via flickr user Kevin Krejci

The Ninjas Strike Back
My first encounter with a 21st century Ninja came in the spring of 2006. I was on my way to a rendez-vous at a sandwich place in a dodgy part of Brooklyn. Emblazoned across a storefront were the words: “No job. No credit. No problem. We give mortgages to everyone.” As I later learned, not only was this practice legal, but it was an institutionalized multi-billion dollar asset class, referred to by Wall Street bankers as NINJA loans [No-Income-No Jobs or Assets]. More than three-quarters of these subprime loans originated between 2003 and 2007 and had an exploding teaser rate feature: after two or three years, the low-introductory interest rate would spike.

Two years later, these co-conspirator Ninjas unleashed a flurry of blows on the solar plexus of predatory financiers. Rather than a shobo (a small ring used for hand-to-hand combat), the Ninjas’ weapon of choice was much more potent: jingle mail. With the popping of the housing bubble, thousands of people faced with exploding interest rates on a mortgage that was now worth more than their home did the only logical thing. They packed up, moved out, and sent an envelope with the keys to the bank.

The jingle mail unlocked the black box of risk management on which the reputations of the Wizards of Wall Street were staked. The financial markets reacted savagely to this betrayal of trust. Storied investment houses Lehman Brothers and Bear Stearns were buried alive without eulogies. AIG and Citibank became wards of the state. Within 15 months more than US $50 trillion (roughly equivalent to the annual world domestic product) in stocks, real estate, commodities and operational earnings had vapourized.

Down the Path of Laissez-Faire
In 2004, my roommates and I threw a party at our condominium to celebrate our beautiful view which, par for the course in Toronto, was slowly being eclipsed by a rising condo. John was about to start a new job in New York, working with special purpose vehicles. “So you are getting into the car business…” Pepe said. “No,” John replied. “Wall Street.”