Saturday, December 27, 2008

Nobody Could Have Predicted

Actually I didn't because I had no idea lending practices had gotten so absurd. I did know that people were getting loans were bad ideas for them, I just didn't know that they were getting loans which were bad ideas for the banks.

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's a shame more journalists weren't spending time trying to figure out what was going on with the housing bubble instead of getting quotes from people with a vested interest in it continuing to expand, but you go to financial crises with the press you have not the press you want.