And lenders SO didn’t care back in the bubble days. They invented liar’s loans and blanketed the country with them during the Oughts not because the poors talked them into doing it, or because the liberals in the Bush Administration forced them to do it—on the contrary, the government warned them against issuing these things, just as the government warns us against swallowing arsenic. The reason bankers did it was because liar’s loans were making bankers rich. This is a difficult thing to understand—indeed, not understanding it is the stated reason Obama Administration officials have made no effort to send financiers to jail—so let us take this slowly. Executives at the mortgage origination companies got huge bonuses in those days for writing lots of loans. OK? They wanted to write more of them, and the only way to really crank out mortgages on a vast scale was by giving one to anyone who wanted one, regardless of their ability to pay, a feat that is only possible by means of the liar’s loan. So: Liar’s loans = rich bankers... The name for this kind of scheme is a control fraud; it happens when the officers who control a firm use their power over the firm to enrich themselves while driving the firm itself to the boneyard. The country has seen control frauds many times before; indeed, the man who invented the term was a regulator of S&Ls during the S&L meltdown of the 1980s, and he saw the pattern so many times back then that he wrote a book about it. I am referring to my friend Bill Black, a professor of economics and law at the University of Missouri-Kansas City and also a Distinguished Scholar in Residence for Financial Regulation at the University of Minnesota’s School of Law. Control fraud, Black says, always follows the same recipe, with banks growing rapidly by making vast numbers of extremely risky loans, executives immediately getting rich with big bonuses, and the bank eventually collapsing under the weight of those malicious loans.
Posted on: Sun, 14 Sep 2014 09:10:07 +0000
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