naked capitalism

Jojo says:

Must read!
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Businessweek
The Mortgage Industry
November 13, 2008

Sex, Lies, and Subprime Mortgages
The sexual favors, whistleblower intimidation, and routine fraud behind the fiasco that has triggered the global financial crisis

By Mara Der Hovanesian

It may seem like ancient history now, but not long ago the mortgage industry was turning ordinary people into millionaires. One of them was Sharmen Lane, a high school dropout who, like many other young women during the boom, found her way into an obscure banking job with the clunky title “mortgage wholesaler.” Her experience–and the experiences of other wholesalers like her–offers a glimpse into the recklessness and indulgence that drove the industry to ruin.

The rise of mortgage wholesalers from grunts to rainmakers is one of the more curious developments of the housing bubble. Wholesalers work for banks and other lenders. The wholesaler’s job is to buy loan applications from independent mortgage brokers so that lenders can turn them into loans. Wholesalers are paid on commission: the more loans they generate, the more money they make. During the housing boom, lenders typically approved the loans and then packaged them into securities. That path–from mortgage brokers to wholesalers to lenders to securities–turned out to be a road to disaster.

But as the housing bubble inflated, wholesalers–though hidden from public view–became high-earning superstars. Lane, a manicurist before joining now-defunct subprime lender New Century Mortgage in 1997, says she brought home $1 million in 2002 and $1.2 million in 2003.

Eventually the deal-making turned frenetic. Multiple wholesalers began inundating mortgage brokers with offers for the same applications. Some brokers chose to exercise their power by asking for something extra in exchange for their business: sex.

Dozens of former brokers and wholesalers say the trading of sexual favors was so common that it came to be expected. Lane recalls one visit to a mortgage brokerage near San Jose (Calif.) in which the manager lewdly propositioned her in his office. She says she declined the advance, and he didn’t sell her any applications. But other female wholesalers didn’t have the same qualms about crossing the line. “Women who had sex for loans were known very quickly,” says Lane, who left New Century before it failed in 2007 and now works as a $200-an-hour life coach and motivational speaker in New York. “I didn’t want to be a mortgage slut.”

WHOLESALE CORRUPTION

Investment bubbles always spawn excesses, and housing was no exception.

…

Full article

lineup32 says:

“I didn’t want to be a mortgage slut.”

the horror of it all the Financial sector demanded sexual favors for worthless securities!

joe c says:

RE Morgenson

Her coverage of the financial crisis, has been exceptional, that is from the mainstream financial press. But, the plan she laid out in Sunday’s paper will not work. It is a plan to re-inflate the bubble. History has shown everywhere, this is impossible. Wall Street is going to have to take their losses and this unfortunately is going to spread through the economy. We need to force the banks to take their losses, and then recapitalize them. We need to spend money fiscally, keeping people in their houses and employed to try and mitigate the slow down. But there is absolutely no way out of this, without the bubble deflating. The guys in the 30s remain smarter than us, much of the financial regulation of the 30s was done to keep bubbles from inflating, then in the late 70s, we started taking those barriers away and got one bubble after the next. Notice from 30s-86, there were no bubbles.

But again, from tulips, to the Depression, to Japan, and to Sweden, the one thing that is necessary is the bubble must deflate, maybe we can once again work on not letting them form.

Anonymous says:

RE Morgenson

What is this obsession she and others have with propping up the real estate market. God damn it, I’ve been waiting ~7 years for the real estate market to come crumbling down so that I can buy something at a good price, and all people like her want to do is let the irresponsible off the hook. I’m really sorry people are losing their homes, but really, tough luck, nobody forced these people to buy over priced houses, or take out second mortgages to finance speculation on more RE. give me a break, I’m tired of this.

doc holiday says:

The grave and foul Dancing Cat Metaphor, which is derived from the original work by Picasso, named, “Dora Maar au Chat”, is a bleak statement about the future of capitalism.

In this unreleased Picasso version, which served as a model for other unreleased versions, Dora is hopelessly struggling at “working” in the cat house in hopes of making ends meet, so that she can buy her only friends (these two mangy flea-bag cats) more tasty protein snacks and meals, which are sold in bags and pouches which connect Dora to the fantasy of a better life. It is in this depraved, futile catch-22 setting we hear the words of Bob Dylan cutting to the bone of Dora’s misery, in the song, “It’s Alright Ma (I’m Only Bleeding)”

Advertising signs that con you
Into thinking you’re the one
That can do what’s never been done
That can win what’s never been won
Meantime life outside goes on
All around you.

You lose yourself, you reappear
You suddenly find you got nothing to fear
Alone you stand with nobody near
When a trembling distant voice, unclear
Startles your sleeping ears to hear
That somebody thinks
They really found you.

Although the cats are dancing and seemingly happy about the forthcoming treats, it is the juxtaposed reality of how Dora is actually being greedy and selfish, which makes this metaphor so challenging, i.e, both cats suffer from two independent, yet interrelated conditions, first, spinal injuries, which have come about as a result of too much dancing and second, Inflammatory bowel disease which came about as the result of eating too many high fat snacks.

The sad nature of this metaphorical image is compounded by the fact that Yves may have unintentionally linked the wrong jpeg file to this day, a time, which is generally used to focus on a less abstract matter relating to dinosaurs.

FYI: Top Republican senators said Sunday they will oppose a Democratic plan to bail out Detroit automakers, calling the U.S. industry a “dinosaur” whose “day of reckoning” is coming.

It is in this statement of logical fact that ailing old men link themselves to an era of failure, where they also are aging dinosaurs that have no future as men, politicians and corrupt policy makers. The day of reckoning is not for just the symbolic auto industry, but for lobby groups like SIFMA and ABS, etc, that have used the conduit of Wall Street to destroy both democracy and capitalism around the globe.

FYI: Wall Street’s main lobbying group, the Securities Industry and Financial Markets Association, this week fired around 25 percent of its staff, sources familiar with the matter said — further proof that the financial crisis is severely hurting the U.S. brokerage industry.

That is a start, but hopefully, this time next year, SIFMA will be dead along with a wide spectrum of political dinosaurs and perhaps Obama will wake up to the fact that he is on the same path, and that talking about change has to be connected to the reality of actions, versus building another defective pool of nepotistic con artists!

Anonymous says:

Grassley is calling for an investigation of Treasury notices turning off restrictions on using a target company's net operating losses, and conflicts of interests involving former Goldman people and Wachovia's board.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aLB.UucYt3xE&refer=home

Fred says:

Not really on the topic of Iceland but this is still an interesting article from the Telegraph:

The world has never seen such freezing heat = GMT 16/11/2008

Doug says:

Fred,

The Obama plan doesn’t say anything specific. So it might not mean $$$$$$$$$$$$$.

[snip]

“Instruct the Secretaries of the Treasury and Housing and Urban Development (HUD) to use their existing authority to more aggressively modify the terms of mortgages”

My take off from posts in this blog is that mods which reduce principle balances are viewed positively, while mods such as temporary payment reductions that do not lower principle balances are viewed as kicking the can down the road. under-Rugfeed.

It is not clear from Obamas plan _what_ terms of the mortgages are to be modified.

SO, this might mean suitcases of $$$$$$$$$$$$$$ and then again it could also mean just a few gunny sacs filled with nickels.

I liked this sentence :

“Barack Obama and Joe Biden’s plan provides direct relief to help America’s homeowners pay their mortgages, stay in their homes, and avoid painful tax increases while protecting taxpayers and not rewarding the bad behavior and bad actors who got us into this mess”.

sentence starts out ok:

“plan provides direct relief to help homeowners pay their mortgages”

and then ends with this :

“not rewarding bad behavior and bad actors who got us into this mess”.

Boil it down “Direct relief to homeowners while not rewarding bad behavior”.

To enforce that kind of ordnance, I envision some Orwellian named panel staffed up. candidates are marched down long sets of stairs into dimly lit basement where they step forward one by one, and stand in front of a long dark desk. No people sit behind the desk. Suddenly a voice booms out from a megaphone “You are a bad actor, you do not qualify”.

DOug