This has always been a footnote to the foreclosure crisis that I feel has not been paid attention to. I also have always felt that it is the thread, that if pulled, exposes how consciously fraudulent the foreclosure crisis was and is from start to finish
A point that is used ad nauseum by those who would like to have a smokescreen for the foreclosure crisis is that "people bought houses they couldn't afford" or alternately that the government, usually personified by Barney Frank and/or Fannie Mae MADE the banks write loans to people who couldn't afford them. The second part is preposterous on the face of it, but the first has a kernel of truth.
The banks did write mortgages to clearly unqualified homeowners - the cocktail waitress approved for 450K, the bricklayer who bought 5 houses, etc. etc. When one does some research one can find stories that supports these kind of events really did occur.
I have always asked myself - "Why would the banks do that?" Why would they throw out every traditional underwriting standard known to man and start writing this worthless crap?
The answer is so simple - because a market for worthless crap opened up. There were people who NEEDED worthless crap to wrap into bonds that they could then bet against.
If there had been no predictably bad mortgages to bet against, then this giant money-making opportunity to bet on the downside of mortgages would not exist.
And now the evidence for what had been obvious just by using logic is slowly starting to drip into the media.
Today we have this story Accused of Deception, Citit Agrees to Pay 285 Million
which really just seems like a variation of the scheme puled by Goldman Sachs in the Abacus deal :
Factbox : How the Goldman Sachs Abacus Deal Worked
If you read these stories, they have one fact in common - the people who wanted to short the mortgages could pick out the bad ones apparently pretty easily.
That's funny isn't it?
What's not funny is that all that is happening is some fines. Nothing to see here, just some immoral and unethical behavior, nothing actually illegal. Move along.
What also not so funny is the banks trying to foist off their derivative exposures to the American taxpayer.
We are not amused. In fact, we're getting pissed.