Saturday, January 26, 2013
When Underwriting Isn't
PBS has come out with a story -- which is part expose and part whitewashing -- about a common ritual leading up to the financial disaster of 2008: "due diligence underwriting" of loans performed with ridiculously loose standards and active discouragement of words like "fraud" (the "f-word") to describe the many bad loan applications the underwiters found.
What is being exposed is the complicity of many bankers in the debacle. What is being whitewashed is the role of the government in precipitating and perpetutating it through policies and regulation. This doesn't go entirely unmentioned, though:
In June 2006, I started issuing warnings. … I honestly could not believe what I found. And I asked for a special investigation by the area of Citi that is over internal controls. I asked for an investigation by that management unit. And they assigned people to investigate. They said, "yes," they investigated. "Yes. You have very, very serious problems and you are out of compliance with policy. And we have been out of compliance with policy for some time."Shame on the many people in ths tapestry of lies for attempting to cash in on this government-enabled fraud, but no investigation of this debacle is complete or just without a hard look at the role of government regulation in causing it.
And what was the result of that?
My warnings kept continuing, and the volumes increased and the percentage of defective mortgages increased. … The loans were being sold to Fannie Mae, Freddie Mac, other investors. And Citi was making representations on these mortgages that they met our credit policy guidelines. [bold in last paragraph added]
"If we are to accept the equation of the potential with the actual and call the embryo an 'unborn child,' we could, with equal logic, call any adult an 'undead corpse' and bury him alive or vivisect him for the instruction of medical students." -- Leonard Peikoff, in "Abortion Rights Are Pro-life" at The Huffington Post
"Unfortunately, this 'live and let live' attitude gets a little tricky in a familial or marital relationship." -- Michael Hurd, in "Share Your Dollars with Sense" at The Delaware Coast Press
"Noted educator Maria Montessori once said, 'Never help a child with a task at which he feels he can succeed.'" -- Michael Hurd, in "Let Them Try!" at The Delaware Wave
"[The] other choice [for the Republican leadership] is to recognize that the philosophy which animates the Tea Party is inseparable from the American people, and that fighting it is pointless." -- Wendy Milling, in "Bad News For The Establishment: Counterinsurgenices Are Unwinnable" at Forbes
My Two Cents
Wendy Milling draws a compelling parallel between failed military campaigns against insurgencies and the current attempt by the Republican leadership to marginalize the Tea Party. Will the GOP establishment have the sense to listen? The very fact that they are attempting to crush this insurgency suggests not, but then they aren't the only ones reading this piece.
Make Sure Your Cat Sees This Important PSA!
HT: VA Viper, via Snedcat