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Unfortunately, the Bull that gilded Renaissance New York did little for most Americans. Eighties Wall Street was about institutional money released by deregulation, mergers and acquisitions, and, most of all, the debt that made it all possible. As John Kenneth Galbraith points out, financial euphoria always starts with new ways to borrow money; this time it was triggered by the Savings & Loan crisis. Volcker’s rocketing interest rates had forced S&Ls to offer double digits to new depositors while only getting back single digits on the old thirty-year mortgages on their books. S&Ls were going under, and getting a mortgage was nearly impossible, so in March 1980, with the banking system and the housing market on the brink, Carter had signed a law to allow them to issue credit cards, invest in commercial real estate, and offer checking accounts in order to stay in business. Reagan then took it a step further with a change that encouraged S&Ls to sell their mortgages in search of higher returns, freeing up a $1 trillion that needed to be invested in something. Which takes us back to Salomon Brothers, where in 1978 one Lew Ranieri had repackaged an old investment product the government had clamped down on during the Depression: A group of home mortgages all backed by government insurance would be bundled together, then sliced into bonds, thus converting the debt some people owed on their homes into an asset for others. Ranieri had been a bit ahead of the curve then—the same high interest rates that killed the S&Ls also made his bonds unattractive—but now deregulation let Salomon buy up the S&Ls’ mortgages at a deep discount, bundle them into bonds, and sell them back to the S&Ls who believed they’d diversified into the bond market when in fact they’d just bought ground meat made out of their own steaks. In June 1983, Salomon Brothers and Freddie Mac together issued the first collateralized mortgage obligation bonds (CMOs), which bundled up debt and cut it into tranches based on the amount of risk: you could choose between ground chuck and ground sirloin. It would be years before technology would allow doing this on a huge scale, but the immediate impact was that all kinds of debt, not just mortgages, were bundled, cut into bonds, and sold: credit card debt, car loans, you name it. Between 1983 and 1988, some $60 billion of CMOs were sold; GM’s financing arm became more profitable than its cars. America began to make debt instead of things. The

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