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Pay no attention to the people behind the curtain

Sunday, December 28, 2008

Yet Republicans blame Fannie and Freddy

by folkbum

Here's another story about how all those poor black people crashed the housing market by getting risky loans through the Community Reinvestment Act. Or not:
Interviews with two dozen former employees, mortgage brokers, real estate agents and appraisers reveal the relentless pressure to churn out loans that produced such results. [. . .] According to these accounts, pressure to keep lending emanated from the top, where executives profited from the swift expansion--not least, Kerry K. Killinger, who was WaMu’s chief executive from 1990 until he was forced out in September.

Between 2001 and 2007, Mr. Killinger received compensation of $88 million, according to the Corporate Library, a research firm. He declined to respond to a list of questions, and his spokesman said he was unavailable for an interview.

During Mr. Killinger’s tenure, WaMu pressed sales agents to pump out loans while disregarding borrowers’ incomes and assets, according to former employees. The bank set up what insiders described as a system of dubious legality that enabled real estate agents to collect fees of more than $10,000 for bringing in borrowers, sometimes making the agents more beholden to WaMu than they were to their clients.

WaMu gave mortgage brokers handsome commissions for selling the riskiest loans, which carried higher fees, bolstering profits and ultimately the compensation of the bank’s executives. WaMu pressured appraisers to provide inflated property values that made loans appear less risky, enabling Wall Street to bundle them more easily for sale to investors.

“It was the Wild West,” said Steven M. Knobel, a founder of an appraisal company, Mitchell, Maxwell & Jackson, that did business with WaMu until 2007. “If you were alive, they would give you a loan. Actually, I think if you were dead, they would still give you a loan.”
One of the most amazing aspects of watching the present financial crisis unfold, for me, is the degree to which conservatives and Republicans refuse to place any share of the blame for the calamity on the people who actually caused it. The private sector is holy, and the saintly CEOs are mere victims of a grand scam perpetrated by the people who are now living in homeless shelters or cardboard boxes. Privately held banks and mortgage brokers were mere rubes in a fantastical scheme concocted by Fannie Mae and Freddie Mac (who were not even making subprime loans for most of the boom time) via Jimmy Carter and the aforementioned CRA. Truth is, there was big money to be made, personally and institutionally, by aggressively pursuing risky loans and securitzing them. The private sector followed that trail of money with abandon, and now, with tight credit throughout all markets, we are seeing the results.

I do not understand Republicans' refusal to recognize reality. I suppose that is one of the long-running themes of this blog, though.

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