Real-life “Wolf of Wall Street” Jordan Belfort has claimed that “there’s no difference” between his actions and those of US lenders who drove the subprime mortgage bubble that triggered the financial crisis.
“The parallel is unbelievable in the sense that they were also recommending **** to their clients,” Belfort said, in an interview with Arabian Business, ahead of a keynote speech in Dubai on May 19.
The subprime mortgage crisis resulted from lenders offering home loans to borrowers with poor or non-existent credit histories. A series of investment banks bought those loans, repackaging them as mortgage-backed securities or collaterised debt obligations (CDOs) in order to take advantage of higher interest rates on the mortgages.
“[Before] the global financial crisis, you’d sell the good loans first, and when you run out them, you sell the A- loans, and when you run out of them you sell worse ones, and before you know it, if you’ve got a pulse and a social security number, you’ve got a loan,” Belfort said. “They ran out of loans.”
When the American housing bubble collapsed, borrowers defaulted on their loans, causing several banks, including Lehman Brothers and Bear Stearns, to declare bankruptcy.
“At the end of the day what I really did wrong was a breach of fiduciary duty. What I’m saying is I did not put my clients first,” said Belfort, who founded over-the-counter trading house Stratton Oakmont, and who was jailed for 22 months for stock market manipulation.
“I was selling them things that I had marked up, the exact same thing that happened with these big collateralised bond obligations, these credit default swaps. It’s exactly the same thing – those are junk mortgages. I was selling junk stocks. And that’s not to say that some of the mortgages weren’t good – and some of my stocks were good. But overall, the prices were not up to the quality. And that was the problem, for sure.”
“You could sell your client anything. If you look at… the public hearings, the rating agencies were laughing: ‘yeah, this piece of ****, let’s rate this AAA’. And that’s ******* Standard & Poor’s saying that! No-one cared, you know? It was crazy… but no-one went to jail there.”
When questioned as to whether it was fair that no senior executives on Wall Street went to jail as a result of the sub-prime mortgage crisis, Belfort replied: “I deserved to go to jail. Listen, I deserved to go to jail. But I know, I don’t think it’s going to happen [bankers going to jail] though, yeah? I know it’s frustrating for people.”
Since leaving prison, Belfort has reinvented himself through his acclaimed Straight Line sales technique and acted as a consultant to more than 50 public companies. His two international bestselling memoirs, The Wolf of Wall Street and Catching the Wolf of Wall Street, have been published in over forty countries and translated into eighteen languages.
The full interview with Jordan Belfort will be published on Sunday May 18.
*Jordan Belfort will be speaking about his rise and fall, and giving insights into his Straight Line sales technique, at the Arabian Business Forum on 19 May. For information and tickets click here.