Comments on: How a Loan Becomes a Scam

By: try2bamused

try2bamused — Mon, 09 Mar 2009 19:51:39 +0000

Where is the legal system? Taking a long lunch? Like the entire decade, maybe? Obama doesn’t help when he says things like “I want to look forward, not backward”. That might sound forgiving, but I don’t recall hearing any forgiveness being demanded or offered. Such talk only soothes, reassures and emboldens the thieves responsible for this mess.

By: Marcus Aurelius

Marcus Aurelius — Fri, 06 Mar 2009 20:19:54 +0000

Short version:

Builder, banker, and appraiser are in cahoots: Value of asset is jacked up. Buyer commits fraud on loan application, while Banker’s loan officer and his buddy – the RE agent/broker look the other way (all the while assuring buyer that it’s okay, ’cause everyone is doing it). Buyer purchases fraudulently assessed house – counting on endlessly increasing values to get out of dodge should the need arise (wink and nod to appraiser, loan officer, and RE agent), builder reaps huge profit margin, RE and loan officer take commissions, fees, and bonuses. Meanwhile, banker gets regular bonuses, and sells securities he creates from mortgages he knows will go bad, and which he gets the appraiser’s brother-in-law – who works for a ratings agency – to rate the securities AAA+ double big-time good. To keep the skim going, he purchases some of the securities himself, on behalf of the bank. At their weekly strip-poker game, bankers eventually cop to the scam and figure the best way to protect themselves is to buy insurance against the securities they have created. They call this new insurance a CDS (which stands for Deadly Economic Viral Plague), and they get the Ratings Agency connection – after getting him drunk and buggering him over a conference table at the Ritz in Naples – to bless them. It all turns to shit, eventually, and everyone goes broke. The taxpayer is left holding the bag.

Simple.

By: JohnDoe

JohnDoe — Fri, 06 Mar 2009 20:09:33 +0000

@FL: 6 is 20% higher than 5, not 10%. And as usphoenix stated it’s not the frequency that matters, its the magnitude

By: Foghorn Longhorn

Foghorn Longhorn — Fri, 06 Mar 2009 19:58:12 +0000

An aside about the newspaper business.
They are dying, they loaded the gun, pointed it at their temple and pulled the trigger.
Oh, it’s the internet’s fault, wrong answer.
They died when they abdicated their role as the fourth estate.
This country can not function without a watchdog press, when they became the mouthpiece of the gov, they sealed their fate.
Now they are just in their last dying throes, blood leaking from their ears, the wound was inflicted long, long ago.

By: usphoenix

usphoenix — Fri, 06 Mar 2009 19:57:46 +0000

@FL: depends on whether they’re inside or not and the scale of the 10%. Dink around the edges in a small way, but get the big deals done.

By: Foghorn Longhorn

Foghorn Longhorn — Fri, 06 Mar 2009 18:20:03 +0000

Yawn
Shake me, wake me when we have some real news.

Now let’s move on to the ‘Quote of the Day’

In this business if you’re good, you’re right six times out of ten. You’re never going to be right nine times out of ten. -Peter Lynch

So, esteemed traders like Mr. Lynch, are only 10% better than a coin flip?
I get it.