The title of Michael Hudson’s latest, most ambitious dissection yet of the subprime phenomenon might ring overwrought, even hyperbolic. But The Monster: How a Gang of Predatory Lenders and Wall Street Bankers Fleeced America—And Spawned a Global Crisis (Henry Holt and Co.) is not Hudson’s epithet. “The Monster” is the name First Alliance Mortgage Co. gave to step No. 8 of its sales “track.” It is a mathematical sleight of hand every bit as disingenuous as “trickle down” economics or the so-called “fair tax,” but veiled by a mix of emotional razzle-dazzle and false hope. “The Monster” was an attack on the concept of annual percentage rate, the disclosure of which regulators had mandated in order to stop older style scammers. The loan officer would point out that over any 30-year loan, the borrower pays back much more money than he originally borrowed.

“Next came a series of leading questions, all designed to prompt the borrower to ‘realize’ for themselves that time was their enemy, not the interest or fees,” he continues. After that pitch comes a hand-drawn chart comparing the loans of example recipients, Smith versus Jones. Both borrowed the same amount and paid the same fees and interest rate, but Smith pays it off in 15 years instead of 30, shelling out fewer total dollars than Jones. “But strangely, the loan officer gently points out, Smith’s annual percentage rate was higher.”

To a financially literate person, the reason for this is obvious—the up-front fees and points were spread over a shorter time period, which drives the annual cost of credit higher. Instead of explaining or admitting that situation, the loan officer “would prod borrowers into saying that the interest rate and fees really didn’t matter, that what mattered was for the borrower to make extra payments” to pay the loan off early.

Typically, every other element of the loan package was designed to prevent that.

“The Monster,” and the mindset it engenders, permeated mortgage lending in the 2000s. Philosophically, it is also at the core of the current economic crisis: a set of practices and procedures that, when spelled out in the light of reason, some might consider fraud; others—Karl Rove and former Federal Reserve Chairman Alan Greenspan spring to mind—might hail them as excellent salesmanship.

Regulators struggled to prosecute fraud-fueled subprime lenders, settling for fines without admission of wrongdoing. Even supposed citizen watchdog groups like ACORN spoke up for some of the worst actors—after they’d accepted money from them.

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