Lewis Ranieri

Lewis S. Ranieri (born 1947) is a former bond trader, and founding partner and current chairman of Ranieri Partners, a real estate firm. He is considered the "father" of mortgage-backed securities, for his pioneering role in their emergence in the 1970s, during his tenure in Salomon Brothers, where he reached the position of Vice Chairman. Although he was named by BusinessWeek in 2004 as "one of the greatest innovators of the past 75 years", he was later strongly criticized for his role in the subprime mortgage crisis of 2007–09.

Lewis S. Ranieri was born in Brooklyn, NY in 1947. Ranieri had sought to be an Italian chef before finding that his asthma prevented him from working in smoky kitchens. He began college at St. John's University but left before completing his degree. Ranieri later returned to school and completed his Bachelor of Arts in English in 1986. In 1987, St. John’s University awarded him an honorary Doctor of Laws degree.

In 1968, Ranieri took a part-time job in the mail room of Salomon Brothers. He worked his way from the mail room to the position of Vice Chairman of Salomon Brothers, the full story of which is captured in Michael Lewis's bestseller Liar's Poker. In the late 1970s, Ranieri joined the new mortgage-trading desk of Salomon Brothers where he contributed to creating the innovative practice of securitization, a word he is said to have coined. BusinessWeek said that in 1977, with the creation of mortgage-backed securities (MBS), "Ranieri's job was to sell those bonds—at a time when only 15 states recognized MBS as legal investments. With a trader's nerve and a salesman's persuasiveness, he did much more, creating the market to trade MBS and winning Washington lobbying battles to remove legal and tax barriers." Ranieri also declared that "mortgages are math," hiring PhDs who developed the collateralized mortgage obligation, repackaging mortgages into more attractive bonds.

After leaving Salomon in 1987, Ranieri formed Hyperion Partners, a successful investment firm, in 1988. In 2000, Ranieri and his partners at Hyperion sold Bank United, a firm they acquired in the late 1980s.

As mortgage-backed securities came under scrutiny for their role in the subprime mortgage crisis, the United States housing bubble and the financial crisis of 2007–2010, critics took aim at Ranieri. In March 2007, at a time when it was unknown whether or not the over-extension of leverage inherent in subprime mortgages could lead to a financial crisis, Ranieri commented "I think [the risk] is containable. I don't think this is going to be a cataclysm."

Ranieri commented on the situation in a 2009 interview. "It wasn't the concept of securitization that created the problem", argued Ranieri. Rather, he blamed Wall Street for misusing securitization to create mortgage products that homeowners were unable to afford over the long term, such as those with low 'teaser' rates that became unaffordable when they reset. In the same interview, Ranieri also explained his firm's ongoing efforts to rehabilitate the US housing market by purchasing delinquent mortgages, working with the original homeowners to establish consistent payments, and then selling the newly stabilized loans.

In 2005, Ranieri was appointed by Roman Catholic Bishop William Murphy of the Diocese of Rockville Centre to form Tomorrow's Hope Foundation, a nonprofit organization whose mission is to provide assistance to the Catholic elementary and secondary schools of the diocese. The foundation has provided scholarships to thousands of families seeking Catholic education for their children. Ranieri continues to serve as chairman of the foundation.

Ranieri received the Distinguished Industry Service Award from the American Securitization Forum in 2005 and has participated on the National Association of Home Builders Mortgage Roundtable since 1989. Ranieri has also been inducted into the National Housing Hall of Fame and received the Lifetime Achievement Award given by the Fixed Income Analysts Society, Inc. In 2012, St. John's University awarded Ranieri the Spirit of Service award for his work with Tomorrow's Hope Foundation and his dedication to serving others.

Ranieri is portrayed by actor Rudy Eisenzopf at the beginning of the film The Big Short (adapted from Michael Lewis' book of the same name), which dramatized the events leading up to the 2007–08 housing crisis.