Lewis Ranieri
Encyclopedia
Lewis S. Ranieri is a former bond
trader and former vice chairman of Salomon Brothers
. He is considered the "godfather" of mortgage finance for his role in pioneering securitization
and mortgage-backed securities. In 2004, Ranieri was considered by BusinessWeek
one of the greatest innovators of the past 75 years.
Ranieri had sought to be an Italian chef
before finding that his asthma
prevented him from working in smoky kitchens. A part-time job in the mail room of Salomon Brothers in 1968 then turned into a trading career. In the late 1970s, Ranieri joined the new mortgage-trading desk of Salomon Brothers where he contributed to creating the innovative practice of securitization, a word he is said to have coined. BusinessWeek
said that in 1977, with the creation of mortgage-backed securities (MBS), "Ranieri's job was to sell those bonds—at a time when only 15 states recognized MBS as legal investments. With a trader's nerve and a salesman's persuasiveness, he did much more, creating the market to trade MBS and winning Washington lobbying battles to remove legal and tax barriers." Ranieri also declared that "mortgages are math," hiring PhDs who developed the collateralized mortgage obligation
, repackaging mortgages into more attractive bonds.
After leaving Salomon in 1987, Ranieri bought BankUnited
in 1988, selling it in 2000.
After mortgage-backed securities came under major scrutiny for their role in the subprime mortgage crisis
the United States housing bubble
and the Financial crisis of 2007-2010, however, critics have taken aim at Ranieri. In March 2008, for example, Nobel Prize laureate in Economics Robert Mundell
inserted Ranieri among the "Five Goats Who Contributed to the Financial Crisis" of 2008 with President Bill Clinton
, former AIG head Hank Greenberg
, Ben Bernanke
, and Henry Paulson
.
In November 2008, Franklin Bank in Houston, TX, failed after taking large real estate loan losses. The bank was founded by Ranieri, who served as the bank's chairman and took over the CEO duties in May 2008.
Bond (finance)
In finance, a bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest to use and/or to repay the principal at a later date, termed maturity...
trader and former vice chairman of Salomon Brothers
Salomon Brothers
Salomon Brothers was a bulge bracket, Wall Street investment bank. Founded in 1910 by three brothers along with a clerk named Ben Levy, it remained a partnership until the early 1980s, when it was acquired by the commodity trading firm Phibro Corporation and then became Salomon Inc. Eventually...
. He is considered the "godfather" of mortgage finance for his role in pioneering securitization
Securitization
Securitization is the financial practice of pooling various types of contractual debt such as residential mortgages, commercial mortgages, auto loans or credit card debt obligations and selling said consolidated debt as bonds, pass-through securities, or Collateralized mortgage obligation , to...
and mortgage-backed securities. In 2004, Ranieri was considered by BusinessWeek
BusinessWeek
Bloomberg Businessweek, commonly and formerly known as BusinessWeek, is a weekly business magazine published by Bloomberg L.P. It is currently headquartered in New York City.- History :...
one of the greatest innovators of the past 75 years.
Ranieri had sought to be an Italian chef
Chef
A chef is a person who cooks professionally for other people. Although over time the term has come to describe any person who cooks for a living, traditionally it refers to a highly skilled professional who is proficient in all aspects of food preparation.-Etymology:The word "chef" is borrowed ...
before finding that his asthma
Asthma
Asthma is the common chronic inflammatory disease of the airways characterized by variable and recurring symptoms, reversible airflow obstruction, and bronchospasm. Symptoms include wheezing, coughing, chest tightness, and shortness of breath...
prevented him from working in smoky kitchens. A part-time job in the mail room of Salomon Brothers in 1968 then turned into a trading career. In the late 1970s, Ranieri joined the new mortgage-trading desk of Salomon Brothers where he contributed to creating the innovative practice of securitization, a word he is said to have coined. BusinessWeek
BusinessWeek
Bloomberg Businessweek, commonly and formerly known as BusinessWeek, is a weekly business magazine published by Bloomberg L.P. It is currently headquartered in New York City.- History :...
said that in 1977, with the creation of mortgage-backed securities (MBS), "Ranieri's job was to sell those bonds—at a time when only 15 states recognized MBS as legal investments. With a trader's nerve and a salesman's persuasiveness, he did much more, creating the market to trade MBS and winning Washington lobbying battles to remove legal and tax barriers." Ranieri also declared that "mortgages are math," hiring PhDs who developed the collateralized mortgage obligation
Collateralized mortgage obligation
A collateralized mortgage obligation is a type of financial debt vehicle that was first created in 1983 by the investment banks Salomon Brothers and First Boston for U.S. mortgage lender Freddie Mac. A collateralized mortgage obligation (CMO) is a type of financial debt vehicle that was first...
, repackaging mortgages into more attractive bonds.
After leaving Salomon in 1987, Ranieri bought BankUnited
BankUnited
BankUnited is a savings and loan association based in Miami Lakes, Florida. It was seized by U.S. financial regulators and immediately handed over to a new holding company on 21 May 2009, in the second largest bank failure of the Financial crisis of 2007–2010...
in 1988, selling it in 2000.
After mortgage-backed securities came under major scrutiny for their role in the subprime mortgage crisis
Subprime mortgage crisis
The U.S. subprime mortgage crisis was one of the first indicators of the late-2000s financial crisis, characterized by a rise in subprime mortgage delinquencies and foreclosures, and the resulting decline of securities backed by said mortgages....
the United States housing bubble
United States housing bubble
The United States housing bubble is an economic bubble affecting many parts of the United States housing market in over half of American states. Housing prices peaked in early 2006, started to decline in 2006 and 2007, and may not yet have hit bottom as of 2011. On December 30, 2008 the...
and the Financial crisis of 2007-2010, however, critics have taken aim at Ranieri. In March 2008, for example, Nobel Prize laureate in Economics Robert Mundell
Robert Mundell
Robert Mundell, CC is a Nobel Prize-winning Canadian economist. Currently, Mundell is a professor of economics at Columbia University and the Chinese University of Hong Kong....
inserted Ranieri among the "Five Goats Who Contributed to the Financial Crisis" of 2008 with President Bill Clinton
Bill Clinton
William Jefferson "Bill" Clinton is an American politician who served as the 42nd President of the United States from 1993 to 2001. Inaugurated at age 46, he was the third-youngest president. He took office at the end of the Cold War, and was the first president of the baby boomer generation...
, former AIG head Hank Greenberg
Maurice R. Greenberg
Maurice Raymond "Hank" Greenberg is an American business executive and former chairman and CEO of American International Group , which was the world's 18th largest public company and its largest insurance and financial services corporation.He is currently chairman and CEO of C.V. Starr & Co., Inc....
, Ben Bernanke
Ben Bernanke
Ben Shalom Bernanke is an American economist, and the current Chairman of the Federal Reserve, the central bank of the United States. During his tenure as Chairman, Bernanke has overseen the response of the Federal Reserve to late-2000s financial crisis....
, and Henry Paulson
Henry Paulson
Henry Merritt "Hank" Paulson, Jr. is an American banker who served as the 74th United States Secretary of the Treasury. He previously served as the Chairman and Chief Executive Officer of Goldman Sachs.-Early life and family:...
.
In November 2008, Franklin Bank in Houston, TX, failed after taking large real estate loan losses. The bank was founded by Ranieri, who served as the bank's chairman and took over the CEO duties in May 2008.
External links
- CNNCNNCable News Network is a U.S. cable news channel founded in 1980 by Ted Turner. Upon its launch, CNN was the first channel to provide 24-hour television news coverage, and the first all-news television channel in the United States...
, 9 December 2009, Lewie Ranieri wants to fix the mortgage mess