All the Devils Are Here: 2008 Financial Crisis Book Review
This paper reviews All the Devils Are Here by Bethany McLean and Joe Nocera, a comprehensive account of the 2008 financial crisis. The review examines the authors' chronological approach to tracing the crisis from the invention of mortgage-backed securities through the failures of Fannie Mae, Freddie Mac, and Wall Street. It evaluates how McLean and Nocera identify the key players responsible for the meltdown, assess government complicity, and explain how risky financial instruments combined with reckless assumptions to produce a catastrophic economic collapse. The review also notes the book's accessible, narrative writing style and its contribution to the broader scholarship on the crisis.
- Introduction: Overview of the Book: Book's scope, timing, and central argument
- Origins of the Mortgage-Backed Security: How mortgage-backed securities created systemic risk
- Government Complicity and the Role of Fannie Mae and Freddie Mac: Government's role through Fannie Mae and Freddie Mac
- The Cast of Characters and the Culture of Risk: Key players and their thrill-seeking risk culture
- Assumptions, Ignorance, and Possible Culpability: Decision-makers' dangerous ignorance and potential liability
- Conclusions and the Legacy of the Crisis: Authors' final conclusions and book's contribution
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What makes this paper effective
- The review moves logically through the book's structure, allowing readers to follow the argument chapter by chapter rather than jumping between unrelated points.
- It balances summary with evaluation, offering brief critical observations — such as noting that the authors stop just short of making a direct claim of criminal responsibility — without overstating the reviewer's own position.
- The use of direct quotations from both the book and secondary reviewers grounds the analysis in textual evidence and demonstrates engagement with multiple perspectives on the same work.
Key academic technique demonstrated
This paper demonstrates how to integrate source quotations purposefully in a book review. Rather than simply listing what the book says, the reviewer uses quotations as evidence for evaluative claims — for example, citing the "cash outs" anecdote to support the argument that decision-makers were operating on dangerous assumptions. This technique keeps the review analytical rather than purely descriptive.
Structure breakdown
The paper opens with a brief contextual introduction placing the book within the broader literature on the 2008 crisis. It then moves through the book's core arguments in sequence: the invention of mortgage-backed securities, government complicity via Fannie Mae and Freddie Mac, the "cast of characters" framing, the culture of risk-taking, and the final assessment of causes and consequences. A short concluding paragraph evaluates the book's overall contribution and writing style.
Introduction: Overview of the Book
Since the financial crisis began in 2008, many writers have attempted to produce a comprehensive analysis of what went wrong. All the Devils Are Here by Bethany McLean and Joe Nocera is not an entirely new take on the crisis, but it has the element of time on its side. With three years of hindsight available, the authors were positioned to release a well-researched account of how it all happened. McLean and Nocera chronologically tell the tale of how "the seeds of financial disaster were sown more than thirty years ago when three smart, ambitious men… created a shiny new financial vehicle called the mortgage-backed security" (McLean & Nocera, 2011). This book offers an insightful look at "the fog behind the 2008 financial crisis" (Drea, 2011), and it helps to lift that fog by going back to the beginnings of the crisis and identifying those culpable regardless of political affiliation.
Origins of the Mortgage-Backed Security
On the first page of the first chapter, the authors begin to scrutinize the people who were the real players behind the mortgage crisis. Many of the individuals who would later be seen to have made some of the most foolish financial decisions in history were originally regarded as financial geniuses. Their decisions seemed sound because they used mortgage-backed securities to generate returns that were, in reality, based on a very insecure premise.
Mortgage-backed securities are described as instruments "that allow you to invest in mortgage loans. Each security consists of a collection, or 'pool,' of loans made to homeowners. These loans are backed by a pool of real estate pledges that secure the loans, which serve as the underlying assets of the MBS" (Fidelity, 2011). This can be a sound type of investment under stable conditions, but it is easily undermined when mortgages are issued to borrowers likely to default or when a correction in housing prices becomes imminent. Initially, investors earned substantial returns because the housing market was strong — but it did not remain so. As the authors quote one key figure, Ranieri, as saying: "I wasn't out to invent the biggest floating craps game of all time, but that's what happened" (McLean & Nocera, 2011).
Government Complicity and the Role of Fannie Mae and Freddie Mac
Throughout the book, the authors attempt to identify who was truly responsible for the entire meltdown. After detailing the origins of the mortgage-backed securities market, they turn to how the government was also complicit — arguably more so than investors on Wall Street. As they argue, "it was the government, not Wall Street, that first securitized modern mortgages" (McLean & Nocera, 2011). The government had created Fannie Mae and Freddie Mac as vehicles designed to free up capital so that more loans could be made. By financing mortgages at the federal level, these institutions were meant to relieve pressure on private banks. However, both organizations became more bloated than was healthy.
When the housing market began to decline, Fannie Mae and Freddie Mac suffered staggering losses. Part of the reason the two companies had enjoyed such guaranteed access to capital and loan backing was that they were staffed by Washington insiders from both political parties. This type of insider arrangement was a major contributing factor to why the crash ultimately occurred (Falkenstein, 2011).
References
Drea, M. (2011). Book review. Retrieved from
Falkenstein, E. (2011). Book review. Retrieved from http://falkenblog.blogspot.com/2010/11/book-review-all-devils-are-here.html
Fidelity. (2011). What are mortgage-backed securities. Retrieved from
McLean, B., & Nocera, J. (2011). All the devils are here: The hidden history of the financial crisis. New York: Portfolio/Penguin.
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