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Lewis S. Ranieri (; born 1947) is a former
bond Bond or bonds may refer to: Common meanings * Bond (finance), a type of debt security * Bail bond, a commercial third-party guarantor of surety bonds in the United States * Chemical bond, the attraction of atoms, ions or molecules to form chemical ...
trader, founding partner and current chairman of Ranieri Partners,http://www.ranieripartners.com/ranieri-senior-executive-team-1/lewis-s-ranieri a
real estate Real estate is property consisting of land and the buildings on it, along with its natural resources such as crops, minerals or water; immovable property of this nature; an interest vested in this (also) an item of real property, (more genera ...
firm. He is considered the "father" of mortgage-backed securities, for his pioneering role in their emergence in the 1970s, during his tenure in Salomon Brothers, where he reached the position of Vice Chairman.''
BusinessWeek ''Bloomberg Businessweek'', previously known as ''BusinessWeek'', is an American weekly business magazine published fifty times a year. Since 2009, the magazine is owned by New York City-based Bloomberg L.P. The magazine debuted in New York City ...
'', 29 November 2004
Lewis S. Ranieri: Your Mortgage Was His Bond
/ref>'' The Guardian'', 26 January 2009
Twenty-five people at the heart of the meltdown ...
/ref>'' TIME''
25 People to Blame for the Financial Crisis
/ref> Although he was named by ''
BusinessWeek ''Bloomberg Businessweek'', previously known as ''BusinessWeek'', is an American weekly business magazine published fifty times a year. Since 2009, the magazine is owned by New York City-based Bloomberg L.P. The magazine debuted in New York City ...
'' in 2004 as "one of the greatest innovators of the past 75 years", he was later strongly criticized for his role in the subprime mortgage crisis of 200709.


Early life

Lewis S. Ranieri was born in Brooklyn, New York, in 1947. Ranieri had sought to be an Italian chef before finding that his asthma prevented him from working in smoky kitchens. He began college at St. John's University but left before completing his degree. Ranieri later returned to school and completed his Bachelor of Arts in English in 1986. In 1987, St. John's University awarded him an honorary Doctor of Laws degree.


Career

In 1968, 21-year-old Ranieri took a part-time job in the mail room of Salomon Brothers. He worked his way to the position of vice chairman of Salomon Brothers, as discussed in
Michael Lewis Michael Monroe Lewis (born October 15, 1960) Gale Biography In Context. is an American author and financial journalist. He has also been a contributing editor to '' Vanity Fair'' since 2009, writing mostly on business, finance, and economics. H ...
's bestseller '' Liar's Poker''. 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 ''Bloomberg Businessweek'', previously known as ''BusinessWeek'', is an American weekly business magazine published fifty times a year. Since 2009, the magazine is owned by New York City-based Bloomberg L.P. The magazine debuted in New York City ...
'' 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 A collateralized mortgage obligation (CMO) is a type of complex debt security that repackages and directs the payments of principal and interest from a collateral pool to different types and maturities of securities, thereby meeting investor need ...
, repackaging mortgages into more attractive bonds. By 1981, American Savings and Loan (S&Ls) were battered by high inflation as well as the high interest rates charged by the Federal Reserve under chairman
Paul Volcker Paul Adolph Volcker Jr. (September 5, 1927 – December 8, 2019) was an American economist who served as the 12th chairman of the Federal Reserve from 1979 to 1987. During his tenure as chairman, Volcker was widely credited with having ended th ...
, but Congress allowed S&Ls to hide some of their losses by moving assets off their books. Ranieri bought mortgages from one S&L and sold them to another, allowing Wall Street to become involved in the home mortgage market (and profit from the spread). He convinced Freddie Mac to assist with a deal which packaged older loans from Perpetual Savings, a troubled S&L in the Washington D.C. area. However, institutional investors only became attracted to the market when he and Larry Fink of First Boston created the CMO in 1983. In 1984, Congress passed the
Secondary Mortgage Market Enhancement Act The Secondary Mortgage Market Enhancement Act of 1984 (SMMEA) was an Act of Congress intended to improve the marketability of private label mortgage-backed security passthroughs. It is mentioned as a significant contributing factor in the subprime ...
(SMMEA), overturning the previous prohibition against private banks selling mortgage-backed securities without a government guarantee. It also pre-empted state
blue sky laws A blue sky law is a state law in the United States that regulates the offering and sale of securities to protect the public from fraud. Though the specific provisions of these laws vary among states, they all require the registration of all sec ...
which had previously required investment banks to register with multiple states before selling them. Furthermore, institutional investors could purchase mortgage-backed securities, provided a
nationally recognized statistical rating organization A nationally recognized statistical rating organization (NRSRO) is a credit rating agency (CRA) approved by the U.S. Securities and Exchange Commission (SEC) to provide information that financial firms must rely on for certain regulatory purpos ...
(NRSRO) gave them a high rating; in effect allowing those investors to outsource their due diligence to such agencies. Ranieri attended the ceremony in which President Ronald Reagan signed SMMEA. Ranieri also secured a tax exemption applicable to pools of mortgages held by a
REMIC is a Japanese animation studio notable for producing the anime is hand-drawn and computer-generated animation originating from Japan. Outside of Japan and in English, ''anime'' refers specifically to animation produced in Japan. Howe ...
. Legalized by the Tax Reform Act of 1986, the mortgage-backed securities market reached $150 billion in 1986. However, Salomon Brothers fired Ranieri in 1987, which some characterized as him becoming a victim of his own success, since his old traders staffed many Wall Street investment banks. Ranieri formed Hyperion Partners, an investment firm, in 1988. In 2001, Ranieri and his partners at Hyperion sold Bank United of Texas, a firm they acquired in the late 1980s. Under Ranieri's leadership as chairman of the board, Bank United went from having been a failed savings and loan to being a successful $18 Billion asset regional bank at the time of sale. As mortgage-backed securities came under scrutiny for their role in the subprime mortgage crisis, the United States housing bubble and the financial crisis of 2007–2010, critics took aim at Ranieri. In March 2007, at a time when it was unknown whether or not the over-extension of leverage inherent in subprime mortgages could lead to a financial crisis, Ranieri commented "I think
he risk He or HE may refer to: Language * He (pronoun), an English pronoun * He (kana), the romanization of the Japanese kana へ * He (letter), the fifth letter of many Semitic alphabets * He (Cyrillic), a letter of the Cyrillic script called ''He'' ...
is containable. I don't think this is going to be a cataclysm." Ranieri commented on the situation in a 2009 interview. "It wasn't the concept of securitization that created the problem", argued Ranieri. Rather, he blamed Wall Street for misusing securitization to create mortgage products that homeowners were unable to afford over the long term, such as those with low 'teaser' rates that became unaffordable when they reset. In the same interview, Ranieri also explained his firm's ongoing efforts to rehabilitate the US housing market by purchasing delinquent mortgages, working with the original homeowners to establish consistent payments, and then selling the newly stabilized loans.


Philanthropy

In 2005, Ranieri was appointed by Roman Catholic Bishop William Murphy of the Diocese of
Rockville Centre Rockville Centre, commonly abbreviated as RVC, is an incorporated village located in the Town of Hempstead in Nassau County, on the South Shore of Long Island, in New York, United States. The population was 24,023 at the 2010 census. Histo ...
to form Tomorrow's Hope Foundation, a nonprofit organization whose mission is to provide assistance to the Catholic elementary and secondary schools of the diocese. The foundation has provided scholarships to thousands of families seeking Catholic education for their children. Ranieri continues to serve as chairman of the foundation.


Recognition

Ranieri received the Distinguished Industry Service Award from the American Securitization Forum in 2005 and has participated in the National Association of Home Builders Mortgage Roundtable since 1989. Ranieri has also been inducted into the National Housing Hall of Fame and received the Lifetime Achievement Award given by the Fixed Income Analysts Society, Inc. In 2012, St. John's University awarded Ranieri the Spirit of Service award for his work with Tomorrow's Hope Foundation and his dedication to serving others. Ranieri is portrayed by actor Rudy Eisenzopf at the beginning of the film ''
The Big Short ''The Big Short: Inside the Doomsday Machine'' is a nonfiction book by Michael Lewis about the build-up of the United States housing bubble during the 2000s. It was released on March 15, 2010, by W. W. Norton & Company. It spent 28 weeks on ' ...
'' (adapted from Michael Lewis' book of the same name), which dramatized the events leading up to the 2007–08 housing crisis.


References


External links

* {{DEFAULTSORT:Ranieri, Lewis 1947 births American financiers Living people Mortgage-backed security St. John's University (New York City) alumni