Following the Technology in Mortgage Securitization Mess

In a recent blog post, I said that it was as important to follow the information technology (IT) to get to the bottom of the Madoff scandal as it was to follow the money in the Watergate scandal.

It can't be rocket science. All Madoff did, it now turns out, was take in about $17 billion from investors, send some of them $16 billion in checks and printouts, and send the rest of the investors printouts that said the money they gave him was now worth $50 billion. All it would have taken--must have taken--was a simple COBOL program from the 1970s.

Except I am not qualified to write the story myself. And the guy who is--certainly not Madoff--is probably afraid of being lynched.

Which is what made it all the more interesting that the IT guy that wrote the software that enabled mortgage securitization has come forward and both told his story... and where he lives. Subtitled "How I helped build the bomb that blew up Wall Street," this New York article by Michael Osinski published March 29 is a must read for those who want to begin to understand the current financial meltdown.

I admit that even though I followed financial-services software in the late 1990s, I never heard of Intex (TEXT.PK). And they have an office only a few miles from where I lived at the time. I always thought all of this stuff was custom written by rocket scientists on big hunking Sun (JAVA) workstatsions. Which is exactly how Osinski began. But later, according to Intex' web site and Osinski's story, it was packaged just like the mortgages it worked on and even apparently ported to Windows. Go to Radio Shack and get a Wintel machine and you too could get in the game (if you also ponied up $500,000 for the software).

And Intex is still proud of the product. It is true that they have not put out a press release since 2006 when they opened a European office but it looks like they had never put out one before then either.

Now as for Madoff's COBOL programmer....