eventually got an interview in the newly emerging field of mortgage finance . A man named Lewis S . Ranieri handed her a prospectus on a Friday and said they ’ d talk on Monday .
Ranieri was not yet a familiar name outside of Salomon Brothers , although he would become well known after the publication of Liar ’ s Poker , Michael Lewis ’ s autobiographical account of life at Salomon Brothers in the late 1980s . Ranieri had started in the mailroom at Salomon Brothers while a college student in Queens , alighted on the trading floor as a college dropout and then blew past everyone when he created an entirely new market in mortgage-backed bonds . He would be known for coining the term “ securitization ” and be among the first to practice “ financial alchemy ,” in his case packaging home loans and selling them to institutional investors .
When Marianne arrived for her interview in the early 1980s , the mortgage trading department on the 41st floor was not yet filled with what Lewis would call “ the firm ’ s Biggest Swinging Dicks .” Ranieri ’ s department would eventually be the golden goose laying the firm ’ s most monumental golden eggs , outpacing all other departments at Solly ; it was where every analyst trainee would want to be assigned .
But for now , there was no sign of this future . That Ranieri handed Marianne a prospectus explaining what his department did and what they were selling suggested that no one yet understood mortgage bonds . Mortgages as a possible source of Wall Street trading was , in hindsight , obvious . Yet mortgages had not been recognized as a potential source of seemingly endless revenue until Salomon Brothers started Wall Street ’ s first mortgage securities department in 1978 . At the center of it all was the small-town savings and loan bank , known as a thrift , which doled out most of America ’ s mortgages and benefitted from government protections and tax breaks . Outstanding mortgage loans were at $ 55 billion in 1950 , rising to $ 700 billion in 1976 and becoming a whopping $ 1.2 trillion by January 1980 .
Marianne , even after she ’ d read the prospectus cover to cover and her friends had quizzed her until she could recite it in her sleep , still wasn ’ t sure what these mortgage-backed securities were , but on Monday morning she took a deep breath and knocked on Ranieri ’ s office door .
She was ready to answer any questions he could possibly throw at her . But after a short while he simply said that she sounded like everyone else at the firm so she might as well have the job .
It had taken Marianne over a year , but she finally had a position at Salomon Brothers . Yet when she started cold calling to sell this product that neither she , nor anyone else , understood , it was a fail . And so she decided to use her common sense . She realized this was a long-term asset , which would influence who wanted to buy it . Pension funds was the obvious answer . She switched gears and , sure enough , public government pension funds proved to be the most receptive . As soon as she did her first deal , she was on to the next state to do another . Soon she was selling a whole series of mortgage bonds to various state and city pensions .
Marianne had lucked out . It could not have been predicted that Ranieri ’ s department would become the top earner at Salomon Brothers . When the department finally took off , it was because of a single tax decision . In October 1979 , the Federal Reserve , under Paul Volcker , appointed by President Jimmy Carter in a desperate attempt to staunch inflation , had significantly raised interest rates . The S & Ls , the thrifts , were hit hard . Until then , the joke had been that they operated under a system of 3 – 6 – 2 : pay depositors 3 %, lend their money out as mortgages at 6 % and hit the golf course at 2 p . m . But with Volcker now trying to tighten up money to lower inflation , the reliable formula imploded . Volcker cooled the economy , as intended , but he also brought the housing market to a screeching halt , and the S & Ls to the brink of collapse . Congress , unwilling to give up on the mom-and-pop banks of middle America , agreed to help them out .
Starting in October 1981 , these small thrifts were given the right to sell off their mortgages to pay off their depositors . To make it yet more advantageous for them , they were also able to turn their loss on these mortgages into refunds on taxes they ’ d paid in previous years . With such a profitable tax break dangled in front of them , S & Ls were suddenly extremely eager to unload their mortgages , and Salomon Brothers was the only brokerage house with a fully established mortgage trading department . Overnight , Ranieri found himself with a Wall Street monopoly .
At first , he bought mortgages from one S & L and sold them to another at a markup . But to make them more tradeable for institutional investors , he came up with what became called the mortgage-backed security ( MBS ). These securities were pooled , turned into baskets filled with anonymous mortgages that the buyer and trader only saw as paper and that the mortgage-owner only saw as a monthly mortgage reminder from their local , friendly S & L . In 1982 , Ranieri ’ s department made $ 150 million for Salomon Brothers .
In 1984 , Marianne was called on to testify before Congress about the MBS market in relation to a proposed bill to increase the ability of pension funds , both public and private , to participate in this new market . Marianne , representing Salomon Brothers , explained , “ We are pioneers in developing mortgage securities and , indeed , I think we could go so far as to say that we have been missionaries , in that field . We have learned a lot of lessons .” She was asked why other firms were so slow in getting in on the MBS , and she countered , “ I would love to say that that was true , that other firms haven ’ t tried , but they have … We were willing to come into this market at an early stage in time ,” and as a result are “ now trading about $ 15 billion in mortgage securities a month .” That same year , Marianne would herself do four Connecticut transactions that totaled $ 500 million .
Marianne was extravagant and reveled in being so . When she closed on her first big deal , she invited her friends , most of them from outside the finance world , to the Palace on East 59th Street , which was said to be “ the city ’ s most expensive restaurant .” She jubilantly announced to the waiters at the start of the dinner to put the glasses on the bill “ because we ’ re going to break them !” Marianne had not only found a seat at the table but had guaranteed herself a full place setting .
Paulina Bren is a writer and award-winning historian who teaches at Vassar College on the Pittsburgh Endowment Chair in the Humanities . She is the author of the best-selling book The Barbizon : The Hotel That Set Women Free ( Simon & Schuster , 2022 ). Her latest book is She- Wolves : The Untold History of Women on Wall Street ( W . W . Norton & Company , 2024 ), from which this article has been adapted .
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