Over the past decade Hedge funds played an important role in the shift to sloppy mortgage lending and Devaney is a poster boy for Mortgage based Hedge Funds. By buying up mortgage loans, Devaney and other hedge-fund managers made it profitable for lenders to make questionable loans and then sell them off, he created a market for loans which were toxic and about to explode ...

Hedge funds were more than willing to swallow the risk in exchange for the promise of fat returns. Devaney wasn't just a big buyer of mortgage bonds — he had his own $600 million fund devoted to buying risky loans - he was one of its cheerleaders. Worse, Devaney knew the loans he was funding were bad for consumers. In early 2007, talking about option ARM mortgages, he told Money, "The consumer has to be an idiot to take on one of those loans, but it has been one of our best-performing investments."