I started looking up Ameriquest cases, and found lots of borrower suits and ex-employee suits. There was one in particular, which basically said that the guy had been fired because he had complained that Ameriquest’s business ethics were terrible. I found the guy in the Kansas City phone book, and he told me a really compelling story. One of the things that really stuck out is, he said to me, “Have you ever seen the movie Boiler Room [the 2000 film about an unethical pump-and-dump brokerage firm]?”

By the time I had roughly 10 former employees, most of them willing to be on the record, I thought: This is a really important story. Ameriquest at that point was on its way to being the largest subprime lender. So I started trying to pitch it.

The Los Angeles Times liked the story and teamed me with Scott Reckard, and we worked through much of the fall of 2004 and early 2005. We had 30 or so former employees, almost all of them basically saying that they had seen illegal practices, some of whom acknowledged that they’d done it themselves: bait-and-switch salesmanship, inflating people’s incomes on loan applications, inflating appraisals. Or they were cutting and pasting W2s or faking a tax return. It was called the “art department”—blatant forgery, doctoring the documents. In a sense I feel like I helped them become whistleblowers because they had no idea what to do. One of the best details was that many people said they showed Boiler Room—as a training tape! And the other important thing about the story was that Ameriquest was being held up by politicians, and even by the media, as the gold standard—the company cleaning up the industry, reversing age-old bad practices in this market. To me, theirs was partly a story of the triumph of public relations.

Leaving Roanoke

I resigned from the Roanoke Times and for most of 2005 was freelancing full-time. I made virtually no money that year, but by working on the Ameriquest story, it helped me move to the next thing. I was hired by The Wall Street Journal to cover the bond market. Of course, I came in pitching mortgage-backed securities as a great story. I could have said it with more urgency in the proposal, but I didn’t want to come off as an advocate.

Daily bond-market coverage is their bread and butter, and I tried to do the best I could on it. I was doing what I could for the team but I was not playing in a position where my talents and my skills were being used to the highest. I felt like I had a lot of information that needed to be told, and an understanding that many other reporters didn’t have. And I could see a lot of the writing focused on deadbeat borrowers lying about their income, rather than how things were really happening.

Through my reporting I knew two things: that there were a lot of predatory and fraudulent practices throughout the subprime industry. It wasn’t isolated pockets, rogue lenders, or rogue employees. It was endemic. And I also knew that Wall Street played a big role in this, and that Wall Street was driving or condoning and/or profiting from a lot of these practices. I understood that, basically, the subprime lenders, like Ameriquest, and even Countrywide, were creatures of Wall Street. Wall Street loaned these companies money; the companies then made loans and off-loaded the loans to Wall Street; Wall Street then sold the loans as securities to investors. It was this magic circle of cash flowing. The one thing I didn’t understand was all the fancy financial alchemy—the derivatives, the swaps—that was added on to put the loans on steroids.

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.