The Mortgage Meltdown
| Mon Aug. 25, 2008 8:57 AM PDT
THE MORTGAGE MELTDOWN....From the LA Times this morning:
Long before the mortgage crisis began rocking Main Street and Wall Street, a top FBI official made a chilling, if little-noticed, prediction: The booming mortgage business, fueled by low interest rates and soaring home values, was starting to attract shady operators and billions in losses were possible.
"It has the potential to be an epidemic," Chris Swecker, the FBI official in charge of criminal investigations, told reporters in September 2004. But, he added reassuringly, the FBI was on the case. "We think we can prevent a problem that could have as much impact as the S&L crisis," he said.
You gotta be kidding. Even a guy at the FBI saw this coming? But the rocket scientists at the Fed somehow slept through it anyway? Yeesh.
Still, the conclusion of the story should restore your faith in the federal bureacracy: after writing his memo, Swecker's budget was cut. "Nobody wanted to listen," Sharon Ormsby, the chief of the FBI's financial crimes section, explained. Partly this was because of an increased focus on counterterrorism, but apparently much of it was also because Ashcroft & Co. insisted on shifting resources into the movement hot button areas of illegal immigration and child pornography. Now that's the approach to regulatory and fraud issues we've come to expect from the Bush administration.
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Comments
The problem is, whenever there is a catastrophe, you can always find, somewhere in the government archives, an amazingly prescient memo from someone warning about the vulnerability of Pearl Harbor, or the need for better scrutiny of flight schools, or subprime mortgages, or whatever. But you have to remember that there are six million other memos in the files warning about crises that didn't happen. Nor is it generally the case that the author of a prescient memo is a genius: even a stopped clock is right twice a day.
A LOT of people saw the mortgage mess coming in 2004-2005, but the sheer power of human greed can create an unstoppable force. Any Voices in the wilderness that were recognizing what was happening were dismissed as debbie downers. People who recognized the bubble and got into the game early made a lot of damn money, those who bought 2005-2007 because they were afraid of being priced out of the market are the ones headed to foreclosure 2008-2011.
Remember: in America, we don't mind fraud as long as we are making money from it. We only have a problem with it on the way down.
Submitted by bmaz (not verified) on Mon Aug. 25, 2008 9:45 AM PDT.
The Feds should have known all about the mortgage fraud that was going on; they were knee deep in it through their prize protected informant Tommy Kontogiannis.
I had dinner this weekend with a recovering mortgage broker, whom I'd known as a young lady. She is now a middle-aged grandmother. Two years ago, before it all came tumbling down, she left her position in Las Vegas because she just couldn't be part of it anymore.
She said she'd counsel a couple who each held down two jobs and were barely making it that the ARM was not a good idea. She would explain how cheap it would be initially, and how much more it would cost down the road. They always told her they knew, but they expected things to improve. She'd have them sign, knowing they'd be losing the house down the road.
She had a friend who was an appraiser. She once confronted him about an inflated evaluation; his response, "we're all playing this game".
Seems to me this bubble climbed a wall of hope, greed, and denial.
Is "fleecing the suckers" something we really want to see in our politicians?
IIRC the top moneymaker in Wall Street last year made $3.7 billion ($3,700,000.00!) shorting the mortgages.
Yeah, 25% of the population are gullible suckers (aka authoritarian followers) and maybe they get what they deserve but when their votes are used to elect flimflam men then that affects all of us.
Rocking "Main Street"? The LA Times is obviously not thinking very hard. The mortgage crisis hits nowhere near Main Street. It hits hardest in the far-flung suburbs and exurbs. If anything, Main Streets stand to gain as legitimate neighbordhoods are less affected.
y81: you can always find, somewhere in the government archives, an amazingly prescient memo
The point is that the FBI wasn't amazingly prescient, but that they saw the elephant in the living room.
from someone warning about the vulnerability of Pearl Harbor
Admiral Kimmel, commander of Pearl Harbor, foresaw the danger of that kind of attack, but was prohibited from taking various actions to prevent it. His reasoning was based largely on USN exercises that had been held ten years prior, so it was hardly a matter of one obscure memo by one faceless bureaucrat.
or the need for better scrutiny of flight schools
The scrutiny was just fine. The point was that FBI headquarters refused to heed the warnings of their own agents in the Phoenix field office.
Nor is it generally the case that the author of a prescient memo is a genius: even a stopped clock is right twice a day.
Or perhaps, as in the case of this FBI fellow, he simply wasn't willfully blind.
The "no one can foresee everything" line is the oldest bureaucratic dodge there is.
Hardly Main Street: The mortgage crisis hits nowhere near Main Street.
Which Main Street is that? My suburban home is three blocks from Main Street, but I suspect there are other streets by that name.
Anyway, it doesn't matter - the mortgage crisis is hitting urban, suburban and rural areas.
If anything, Main Streets stand to gain as legitimate neighbordhoods are less affected.
Who is the arbiter of what constitutes a "legitimate" neighborhood. Sounds like it's based on your personal preferences. If there are objective criteria, please let us know.
You gotta be kidding. Even a guy at the FBI saw this coming? But the rocket scientists at the Fed somehow slept through it anyway? Yeesh.
No, Kevin, that's completely wrong.
Lots of people saw it coming, but the OCC in 2004 prevented that states from doing anything about it.
The mortgage crisis is official Bush administration policy. Has been for years.
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I've been an attorney for over 50 years and have handled real estate transactions, although that was not my specialty. I have wondered what role the legal profession played in accommodating the real estate bubble? Why wasn't the legal profession serving as a watchdog over this before it became such a big mess? Surely there were significant legal fees generated by the real estate bubble. But is that justification for tulip futures?
Mortgage Meltdown
Submitted by Dayton U (not verified) on Tue Apr. 28, 2009 3:44 AM PDT.
Due to ongoing foreclosures and increasing unemployment rate, many people choose to find mortgage and loan modification program. Depending on your situation, your current mortgage interest rate and actual savings, refinancing will always be the best way to solve financial troubles. Refinancing these days will typically be the best option as it can save you hundreds of dollars per month if you are refinancing from a high interest rate to a lower rate. Let me give you a certain situation. Bo Jackson was a standout talent as running back for the Oakland Raiders and as a left fielder and designated hitter for the Kansas City Royals, excelling at both before a hip injury sidelined him for good. Many would give short term loans to see him play again. However, he is trying his hand at something else. Bo is a part owner of the Burr Ridge Bank and Trust, a community bank in Burr Ridge, Illinois. He picked a community bank as a type of bank known for financial stability, and its unlikely Bo Jackson will ever need mortgage loan modification.
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