If you have ever wondered why no one went to jail during the banking crisis you are not alone…but you are wrong, hundreds of people went to jail. Loan officers that were told by their branch managers to generate more loans were writing deals that should have never been accepted by them or their superiors…but they were. And their superiors then sent the bad loans up the chain and their superiors, superior did the same by passing the loan further up the chain.
So who went to jail? Well who else but the lowest person on the totem pole. The loan officer that was pushed with unreasonable quotas wound up doing some things that they were not proud of and they did some time while their superiors, superior saw the whole thing meltdown on CNN and hoped that no one ever took an interest in unscrambling the eggs that they had already made into a Grand Scam omelet.
Of course no one was completely innocent. From the home buyer to the top of Capitol Hill, everyone had their fingers in the pie and everyone loved the upward spiral of the market. It was only the people at the bottom of the hill that the s%*t rolled down on. Stories of loan officers that had fake buyers and homes were all over the internet while somehow the names Geithner, Paulson and Sachs and Lehman were not nearly as news worthy. This may be that more people can understand what roles a loan officer has in a the overall process or it could be that our news organizations prefer easily written human interest stories rather than stories that focus on the interests that effect all humans.
Not this country’s finest hour in the real estate mortgage industry. Hopefully some of us are learning our lesson.
Only the people that suffered are likely to have learned anything. Now what will they remember next time the real estate cycle spins out of control? That is the $64,000 question. We know we can’t count on the newest and less experienced to contain their enthusiasm!
And remember Chuck Schulmer and Barney Frank yelling at the bank CEO’s in a Congressional meeting, telling them there was no reason not to hand out loans to everyone? CEO’s started getting scared, because Congressmen were breathing down their necks to loan to anyone. I can still see them in the video leaning over their tall, exalted tables on their high exalted seats, looking down on the bank CEO’s, “What problem!? Why can’t they have loans!?” while the CEO’s tried to explain the risks involved with loaning to people with poor credit. Could the Congressmen understand? No. Or could they…who knows.
I remember that as if it were yesterday. I sat there thinking “You guys are so out of touch!” It was not only stupid but then later when they blamed the banks it was also dishonest. I cannot (and I have tried) to remember a single time when a politician was a better financial adviser than a banker. I am only consoled by the fact that Chris Dodd was able to receive a friends and family mortgage rate from the same people he chastised.J
Please don’t get me wrong, the big banks were also culpable but making a profit is their sole responsibility and they did that very well.