David_voelker's Favorite Links from Diigo

CJR: Boiler Room

Sat, 04 Oct 2008 20:30:32 -0000

Highlights and Sticky Notes:

Gretchen Morgenson of The New York Times, for one, has taken Countrywide apart, brick by brick.

There does seem to be a tendency in big financial newsrooms to zoom in on esoteric stories on the margins—backdated stock options comes to mind—and ignore the big, dumb, honking ones at the heart of the financial system. In the current case, an entire industry’s business model—“selling” consumer debt—is problematic on its face.

Worse, from a tedium standpoint, the failure to assemble an easily gettable record has perpetuated a particularly sterile argument over who’s to blame. David Brooks, George Will, and other cultural conservatives—let’s call them behavioralists—have felt free to blame the unraveling of the financial system on some sort of spontaneous mass deterioration of public morals. Structuralists like myself, meanwhile, argue that people didn’t change, the marketplace did. Most journalists, I would argue, retreat to the mushy middle: the there-is-plenty-of-blame-to-go-around school, a theory of more generalized cultural decay that includes undisciplined lenders as well as irresponsible borrowers.

borrower misconduct (which, by the way, did occur, but as the Fed rules recognize, is not what crashed the system).

The eighty-one-page Illinois complaint, filed June 25, similarly describes a culture in which traditional banking values were turned on their heads and were aimed overwhelmingly toward “selling” loans, which is the opposite of traditional underwriting.

The complaint has plenty of examples of people blown out of homes they already owned by Countrywide products. A sixty-four-year-old widow with payments of $300 a month on a thirty-year, fixed-rate loan is put in a “3/27 interest-only loan with a fixed rate for only the first three years of the loan.” Never mind what it is; she couldn’t afford the $800 payments before the rate adjusted, Illinois says.

But systemic corruption—and that is the right word—has been unveiled at lenders across the board.

Of course, many individual borrowers knowingly inflated their incomes and otherwise participated in what would be their own undoing. And it is beyond question that a class of speculators took advantage of the loose lending environment and committed outright loan fraud to make leveraged bets on the housing market. Some say the borrower-shysters bear as much as 10 percent of the responsibility.

Let’s concede all that, because it’s true. My point is merely that a year into the credit crisis, the evidence is becoming overwhelming of a profound structural shift in the U.S. lending industry—one that institutionalized widespread deceptive practices and outright fraud perpetrated on borrowers.

The mortgage story is a Wall Street story.

But more broadly, it pays to remember that the borrower is the amateur in this equation, someone who might execute a mortgage twice in a lifetime. A lender will do it a hundred times before lunch.

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Posted by: david_voelker

Minnesota Independent: News. Politics. Media. » National Lawyers Guild: What police seized was not ‘weaponized’ urine

Mon, 08 Sep 2008 23:55:13 -0000

In case you were wondering . . .

Tags: RNC-2008

Posted by: david_voelker

Minnesota Independent: News. Politics. Media. » Police seize ‘propaganda literature,’ staples, curtain rods, and caltrops from raided home on 17th Avenue

Mon, 08 Sep 2008 23:54:11 -0000

Tags: RNC-2008

Posted by: david_voelker

Minnesota Independent: News. Politics. Media. » Crowd control at the RNC: Fifty million unanswered questions

Mon, 08 Sep 2008 23:48:59 -0000

Tue, 02 Sep 2008 16:32:53 -0000

Tags: RNC-2008

Posted by: david_voelker