Two faces of the US subprime crisis

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One, the product of the best schools, was a trader at a large New York bank. The other switched sales jobs to the housing market. Both are among the thousands of Americans whose jobs have been swallowed up in the widening US subprime mortgage crisis.
The real estate meltdown that resulted in credit seizing up impacts the affected employees in different ways. Some are left with nothing; some just change jobs.
Stephen Markham, 28, is ready to turn the page without too much regret. This "golden boy" has just been recruited in the City, London's financial center, and is leaving with a large exit package tucked comfortably in his pocket. His biggest worry of the moment: Will he have to sell or rent his loft in west Manhattan?
Tony Ventimiglio, 45, a former car salesman, changed his field to real estate four years ago during the sizzling housing boom, when subprime mortgage lending to homebuyers with poor credit, who should have been charged higher interest rates, was common.
In June, Ventimiglio was still driving a Cadillac and had just re-enrolled his children in a private school.
But as subprime borrowers found themselves unable to make payments in a double-edged context of increasing interest rates and slumping house prices, the crisis in August triggered a credit crunch that roiled markets around the world.
Ventimiglio's life was upended. By the end of October, he was beginning a free professional course at a university in California, traveling on foot.
Despite their differences, Markham and Ventimiglio say they are victims of the same "bomb" created by the US financial sector.
Ventimiglio was selling the American Dream-home ownership without worrying about whether his clients could repay their home loans.
For Markham, his focus was on buying mortgages and packaging them into products to sell to investors eager to boost their investment portfolios.
"The subprime mortgages activity is over," said the former hotshot trader, who is in a hurry to join the firm that recruited him in the British capital.
"We created fictitious demand, fictitious cash and fictitious volume," he said, explaining how his team embellished their sales pitch to investors who were only too happy to buy it.
For Ventimiglio, house sales in the fat boom years were fast and easy.
"There were a lot of people who knew nothing about mortgages. We were simply in the right place at the right time," he recalled.
"We needed only to pass a written test and pay a few hundred dollars for a license" to sell property, he explained.
Agents can become licensed with just three hours of theory classes and a test, confirmed the National Association of Home Brokers, a trade organization representing the mortgage industry.
"I routinely made 25,000 dollars a month in commission for 225,000 a year, more than double what I made in the previous four years," the ex-real estate agent said.
In California's wealthy Orange County, where Ventimiglio worked, the average house price was 642,250 dollars, fetching a commission of between two to four percent for the agent who sold it.
Markham, the trader, explained he had been recruited to the New York bank after his graduation from Harvard University.
"I accepted to join them because I wanted to save money quickly," he said.
At the bank, he said he was part of a group of 30 financial whiz kids, aged between 22 and 30, whose job was to dream up new financial products to lure investors.
Members of the team discovered problems with the mortgages they bought and were selling in these products. The brokers who sold the mortgages had often failed to check closely enough to see whether they had received proper documentation from homebuyers, he said, resulting in overvalued mortgages. And the bank did not look closely, either, he added.
But as the housing boom turned to bust, credit began seizing up and overseas investors turned cautious, forcing the team to lower their prices.
"We started to get worried when we noticed that our (profit) margins got more and more reduced, then we started to say, stop, there is something wrong here," he said.
Of the some hundred real estate agents who worked with Ventimiglio, most are jobless today.
The Wall Street young lions received kinder treatment because the banks did not want to tarnish their reputations, Markham said.
Although mortgage lenders have slashed some 76,000 jobs since January-and more job cuts are expected-the financial sector in the United States remains a heavyweight, employing 8.5 million people in July, up from 8.4 million a year earlier, according to the business consultancy Challenger, Gray & Christmas. —AFP