Jesse Litvak was ecstatic. It was March 31, 2010, and the mortgage bond trader at Jefferies & Co. had just persuaded Michael Canter, head of securitized assets at from giant asset manager Alliance Bernstein, to bite on the purchase of millions of dollars in mortgage bonds.
Litvak messaged the good news to his boss, William Jennings and wrote that he misrepresented the prices Jefferies had paid for the bonds and could get Canter to pay even more.
“Boom!” replied Jennings. With another phone call and a couple of clicks on his computer, Litvak completed the $27 million sale, which earned him and Jefferies a $50,000 commission.
Or at least that’s what Canter thought.
Thanks to Litvak’s lies about the bond prices, which cost Jefferies less than he claimed, the actual commission was a whopping $650,000.
Litvak’s giddiness over that one sale would later came back to haunt him: The money that Alliance Bernstein used to buy the bonds came from U.S. taxpayers, bailout money approved by Congress in 2008 to help spur investment in mortgage bonds after the financial crisis.