journal, deserves credit for prescience, not to mention guts, for pushing through in June 2007 a revealing story (headlined The Debt Bomb—Lending a Hand: How Wall Street Stoked the Mortgage Meltdown—Lehman and Others Transformed the Market for Riskiest Borrowers) on how Lehman Brothers, in the mid-1990s, funded the retrograde First Alliance Mortgage, despite due diligence from a Lehman vice president who wrote that the mortgage lender was a financial “sweat shop” specializing in “high pressure sales for people who are in a weak state,” a place were employees leave “their ethics at the door,” etc. Lehman went on to lend the lender $500 million and sell $700 million of its mortgages.

This important story, directly linking the fates of a major Wall Street firm with one of the largest—and rankest—actors on the subprime scene, was never adequately followed. Hence, we were treated to minutia about Bear Stearns’s Alan Schwartz (who, because he “hadn’t had time for dinner, ate slices of cold pizza out of the box”), but very little about how his predecessor, Jimmy Cayne, and Wall Street colleagues, worked hand-in-glove with subprime lenders to create the crisis that created the need for tables to be pounded.

Indeed, it is surprising today to remember that most of the big Wall Street firms, to skip the middleman and so desperate for new loans to turn over, bought and expanded their own retail subprime lending operations as the boom heated: Lehman had BNC Mortgage LLC; Merrill Lynch had First Franklin; Deutsche Bank bought Chapel Funding; and so on. Bear Stearns bought Encore Credit Corp. as late as February 2007, unwinding it a few months later.

Wall Street was not just a cog in the lending machine. It was its master mechanic and chief driver. Pushed to provide higher yield to a booming debt market, it funded the most egregious of the boiler-room operations and ignored the plainly deteriorating quality of the loans—the SIVAS (stated income, verified assets); the SISAS (stated income, stated assets); the NINAS (no income, no assets)—it was selling on global markets. The mortgage story is a Wall Street story. The failure of the business press to understand and pursue this angle is so far the biggest failing in the post-crash reporting.

Yet the wall street/subprime story is gettable. I know this because I’ve seen it done. Chicago Public Radio’s This American Life did a story in collaboration with National Public Radio News called “The Giant Pool of Money,” which aired in May. A transcript of this brilliant piece, the most comprehensive and insightful look at the system that produced the credit crisis, is available online at

Dean Starkman Dean Starkman runs The Audit, CJR's business section, and is the author of The Watchdog That Didn't Bark: The Financial Crisis and the Disappearance of Investigative Journalism (Columbia University Press, January 2014). Follow Dean on Twitter: @deanstarkman.