The past quarter-century has seen a revolution in finance. It's felt every time a homeowner refinances a mortgage or signs up for a credit card. No one person can claim to have lit the fuse for this revolution -- but Lewis S. Ranieri was holding the match. Joining Salomon Brothers' new mortgage-trading desk in the late 1970s, the college dropout became the father of "securitization," a word he coined for converting home loans into bonds that could be sold anywhere in the world. What Ranieri calls "the alchemy" lifted financial constraints on the American dream, created a template for cutting costs on everything from credit cards to Third World debt -- and launched a multibillion-dollar industry.
Salomon and Bank of America Corp. (BAC ) developed the first private mortgage-backed securities (MBS) -- bonds that pooled thousands of mortgages and passed homeowners' payments through to investors -- in 1977. Not a moment too soon: Skyrocketing interest rates were turning the business of savings and loans -- funding long-term mortgages with short-term deposits -- making it a financial death trap for banks just as the housing demands of maturing baby boomers began to surge.