Back when he was a major Wall Street deal maker, Mark A. Walsh, the former head of the global real estate group at Lehman Brothers, had a running joke with Carmine Visone, one of his managing directors. Mr. Visone, 10 years older than his boss, would lecture Mr. Walsh about the importance of fundamentals: land values, construction cost and rents.As Mr. Visone remembers it, Mr. Walsh would wave his hand dismissively and would argue just as emphatically that the best way to make office buildings spew cash was through the magic of financial engineering. Mr. Walsh was considered the most brilliant real estate financier on Wall Street. In the ’90s, he pioneered the art of lending to office building developers and then slicing up and repackaging the debt for investors. Less risky pieces went to institutional investors; the lower-rated chunks to hedge funds and others hungry for juicier returns. Lehman pocketed a fee every step of the way, and it often retained a risky piece or two to give its own earnings a kick.
By Devin Leonard, May3, 2009 NYT

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