CJR brings us some of the allegations made against major players in the mortgage industry, in quiz form.
I believe my former colleagues, in rushing into such high-concept fare, have underplayed a good story. Sure, we have an idea that bad practices occurred, along with bad judgment, but do we really know the sweep of it all? Since it’s just us business reporters here—just us chickens—let me illustrate what I mean with a quiz. Match the allegation with the institution. Answers are at the end of the piece.Click through and read (or scroll) to the bottom for the answers.
Allegation1. Handed out copies of the movie Boiler Room as a training tape
2. Partnered to sell its “PayOption Arms” with a brokerage owned by a five-time felon, whose convictions included gun-related charges
3. Forbade loan officers to check borrower income on certain loans
4. Ran an “art department” in its Tampa office, where documents were altered
5. Settled allegations of institutionalized marketing deception that covered two million customers
6. Developed “FastQual,” a program designed to approve borrowers in twelve seconds
7. Incentivized brokers and loan officers through “yield spread premiums” and other compensation schemes to put borrowers into more expensive loans
8. Tapped two kegs of beer at weekly staff meetings
E. Merit Financial
F. New Century
G. All of the above
This is not a take-home exam. If you don’t get more than two of seven, I think we have work to do.
1. McCain Senior Economic Advisor Kevin Hasset's breathless, sensational headline, "How the Democrats Created the Financial Crisis", has been parroted throughout much of the right-wing blogosphere, his argument (while remaining the display of partisanship you would expect from an active McCain advisor) suggests broader Congressional responsibility. Curiously, a mere six months ago, he wasn't so sure we were even in a bubble and argued that the primary cause of any inflation in home values was excessive land use regulation. In the interim he was arguing that protecting polar bears would bring us $200/bbl oil, and presumably was whispering, "The fundamentals of our economy are strong" in McCain's ear.
McCain Advisor Peter Wallison can point to a better track record on FNMA/FDMC, and is a bit more circumspect in his headline, even if he tries to distract his readers from a bipartisan history of Congressional and regulatory failure, and overstate the role of FNMA/FDMC.