Former Head of Securitized Products and Global Fixed Income Research Groups at UBS
A veteran of financial economics and institutional research, Dr. Laurie Goodman discusses her experience as head of UBS’s Fixed-Income and Securitized Products research groups in the run-up to the financial crisis. She highlights internal dynamics and pressures within the institution, explaining the conflict of interest that frequently lay between the trading and research division. Dr. Goodman points to various signs of distress within the mortgage and securities industries that indicated an imminent failure, but emphasizes the difficulty at the time of appreciating how quickly falling home prices, coupled with excessive leverage, could generate snowball effects. She also takes note of when and how different groups in Wall Street and on Capitol Hill responded to those signals, reflecting on the incentives and business practices that contributed to the 2008 financial crisis. In particular, she highlights the incentives of rating agencies to pursue profit by providing the most positive ratings on mortgage assets in order to secure more clients and deals, the incentives of research departments to withhold negative search on assets to avoid hindering the business of their trading departments, and the government’s lack of incentive to wade into the quagmire that was mortgage securitization. Lastly, she acknowledges that predatory lending practices were primarily targeted at minority groups and communities, but argues that banks only underwrote and bought closed loans and did not have access at the time to demographic information in these loans.
Date Recorded:
September 29, 2020
Interviewed by:
Maria Paz Rios
Laurie Goodman is currently the Co-Director of the Urban Institute’s Housing Finance Policy Center, which provides policymakers with data-driven analyses of housing policy issues. Previously, Goodman served as a Senior Managing Director at Amherst Securities, a boutique broker-dealer focused on securitized products. With over 30 years in Wall Street, Goodman headed the Securitized Products and Global Fixed Income Research groups at UBS from 1993-2008. The Securitized Products Research group produced the weekly Mortgage Strategist publication, one of the most read pieces of Wall Street research, and Goodman led the group to the top-ranking position in the Institutional Investor polls for 11 consecutive years. Before joining UBS, Goodman also held roles within other firms such as Merrill Lynch, Eastbridge Capital, Goldman Sachs, and Citi, as well as serving as Senior Economist within the Federal Reserve Bank of New York. Goodman holds a Bachelor of Arts in Mathematics and Bachelor of Science in Business from the University of Pennsylvania as well as a Master’s and PhD in Economics from Stanford University.
This article details the recovery process of the housing market, and more specifically, how minority communities are oftentimes left out of this process. The article draws from Laurie Goodman’s research on housing policy at Urban Institute, where she notes how before the 2008 Financial Crisis, minority communities were unfairly given loans they could not pay back. Now, Goodman explains, minorities are struggling to attain home loans, as banks and non-bank lenders unfairly fear the possibility of default.
In this publication, Goodman discusses possible changes to HMDA, The Home Mortgage Disclosure Act. The publication specifically focuses on the Home Mortgage Disclosure Adjustment Act, an auxiliary bill that would exempt mortgage distributing institutions from reporting many of the data fields required under HMDA. In the analysis, Goodman and co-authors discuss how the passage of this bill would likely stifle previous efforts to provide full transparency to future borrowers.
In this publication, Goodman provides an overview of synthetic CDOs and their role in the housing market as a whole. Goodman explains that unlike traditional CDOs, issuers of synthetic CDOs do not own the risk-bearing securities. Instead, synthetic CDOs accumulate risk through credit default swaps, another important financial instrument within the housing market.
In this publication, Goodman evaluates default and loss behaviors of purchase, rate refinance, and cash-out refinance loans and their larger role in the housing crisis. Throughout her analysis, Goodman concludes that the faulty performance of cash out refinances were the primary cause of the 2008 Financial Crisis.
In-Depth Look – Crash In US Home Prices May Resume, 2009.
In this news clip, Laurie Goodman discusses the housing market in the wake of the 2008 Financial Crisis. Goodman specifically discusses the concept of a “shadow” housing inventory, in which the housing market will likely see an influx of soon-to-be foreclosed homes entering the market. This is especially important following the 2008 Financial Crisis, as many borrowers continued to default on their subprime mortgages.
“Is the Housing Market Recovery Uneven?” November 6, 2015.
In this news clip, Laurie Goodman discusses the recovery of the housing market in the United States, and specifically, the increasing stringency of mortgages and mortgage lending. Goodman explains that even though banks and non-bank lenders are increasing the rate of mortgage distribution, there is minimal risk of another major financial crisis, as the market is now in a state where it can take on more risk.
Institutional Investor. “The 2007 All-America Fixed-Income Research Team.” September 16, 2007.
This news article by the Institutional Investor highlights key players involved in fixed-income research, one of those being Laurie Goodman. The article emphasizes Goodman’s focus on the surging subprime mortgage market prior to the 2008 Financial Crisis. The article also notes that Goodman’s team, while working at UBS, centered primarily on securitized products, structured credit, emerging markets and leveraged finance/high yield. Throughout the article, the authors underscore Goodman’s analysis of the mortgage market, and specifically, how it evolved in relation to the financial crisis.
“Statement by Laurie Goodman on Home Equity Conversion Mortgage Program” September 25, 2019.
This is Laurie Goodman’s testimony before the US House of Representative’s Committee on Financial Services’ Subcommittee on Housing, Community Development, and Insurance regarding the FHA’s Home Equity Conversion Mortgage (HECM) Program. In her testimony, Goodman discusses the housing finance needs of senior homeowners and specifically, how seniors can attain home equity in their retirement.
