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 FINANCIAL CRISIS INQUIRY COMMISSION REPORT

His clients included many of the largest lenders—Countrywide, Ameriquest, and
Ditech among them. Most of their new hires were young, with no mortgage experi-
ence, fresh out of school and with previous jobs “flipping burgers,” he told the FCIC.
Given the right training, however, the best of them could “easily” earn millions. 
“I was a sales and marketing trainer in terms of helping people to know how to
sell these products to, in some cases, frankly unsophisticated and unsuspecting bor-
rowers,” he said. He taught them the new playbook: “You had no incentive whatso-
ever to be concerned about the quality of the loan, whether it was suitable for the
borrower or whether the loan performed. In fact, you were in a way encouraged not
to worry about those macro issues.” He added, “I knew that the risk was being
shunted off. I knew that we could be writing crap. But in the end it was like a game of
musical chairs. Volume might go down but we were not going to be hurt.” 
On Wall Street, where many of these loans were packaged into securities and sold
to investors around the globe, a new term was coined: IBGYBG, “I’ll be gone, you’ll

be gone.” It referred to deals that brought in big fees up front while risking much
larger losses in the future. And, for a long time, IBGYBG worked at every level.
Most home loans entered the pipeline soon after borrowers signed the docu-
ments and picked up their keys. Loans were put into packages and sold off in bulk to
securitization firms—including investment banks such as Merrill Lynch, Bear
Stearns, and Lehman Brothers, and commercial banks and thrifts such as Citibank,
Wells Fargo, and Washington Mutual. The firms would package the loans into resi-
dential mortgage–backed securities that would mostly be stamped with triple-A rat-
ings by the credit rating agencies, and sold to investors. In many cases, the securities
were repackaged again into collateralized debt obligations (CDOs)—often com-
posed of the riskier portions of these securities—which would then be sold to other
investors. Most of these securities would also receive the coveted triple-A ratings
that investors believed attested to their quality and safety. Some investors would buy
an invention from the s called a credit default swap (CDS) to protect against the
securities’ defaulting. For every buyer of a credit default swap, there was a seller: as
these investors made opposing bets, the layers of entanglement in the securities mar-
ket increased.
The instruments grew more and more complex; CDOs were constructed out of
CDOs, creating CDOs squared. When firms ran out of real product, they started gen-
erating cheaper-to-produce synthetic CDOs—composed not of real mortgage securi-
ties but just of bets on other mortgage products. Each new permutation created an
opportunity to extract more fees and trading profits. And each new layer brought in
more investors wagering on the mortgage market—even well after the market had
started to turn. So by the time the process was complete, a mortgage on a home in
south Florida might become part of dozens of securities owned by hundreds of in-
vestors—or parts of bets being made by hundreds more. Treasury Secretary Timothy
Geithner, the president of the New York Federal Reserve Bank during the crisis, de-
scribed the resulting product as “cooked spaghetti” that became hard to “untangle.” 
Ralph Cioffi spent several years creating CDOs for Bear Stearns and a couple of
more years on the repurchase or “repo” desk, which was responsible for borrowing