Can we connect the dots re banks record profits? Take a few minutes to read the following thoughts of Economonitor author William Black that I just received form one of my friends. "Question 1) who will understand the consequences of the actions of the appraisers Question 2) who will get angry enough and have enough steam to take action on this information" "Everyone should read and understand the implications of these two sentences from the 2011 report of the Financial Crisis Inquiry Commission (FCIC). “From 2000 to 2007, [appraisers] ultimately delivered to Washington officials a petition; signed by 11,000 appraisers…it charged that lenders were pressuring appraisers to place artificially high prices on properties. According to the petition, lenders were ‘blacklisting honest appraisers’ and instead assigning business only to appraisers who would hit the desired price targets” (FCIC 2011: 18). Those two sentences tell us more about the crisis’ cause, and how easy it was to prevent, than all the books published about the crisis – combined. Here are ten key implications. The lenders are extorting the appraisers to inflate the appraisal. No honest lender would inflate an appraisal, the lender’s great protection from loss. The lenders were overwhelmingly the source of mortgage fraud. The lenders were not only fraudulent, but following the “recipe” for ”accounting control fraud.” They were deliberately making enormous numbers of bad loans. This had to be done with the knowledge of the bank CEOs. One of the wonderful things about being a CEO is the ability to communicate to employees and agents without leaving an incriminating paper trail. Sophisticated CEOs running large accounting control frauds can use compensation and business and personnel decisions to send three key messages: (a) you will make a lot of money if you report exceptional results, (b) I don’t care whether the reports are true or the results of fraud, and (c) if you do not report exceptional results or if you block loans from being approved by insisting on effective underwriting and honest appraisals you will suffer and your efforts will be overruled. The appraisers’ petition was done over the course of seven years." - See more at: economonitor/blog/2013/07/two-sentences-that-explain-the-crisis-and-how-easy-it-was-to-avoid/?utm_source=contactology&utm_medium=email&utm_campaign=EconoMonitor%20Highlights:%20White%20House%20Down#sthash.cYVBpthQ.DXc1Of7C.dpuf economonitor/blog/2013/07/two-sentences-that-explain-the-crisis-and-how-easy-it-was-to-avoid/?utm_source=contactology&utm_medium=email&utm_campaign=EconoMonitor%20Highlights:%20White%20House%20Down
Posted on: Wed, 17 Jul 2013 14:50:04 +0000
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