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The Guy Who Helped Blow Up Wall Street

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The Guy Who Helped Blow Up Wall Street

Economy

The Guy Who Helped Blow Up Wall Street

The Guy Who Helped Blow Up Wall Street

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  • <iframe src="https://www.npr.org/player/embed/102767684/102769389" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript

After his software was sold to another company, Michael Osinski quit the business and became an oyster farmer on Long Island. Isabelle Osinski hide caption

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Isabelle Osinski

After his software was sold to another company, Michael Osinski quit the business and became an oyster farmer on Long Island.

Isabelle Osinski

These days, everyone's looking for someone to blame for the financial crisis. The list is long, and here's another name that could be on it: Michael Osinski.

In the '90s, Osinski wrote a computer program that made it very easy to make a lot of money off of bad mortgages — maybe too easy. After his software was sold to another company, he quit the business and became an oyster farmer on Long Island. Now he's written an article — or perhaps a confession — that appeared in this week's New York Magazine.

Host Robert Smith talks with Osinski about being a trader in the '90s, and whether he saw the crisis coming.

Excerpt: My Manhattan Project

I have been called the devil by strangers and "the Facilitator" by friends. It's not uncommon for people, when I tell them what I used to do, to ask if I feel guilty. I do, somewhat, and it nags at me. When I put it out of mind, it inevitably resurfaces, like a shipwreck at low tide. It's been eight years since I compiled a program, but the last one lived on, becoming the industry standard that seeded itself into every investment bank in the world.

I wrote the software that turned mortgages into bonds.

Because of the news, you probably know more about this than you ever wanted to. The packaging of heterogeneous home mortgages into uniform securities that can be accurately priced and exchanged has been singled out by many critics as one of the root causes of the mess we're in. I don't completely disagree. But in my view, and of course I'm inescapably biased, there's nothing inherently flawed about securitization. Done correctly and conservatively, it increases the efficiency with which banks can loan money and tailor risks to the needs of investors. Once upon a time, this seemed like a very good idea, and it might well again, provided banks don't resume writing mortgages to people who can't afford them. Here's one thing that's definitely true: The software proved to be more sophisticated than the people who used it, and that has caused the whole world a lot of problems.

As published in New York Magazine. Read the rest of this article at nymag.com.