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Reply #68: A Banker Speaks, With Regret By NICHOLAS D. KRISTOF [View All]

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Demeter Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Dec-01-11 10:27 AM
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68. A Banker Speaks, With Regret By NICHOLAS D. KRISTOF
http://www.nytimes.com/2011/12/01/opinion/kristof-a-ban...

If you want to understand why the Occupy movement has found such traction, it helps to listen to a former banker like James Theckston. He fully acknowledges that he and other bankers are mostly responsible for the countrys housing mess. As a regional vice president for Chase Home Finance in southern Florida, Theckston shoveled money at home borrowers. In 2007, his team wrote $2 billion in mortgages, he says. Sometimes those were no documentation mortgages. On the application, you dont put down a job; you dont show income; you dont show assets, he said. But you still got a nod. If you had some old bag lady walking down the street and she had a decent credit score, she got a loan, he added.

Theckston says that borrowers made harebrained decisions and exaggerated their resources but that bankers were far more culpable and that all this was driven by pressure from the top. Youve got somebody making $20,000 buying a $500,000 home, thinking that shed flip it, he said. That was crazy, but the banks put programs together to make those kinds of loans. Especially when mortgages were securitized and sold off to investors, he said, senior bankers turned a blind eye to shortcuts.

The bigwigs of the corporations knew this, but they figured were going to make billions out of it, so who cares? The government is going to bail us out. And the problem loans will be out of here, maybe even overseas.

One memory particularly troubles Theckston. He says that some account executives earned a commission seven times higher from subprime loans, rather than prime mortgages. So they looked for less savvy borrowers those with less education, without previous mortgage experience, or without fluent English and nudged them toward subprime loans. These less savvy borrowers were disproportionately blacks and Latinos, he said, and they ended up paying a higher rate so that they were more likely to lose their homes. Senior executives seemed aware of this racial mismatch, he recalled, and frantically tried to cover it up.

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