Good questions


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Posted by David Sherman on Friday, December 07, 2007 at 17:38:02 :

In Reply to: Re: "Real banks aren't in foreclosure trouble"? posted by Todd Wilson on Friday, December 07, 2007 at 15:58:38 :

I'll ask my banker friend the next time I see him. Maybe the Loans4Everyone guys didn't make their borrowers buy mortgage insurance. Maybe they didn't even check their credit and income. These guys made a commission off of every loan they sold, and then that was the last they cared about it.

Some clever MBA farther up the line rolled that loan into some kind of tricky security and then peddled it to people who liked the combination of a higher interest rate and collateral. Never mind if the collateral wasn't really worth anywhere near what the paper claimed it was. The mortgage guys told the appraisers that appraisal had to come in at such-and-such value (whatever the buyer agreed to pay), and if they didn't, they'd find a better appraiser.

By the way, Citibank is as "real" as any bank as far as having lots of physical offices. They're big in the Northeast. You see them all over New York. I don't know where you are, but they don't seem to have any offices in the Northwest. Citibank has physical locations, checking and savings accounts, commercial and home loans, and all that other bank stuff. They're not a LendingTree or Countrywide. I've forgotten what they were called before all the bank mergers. Right now their largest shareholder is a Saudi oil sheik who had the CEO fired after the 2nd $6 billion of unexpected losses. The latest $15 billion came after that. When one of the biggest banks in the country has to restate its increasing losses three quarters in a row, each time saying, "we're sure this covers everything", it tells me that nobody has a clue how bad things really are. Maybe it's just paper losses for paper billionaires, or maybe it will eventually start to hurt real people.



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