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Why Did Banks Give Home Loans to People Who They KNEW Couldn't Pay?

George Washington's picture




 

Washington’s Blog

 

William K. Black - professor of economics and law, and the senior regulator during the S & L crisis - explained
last month before to the Financial Crisis Inquiry Commission why banks
gave home loans to people who they knew couldn't repay. The whole piece
is a must-read, but here are excerpts from the introduction:

 

The
data demonstrate conclusively that most liar’s loans were fraudulent,
which means that there were millions of fraudulent mortgage loans
because liar’s loans became common (Credit Suisse estimates that they
represented 49% of new originations by 2006). The data also
demonstrate that even minimal underwriting of the loan files was
sufficient to detect the overwhelming majority of such fraudulent
liar’s loans. No honest, rational lender would make large numbers of
liar’s loans. The epidemic of mortgage fraud was so large that it
hyper-inflated the housing bubble, which allowed refinancing to further
extend the life of the bubble (and the depth of the ultimate Great
Recession.

 

 

***

 

In
the cases where there have been even minimal investigations (New
Century, Aurora/Lehman, Citi, WaMu, Countrywide, and IndyMac) senior
lender officials were aware that liar’s loans were typically fraudulent.
The lenders could not make an honest business out of selling
overwhelmingly fraudulent mortgages.

Liar’s
loans were done for the usual reason – they optimized (fictional)
short-term accounting income by creating a “sure thing” (Akerlof &
Romer 1993). A fraudulent lender optimizes short-term fictional
accounting income and longer term (real) losses by following a
four-part recipe:

A. Extreme Growth
B. Making bad loans at a premium yield

C. Extreme leverage

D. Grossly inadequate loss reserves


 

Note
that this same recipe maximizes fictional profits and real losses.
This destroys the lender, but it makes senior officers that control the
lender wealthy. This explains Akerlof & Romer’s title –
Looting: The Economic Underworld of Bankruptcy for Profit.
The failure of the firm is not a failure of the fraud scheme.
(Modern bailouts may even recapitalize the looted bank and leave the
looters in charge of it.)

 

 

The
first two “ingredients” are related. Home lending is a mature,
reasonably competitive industry. A lender cannot grow extremely rapidly
by making good loans. If he tried, he’d have to cut his yield and his
competitors would respond. His income would decline. But he can
guarantee the ability to grow extremely rapidly by being indifferent to
loan quality and charging weaker credit risks, or more naïve borrowers, a
premium yield.

 

In order to become indifferent to loan quality the officers controlling the lender must eviscerate its underwriting.

 

***

 

 

There is no honest reason for a secured lender to seek or permit inflated appraisal values. This is a sure marker of accounting control fraud – a marker that juries easily understand.

 

In other words, banks made loans to borrowers who they knew couldn't
really repay because the heads of the banks could make huge bonuses
based on high volumes and fraudulent appraisals, and they didn't care if
their own companies later failed.

In short, they looted their companies and the economy as a whole.

Professor Black brings us current to where we are today:

 

History demonstrates that if the control frauds get away with their frauds they will strike again.


By
allowing the banks to use their political power to gimmick the
accounting rules to permit them to hide their massive losses on liar’s
loans we have made it far harder to take effective administrative,
civil, and criminal sanctions against the elite frauds that caused the
Great Recession. Hiding the losses also adopts the dishonest Japanese
approach that cripples economic recovery and public integrity.

Prosecuting
the elites control frauds can be done successfully. Create a new
“Top 100” priority list and appoint regulators that will make
supporting the Justice Department a top agency priority. That’s how we
obtained over 1000 priority felony convictions of elite S&L
criminals. No controlling officer of a large, non-prime specialty
lender has been convicted of running a control fraud. Only one has
even been indicted.

 

The FBI has written that any discussion of the crisis that ignores the role of mortgage fraud is “irresponsible.”

 

On a related note, Chris Whalen (co-founder of Institutional Risk Analytics, who has been hailed by Nouriel Roubini as one of the leading independent analysts of the U.S. banking system) told me that the collection of credit default swap payouts might also have played into the banks extending loans to borrowers who couldn't repay:

There
are some really bad incentive structures in this industry. Default
increases servicing fees, etc. So yes, your example is not outlandish.
And the wonder of CDS lets us all bet that the other’s home burns down.
Speculative madness, but consistent for a culture that prizes sales
about all else.

Whalen also notes
that Freddie and Fannie helped to create the epidemic of mortgage
fraud, and - like Black - blasts the government for covering it up:

The
invidious cowards who inhabit Washington are unwilling to restructure
the largest banks and GSEs. The reluctance comes partly from what
truths restructuring will reveal. As a result, these same large zombie
banks and the U.S. economy will continue to shrink under the weight of
bad debt, public and private. Remember that the Dodd-Frank
legislation was not so much about financial reform as protecting the
housing GSEs.

Because President Barack Obama and the leaders of
both political parties are unwilling to address the housing crisis and
the wasting effects on the largest banks, there will be no growth and
no net job creation in the U.S. for the next several years. And because
the Obama White House is content to ignore the crisis facing millions
of American homeowners, who are deep underwater and will eventually
default on their loans, the efforts by the Fed to reflate the U.S.
economy and particularly consumer spending will be futile. As Alan
Meltzer noted to Tom Keene on Bloomberg Radio earlier this year: "This
is not a monetary problem."

***

The
policy of the Fed and Treasury with respect to the large banks is
state socialism writ large, without even the pretense of a greater
public good.

***

The fraud and obfuscation now
underway in Washinton to protect the TBTF banks and GSEs totals into the
trillions of dollars and rises to the level of treason.

***

And
in the case of the zombie banks, the GSEs and the MIs, the fraud is
being actively concealed by Congress, the White House and agencies of
the U.S. government led by the Federal Reserve Board. Is this not
tyranny?

 

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Wed, 10/27/2010 - 21:42 | 682160 UncleFurker
UncleFurker's picture

 

JUMP, YOU FUCKERS!

 

Wed, 10/27/2010 - 21:11 | 682092 mechawreck2
mechawreck2's picture

We can't handle the truth.  The only solution is the vote, but this year one has to expect the news to report next Wed morning that Obama's candidates actually won!  ...on a GAAP/proforma/hold-to-maturity basis.  Carry on proles.

Wed, 10/27/2010 - 20:53 | 682062 beastie
beastie's picture

Tyler,

Please post a poll on ZH and ask who here is considering a "show me the note"

strategy.

Who here has actually done it.

Thx 

Wed, 10/27/2010 - 20:44 | 682041 blindman
blindman's picture

This video is a musical remix of highlights from David DeGraw’s TV interviews. He exposes the financial terrorism network that has looted the global economy and calls for a 99% movement to restore the rule of law. As DeGraw has said, “Republicans and Democrats have failed us. Both parties have been bought off by a well-organized Economic Elite who are tactically destroying our way of life. The harsh truth is that 99% of the US population no longer has political representation. The US economy, government and tax system are now blatantly rigged against us. It’s time for revolution!”

Wed, 10/27/2010 - 20:38 | 682024 notadouche
notadouche's picture

Why would anyone borrow money they had to know they couldn't afford to pay back.  I had friends and family alike borrow what was obvious they couldn't afford.  Seems like there is a two way street but it doesn't appear to be popular to bring up the second part.

Thu, 10/28/2010 - 01:59 | 682585 StychoKiller
StychoKiller's picture

'Cause word got out that the Banks/Mortgage lenders would let anyone with a pulse receive a loan!  You leave the vault open with no one guarding it and wonder why there's no currency left at the end of the day?  WTF?

Wed, 10/27/2010 - 20:08 | 681961 Kina
Kina's picture

Bankster were only able to do all this because they were confident that all regulators and politicians were sufficiently owned as to keep them safe from responsibility and prosecution.

The Senate and HOR are a den of thieves and prostitutes. Regulators are the appointed bitches of the banks, eager and keen to sell their country down the toilet.

The entire system is sick. The only possible way to clean out this corruption is for the US to crash in a mighty heap. Only then will you find law and punishment applying to high and mighty.

Thu, 10/28/2010 - 02:03 | 682590 StychoKiller
StychoKiller's picture

The Govt let the foxes into the henhouse:

[quote]

To illustrate my point that you all believe the propaganda instead of doing your
research this statement is totally uninformed:  "It was when the banks and wall
street starting selling their loans as derivatives that the problem started." That
may be the party line and CNBC talking heads explanation but it's not accurate.
That's just a cause of some stupid regulation that forced banks to originate loans to people who they knew had no chance of paying them back. That's right, they were forced to make these loans by regulations passed by the Federal government and threats of fines by the Federal Reserve bank for non-compliance. Hmmm...what's a poor bank to do? I have to loan this money to people who can't pay it back or suffer the wrath of the Feds so I'll have to offset my risk of the defaults I know are coming. The qaunts on wall street figured out that it was legal to package these loans into securities and sell them. What a wonderful idea says the banker. I can make the loan and offset my risk to someone else. It's like insurance! Further, the buyer who took on the risk could bundle the loans with others and sell them to someone else if desired. "Hey this is great! Thanks Government regulators!!, you just created a whole new way for us all to make money while spreading the risk around." "This is easy money, government endorsed, and housing is booming." said the bankers and wall street titans. Problem was, everyone assumed that the defaults would be handled a little here and a little there. But what happens if the defaults all come at once? We know the answer to that one.

[/quote]

Wed, 10/27/2010 - 19:45 | 681908 Common_Cents22
Common_Cents22's picture

Incentives for everyone to expand the bubble.  Pass the hot potato on to the next sucker leaving behind any accountability.   It was a perfect storm from consumer, to RE agent, to mortgage originator, to title company, to bank, to wall st/fannie/freddie.  A game of musical chairs.  The ultimate responsibilty would have laid at the hands of those who held the mortgages or corresponding securities.  The system had no real accountability, checks or balances until it blew up.

Wed, 10/27/2010 - 19:23 | 681823 Mercury
Mercury's picture

I don't find much fault with anything in particular in this article but this is soooooo only part of the story...

At any time were these banks pressured by the government to increase their loan originations or make them "look like America" in aggregate in terms of their racial, income level or ethnic composition?  Did bank and lending institution CEO's ever brag and then get subsequent slaps on the back by congressmen and regulators for realizing these kinds of soft and hard government mandates?

Funny how the same banks who were not so long ago being prosecuted for "red-lining" are now being accused of predatory lending to the same kinds of people.

There's lot's of blame to go around in this mess but financial execs. Wall St. CDO desks and dumb/insolvent homeowners are the chickens.

But the government is the egg which, in this case, came before.    Incentives matter.

Oh, and Angelo Mozilo is the preening rooster in the henhouse!

Thu, 10/28/2010 - 01:55 | 682578 StychoKiller
StychoKiller's picture

In support of your statements:

[quote]

How is it that people are too dumb to fend for themselves, yet so intelligent that
they can vote for the right person to fend for everyone else?

Wishing the government to be a great protector and benefactor does not make it so.  It is not difficult to find evidence that it is anything but.

All you're really asking for is to exchange the potential corruption of a private
merchant for the assured corruption of a government bureaucrat. If a merchant cheats you, you won't go back. If a merchant cheats enough people, he'll go out of business.  If a government bureaucrat cheats you, then he receives no punishment. If fact, he'll probably receive more funding and more authority to do a job he was too incompetent to do and had no incentive to do effectively in the first place.

[/quote]

Wed, 10/27/2010 - 19:10 | 681822 VaJim
VaJim's picture

Make loans to people that couldn't pay?  Why not?  Govco was stupid enough to buy them.  Govco demanded that banks make loans to people who could not pay via CRA.  Govco provided FHA insurance back in the '70s for people who didn't have the 20% down that smart banks demanded for a M/L.  Govco never paid any diligent attention to what they were buying or what their trustees were accepting.  Govco made the market and all else followed.  It just happened that it was not a prudent market.

Wed, 10/27/2010 - 19:53 | 681928 title examiner
title examiner's picture

What?  CRA--The Community Reinvestment Act?  Try reading it, dude--that trumps listening to whatever news on TV.  Here's a link for you that will help you find it:  http://en.wikipedia.org/wiki/Community_Reinvestment_Act  It mentions the revisions and proposals, too.  Sure, redlining is a lot eaiser than thinking.  CRA compliance hasn't proven to be that expensive to the banks and it has been liberalized to allow them to include investments beyond mortgages in their compliance documentation.  But, CRA has had little or nothing to do with this awful mess.  Why would you think it does?

When you look at the map, the redlined area, note that nobody could get a loan in there, even if they could qualify.  This meant that no redevelopment could occur.  Flippers couldn't go in and apply pastel paint and their superficial substandard improvements, either.

The act itself states that banks must abide by safe and sound banking principles.  To date, no one I have ever challenged has produced a document from the government forcing a bank to make a loan to someone who couldn't qualify.  You could be the first.

You might note when we started seeing huge increases in foreclosures and the philosophy of that administration.

 

Thanks.

 

 

Wed, 10/27/2010 - 18:42 | 681771 The Alarmist
The Alarmist's picture

As a certain inspector in a certain movie once said, "I'm shocked! Shocked to hear there is fraud going on here!"

I heard people commenting for several years on NINJA and Liar loans, so I find it a bit disingenuous that none of the world's smartest bankers would have thought to adequately provision. A lot of people really were that criminal.

But I once commented at an investment symposium in 2005 that people should live in their houses and not necessarily think of them as the primary means of wealth accumulation since property values could not be guaranteed in the face of a retiring wave of baby-boomers and was almost laughed off the stage, so a lot of people really were that stupid.

Let's not forget that in addition to the criminal elite of banking, you had armies of otherwise marginally employable people raking in tons of dough as real-estate agents and mortgage agents, inspectors, homebuilders, etc. I don't hear a loud chorus here for those people to disgorge their ill gotten gains.

Hate to say it, but you had an entire nation running as a criminal enterprise. 

 

Thu, 10/28/2010 - 01:49 | 682574 StychoKiller
StychoKiller's picture

A con-game won't work if the mark isn't greedy!

Wed, 10/27/2010 - 17:21 | 681586 ussa
ussa's picture

We just have to label the private Fed a domestic enemy of the constitution.  How hard is that? 

 

Not that it matters but the U.S. Constitution says:

Article 1 Section 9

Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law; and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time.

Any previous or subsequent QE POMO or Fed bailouts, guarantees violates this.

 

Wed, 10/27/2010 - 17:32 | 681612 RichardENixon
RichardENixon's picture

"Not that it matters" indeed.

Wed, 10/27/2010 - 17:18 | 681580 Taint Boil
Taint Boil's picture

Should this guy have got'n a loan ...

 

http://patrick.net/forum/?p=25968

 

He stuck it to someone - good to see them get some of their own medicine.

Wed, 10/27/2010 - 17:16 | 681573 MachoMan
MachoMan's picture

Nice GW,

Apparently I need to read the Akerlof & Romer article.  It seems to speak to the heart of the entire mess.  I've been harping about it since I got here...  generally without response...  that the institutions are going to die, they'll be sacrificed.  The gag all along was to benefit the principal actors.  The entities (including the FED) are just like the fuselage to a rocket ship, abandoned after the crew (principal actors) are capable of escaping the earth's gravity.

Wed, 10/27/2010 - 17:13 | 681570 Stun Gun
Stun Gun's picture

TPTB have the best congress money can buy. The only thing to do is clean the scoundrels out.

http://www.stungunstopepperspray.com/

Wed, 10/27/2010 - 17:33 | 681521 title examiner
title examiner's picture

Stock buy backs mean they don't have anything better to do with the money, it is more profitable to return it to investors than to run it through their system.  The bankers decided they wanted money, but their means of production, a very old game, had come under competition and they didn't have any legal way of modifying their game so it would make money.  So, they turn to blowing bubbles.  One being the basis for the next.

Bonds have been in a 30 year bull market and now the sequential bubbles we have been seeing are drifting there. Commodities are being heavily inflated, too, while the dollar is being devalued.

What we are seeing is the crony capitalismist's solution to the baby boomer's best efforts at having a retirement: The Dreaded Bubble Wipe. Where the mass of people's money flows to find safety and profit--there shall be none.

Where debt is incurred, the new system will amplify that debt. Wages will fall in the midst of hyperinflation. A debt set down when you made 100K will have to be repaid while you make 25K. That is the nature of this new system.

Note that this rolling fiasco snowballed when it hit real property. In the end, real property with a means of production of some sort will probably prove the best bastion. But then again, property taxes could go quite high.  Leaving one wondering where money might be safely invested, given the culture of "Ambush Economics," which what the Dreaded Bubble Machine has mutated into.  All of that is predicted on the notion of "soft landing."  Soft, for whom?

It is a quandry the Russians faced, to some extent.  The mantra I heard there was a demand for products to sell at a cheap enough price to sell them.  And of course, they had to contend with their Mafia.  Anyone who figured out how to make some money got a visit.  We should be studying what happened to the Russians in their transition from the Soviet Period, because what is happening here has similarities:  Massive job losses, closed factories, pension wipes and etc.  Note that the oligarchs swooped in and ended up owning everything of value for kopecks on the ruble.

It would seem clear that the way out of bubbles and liquidity traps is probably best paved by innovation rather than roving ambushes.  But we have a clear history of innovators being usurped by various means.  Our fearless economists apparently haven't figured out how to deploy technology and innovation without painfully displacing workers.  When you distill their tactics, the only real lever they know to pull is to try to force wages down.  Henry Ford went against this practice with his famous $5 wage--and that was quite counter intuitive, but it did put him on a growth curve.  It is heresy to even think that workers should be paid more and THAT is the source of liquidity traps, eventually.  Constant anti-market downward pressures on wages in the midst of inflationary prices.

Some note that the FED....or whatever our capitalism has mutated into, will always try to employ the same tactic on increasing scales.  It is supposed that subsequent efforts will yeild results.  At least this is predictable--they refuse to admit reality and innovate.  Our next step down will be markets admitting that they do not perform a useful function, but this will be gamed, of course.  Gamed in the form of some Oligarchic revolution, either by flash crash, stock buy backs or some other illegal means.  Like the movie industry, there aren't any new scripts--

There is a dichotomy between Ford Motor Co and what was GM.  But this coming hyperinflation will throw every Humpty Dumpty off the wall and under a bus.  Scales of economy unravel and there is no easy way for them to rescale their supply lines and operations to become profitable.  They are old companies in old industries facing global competition.

So much for the old rituals and incantations of business as usual.  They have finally vested power in idiot heirs--and innovation on the scale needed is quite contrary to their vested interests.

Wed, 10/27/2010 - 16:45 | 681493 Joe Davola
Joe Davola's picture

Doesn't Eric Holder head the Ministry of Justice?

Wed, 10/27/2010 - 16:40 | 681477 DosZap
DosZap's picture

"Whalen also notes that Freddie and Fannie helped to create the epidemic of mortgage fraud, and - like Black - blasts the government for covering it up: "

The Government is MOST to blame, Bawney Fwank, Bill Clinton, all thugs.

The entire original deal was ETHNIC minorities would get loans, OR else...(the Banks were threatened).

IOW's the POTUS Ordered the Banks to do so, or they would be "punished".

Wed, 10/27/2010 - 19:32 | 681877 amusedobserver
amusedobserver's picture

True story:

My dad was a branch manager for Bank of America in the early 1980's.  There was a nearby zip code, filled with ethnic minorities, in which the bank hadn't made any loans.  My dad was ordered by a superior to go make a loan to anyone there, and they didn't care if it got repaid.  The reason is because without a loan made there the bank would be accused of red-lining and it wouldn't get any more charters for opening more branches.  The happy ending is, my dad didn't want a bad loan on his record regardless, so he talked to a business friend who had a friend who happened to be probably the only millionaire living in that zip.  My dad talked to him and explained the situation, and he not only took out a loan but paid it back.

 

The current mess stems from Rep. Barney Frank and Sen. Chris Dodd forcing Fannie and Freddie to take in subprime loans as 50% of their total loan acquisitions.  So, if Fannie and Freddie announce that 50% of what they buy has to be crap, what do you think they're going to be sold? Right, crap!  This was just a way for the liberals to funnel money to their constituencies via the real estate market instead of openly via government handouts.  The idea was, with the RE market going up 20%/year, these deadbeats would buy a house, never bother making a payment, then flip it 6 months later and pocket a $50K or $100K profit.  But these crappy loans had to be dealt with by the financial institutions, and they sure didn't want to hold that crap.  They had to find a way to package them, perfume them, and get rid of them as fast as possible.  And you all pretty well know the rest of the story.

Wed, 10/27/2010 - 16:39 | 681476 Aristarchan
Aristarchan's picture

I bought  a house in 2004, paid 20% down, fixed interest rate for thirty years, and price wise, bought well below my ability to pay. I have taken no home improvement loans, and my local bank still holds my note.....I guess in some corners of this land, there does exist sanity.

Wed, 10/27/2010 - 19:04 | 681806 minosgal
minosgal's picture

In 1998, I put $50k down on a $185k house, fixed interest rate for 30 years. Price wise, it was well within mine and my partner's ability to pay. I took no home improvement loans. In 2003, my lender refused a payment as 'late' despite wire reciept proof. The forbearance legal fees wiped out a good bit of my savings. Fairbanks Capital. We got a few pennies back on the dollar in the class action suit.

Because I lost a good bit of my savings, we couldn't afford a lawyer in a business lawsuit the following year, went in pro se and predictably lost. We had to refinance to pay the $30k judgement. Two years after that, my partner was ripped off in a business contract and it has taken us five years to save up to persue it.

My business tanked in direct proportion to the rise in unemployment, and at present I pick up the temp job here and there.

We are underwater now because the volume of foreclosures has deflated local values, and recently, the company my partner works for has had trouble making payroll because banks aren't lending on the GSA and commercial real estate rehab projects that his company is licensed to do.

There are no extra bathrooms in my house, in fact, they are almost exactly the same as built in 1963. I drive a 17 year old used car. I do not get my nails done. I cut my own hair, and I shop at the outlet store when T-shirts are marked down to $2. I make jam from the fruit trees in my yard and give jars out for Christmas presents.

So, Mr. Smug Much, I can assure you the only time my sanity has been in question through these last few years is when I hear or read masturbatory comments such as yours.

Wed, 10/27/2010 - 19:16 | 681836 Aristarchan
Aristarchan's picture

Hey, man, I understand there are people out there who lost a lot under circumstances not their own doing. Maybe I should have made my post clearer in that I am referring to the multiple home flippers, the people with no Job who bought a house planning to use the equity refinance to make payments. My business came closer than I care to remember going down in the last two years.We managed to save it mainly through savings, cost cutting, price cutting, a low mortgage...and, well, a hell of a lot of fucking luck. But, I did not lay anybody off, and I did not do away with employee benefits - I cut them - but am taking them back up now. My few employees stayed with me. I feel for you, if I would have had a wage job at the time, I would probably be fucked right now.

Wed, 10/27/2010 - 17:10 | 681562 MachoMan
MachoMan's picture

Yes, but unfortunately the baby boomers ensured we institutionalized retardation.  There are some of us that exist out there.  In the event that anyone other than the principal actors of the fraud is able to endure our future, it will be us.  In the event any civilization is built in the aftermath, it will be us who are needed to rebuild it.  Do not despair.  There are others...  we're just thoroughly dispersed and generally seek to avoid attention.  We will eventually be rewarded for our discipline and responsibility.

Wed, 10/27/2010 - 16:28 | 681430 Ripped Chunk
Ripped Chunk's picture

Because everyone else was doing it? 

Boy how many times did you hear your Mom yell at you for that one? "Well if all your friends were jumping off the Brooklyn Bridge would you?"

Wed, 10/27/2010 - 16:02 | 681358 Segestan
Segestan's picture

over looks the political correctness of fullfilling the minority needs. The problem wasn't just with numbers.

Wed, 10/27/2010 - 16:02 | 681357 anonnn
anonnn's picture

"...they didn't care if their own companies later failed." ...

Oops! They are hired managers, not the owners.

They act to maximize personal benefit by hollowing-out the firm [employer]. Whether the firm dies or not is unimportant.

Termites make great CEOs. They stop feasting before the building collapses.

Wed, 10/27/2010 - 15:55 | 681343 tony bonn
tony bonn's picture

"There are some really bad incentive structures in this industry. Default increases servicing fees, etc. So yes, your example is not outlandish. And the wonder of CDS lets us all bet that the other’s home burns down. Speculative madness, but consistent for a culture that prizes sales about all else."

jpm forced one of the stan countries into bankruptcy so it could collect cds payments....fuck jpm chase...

the banksters are out of control and must be destroyed. they are a cancer and plague upon the nation.

Wed, 10/27/2010 - 15:51 | 681337 williambanzai7
williambanzai7's picture

Wed, 10/27/2010 - 16:31 | 681441 Fox Moulder
Fox Moulder's picture

Goldman Busters (Banzai7 Happy Halloween Countdown Post No. 3)Goldman Busters (Banzai7 Happy Halloween Countdown Post No. 3)

 

???

Wed, 10/27/2010 - 16:46 | 681499 williambanzai7
williambanzai7's picture

Stinky mortgage pimps and pawn brokers, what's the difference. ;-) Neither care if you pay the loan back.

Wed, 10/27/2010 - 18:05 | 681692 Rainman
Rainman's picture

....lol.....true dat !

Wed, 10/27/2010 - 15:50 | 681329 anony
anony's picture

Sure it's simple.

One word covers it:  Incentives

The incentives for 1) the mortgage originators' commissions, 2) the individuals in the banks whose compensation is tied to the volume of loans made, 3) the investment banks who offered big incentives for millions of loans to bundle into AAA securities, and the CONgress led by Barney Frank and Christopher Dudd, who think that EVERYONE, whether they could afford it or not, should be permitted to 'buy' a house, all of these people were and still are 'incentivized' to do so.

Change the system?  Change the incentives.  And good luck with that.

Wed, 10/27/2010 - 17:01 | 681533 MachoMan
MachoMan's picture

Don't forget the consumer incentives to live beyond our means, albeit knowingly temporarily...

Thu, 10/28/2010 - 19:57 | 684825 anony
anony's picture

Patsies who there is no sympathy for.  I couldn't care less if they feel victims.  They are no more victims than those who commit suicide.

Wed, 10/27/2010 - 15:47 | 681327 Sudden Debt
Sudden Debt's picture

Give money to the poor, it says so in the bible...

HA!!

WE WON'T MAKE THAT SAME MISTAKE TWICE!!!

Wed, 10/27/2010 - 16:47 | 681500 downrodeo
downrodeo's picture

So, better to let the ultra-rich slowly steal it from you?

Wed, 10/27/2010 - 15:46 | 681326 Gene Parmesan
Gene Parmesan's picture

What I think is most troubling about the state of affairs here (mortgage mess), with the Fed, with the administration, and with the economic PTB is that everyone is playing their hand as if there will never be any repercussions for any of it.

For a society that lives its collective life under the watchful electronic eyes of a thousand video cameras, where electronic files are backed up indefinitely, where damning evidence circles the globe in seconds, and where there's usually no hiding from whatever it is that forensic investigators can dig up, these bastards are waltzing around in plain sight doing whatever they please. Either they know something is coming that's going to shake this great big etch-a-sketch clean, or they think they're going to be able to get away with it because they're going to be in control from here on out.

Wed, 10/27/2010 - 20:21 | 681983 Diogenes
Diogenes's picture

The fix is in.

Wed, 10/27/2010 - 15:44 | 681318 pragmatic hobo
pragmatic hobo's picture

let's not forget another reason why these NINJA loans proliferated near the end of housing boom;

The wall-street and hedge funds, like everyone else, except for Bernanke, knew the housing bubble would pop. So they needed instrument with which they could short the bubble. Therefore they needed the worst kind of mortgage they knew would collapse as soon as the bubble popped. They packaged these into securities and sold it to investores for quick profit, then turned around and bought CDS from the likes of AIG in order to profit from the way down. The fact that these guys then were bailed out in the tune of trillions by the Fed is in fact the crime of the century. Either Bernanke is biggest idiot or he has to be in on the scam.

Wed, 10/27/2010 - 17:33 | 681616 NotApplicable
NotApplicable's picture

Those options are not mutually exclusive, and I'd say they're both true.

Wed, 10/27/2010 - 23:19 | 682333 TheMerryPrankster
TheMerryPrankster's picture

Wise words, and unfortunately apt. The crooks are morons, but they are powerful morons and mostly untouchable for now. Once they get done bottom feeding on all the pensions, 401k's and Ira's, they will resort to cannibalism and feed on their own class, for there will only be one left.

Wed, 10/27/2010 - 15:42 | 681315 THE DORK OF CORK
THE DORK OF CORK's picture

Fraud on a biblical scale - this plague of locusts are devouring all human , technological and resourse capital.

Soon there will be nothing left.

I keep looking back at those final years of hope before we were enveloped in darkness and despair........

Compare and contrast these images - notice the first press conference - the lack of falseness and belief in something beyond, Public relations yes but there was something more.

www.youtube.com/watch?v=M0OurosNBFo 

Although the second sequence has dramatic license it is powerfully resonant none the less.

www.youtube.com/watch?v=dVuh4AiZ-VY  

 

And finally the truth

http://www.youtube.com/watch?v=DxnpujfanUM&feature=related  

 

 

 

Thu, 10/28/2010 - 02:45 | 682348 i-dog
i-dog's picture

Wonderful juxtaposition, Dork! Thanks for posting.

It's hard not to like Kennedy when one sees that first speech! No teleprompter, due recognition to the team effort, ad lib on dropping the medal, and quietly pinning the medal as a personal touch, without fanfare, after the main speeches are over. How different to today's grandstanding teleprompter-in-chief and his predecessor, erstwhile aviator, complete with codpiece, "Stumbles"!

Wed, 10/27/2010 - 16:38 | 681468 downrodeo
downrodeo's picture

lamentations my friend. we're headed for the metaphoric grey goo. Just shoot me now.

 

http://en.wikipedia.org/wiki/Grey_goo

 

Wed, 10/27/2010 - 15:36 | 681289 liberal sodomy
liberal sodomy's picture

It was the problem portion of the hegelian dialectic with the predetermined "solution" being the the "fundamental transformation" of the former free America into Foodstampistan. They intentionally torpedoed the nation's economy to permanently destroy it and her peoples.  This was no boating accident.

Treason doth never prosper: what's the reason? Why if it prosper, none dare call it treason. Ovid

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