A New York Times report on WaMu’s Grande Bouffe in the mortgage market is worth reading for the former employee quotes alone.
For instance, use of controlled substances was acceptable as long as they were the productivity-enhancing sort:
“I’d lie if I said every piece of documentation was properly signed and dated,” said Mr. Parsons, speaking through wire-reinforced glass at a California prison near here, where he is serving 16 months for theft after his fourth arrest — all involving drugs.
While Mr. Parsons, whose incarceration is not related to his work for WaMu, oversaw a team screening mortgage applications, he was snorting methamphetamine daily, he said.
“In our world, it was tolerated,” said Sherri Zaback, who worked for Mr. Parsons and recalls seeing drug paraphernalia on his desk. “Everybody said, ‘He gets the job done.’ ”
As I am sure readers know all too well, that sort of thing is quietly prevalent in investment banks (well, except for being so indiscreet as to have your implements on view), as coke-snorting traders and institutional salesmen were sufficiently common in the 1980s so as to become a staple of fiction and magazine articles. Even in the seemingly innocent early 1980s, a member of Goldman’s corporate finance department was known to use uppers and downers on what was presumed to be a daily basis. He made partner. A attorney buddy realized how naive he was when on a deal, with all too great frequency, the room where negotiations were being held would empty itself. It took him a couple of days to figure out everyone else wasn’t making urgent phone calls, but repairing to bathrooms, and not to have sex with each other, either. I’ve also been told of very high level IT guys (the kind who built and ran mission critical systems, and made seven figures in the peak years) having meth habits. (Based on my very very limited anecdotal sample, meth does appear to live up to its billing and leads to much more rapid personal train wrecks than other stimulants).
But banking, at least until financial institutions started moving in a serious way onto each other’s territory, was a sober, repetitive, low discretion, high reliability business. The comparatively modest stress and pay levels weren’t terribly conducive to costly drug habits (not that it prevented them, mind you, but they were decidedly acultural, except for the trading operations).
Nevertheless, WaMu appears to have brought an exceptionally freewheeling approach to retail banking on many fronts:
“It was the Wild West,” said Steven M. Knobel, a founder of an appraisal company, Mitchell, Maxwell & Jackson, that did business with WaMu until 2007. “If you were alive, they would give you a loan. Actually, I think if you were dead, they would still give you a loan.”…
“I never had a clue about the amount of off-the-cliff activity that was going on at Washington Mutual, and I was in constant contact with the company,” said Vincent Au, president of Avalon Partners, an investment firm. “There were people at WaMu that orchestrated nothing more than a sham or charade. These people broke every fundamental rule of running a company.”
The article also confirms a practice that some borrower advocates have claimed is not unheard-of, namely, that brokers had mortgage applicants sign forms with key sections (like income) blank, to be filled in by someone other than the borrower to make the loan “work”:
Martine Lado, an agent in the Irvine, Calif., office, said she coached brokers to leave parts of applications blank to avoid prompting verification if the borrower’s job or income was sketchy.
“We were looking for people who understood how to do loans at WaMu,” Ms. Lado said.
Of course, under the law, that makes the chump borrower the perpetrator of the fraud, not the person who inked in the blank section.
Go read the piece. Lots of juicy stuff.
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OMG Grand Bouffe! I remember seeing that years ago. That was some crazy shit. I can’t believe anyone else knows about that movie. But damm, that is such a great analogy Yves
Grande Bouffe — Great metaphor!
One thing that was amazing to me was that as recently as this summer, there were reports out including a Merrill Lynch study (which of course I can’t seem to find at the moment) which made the case that the quality of WaMu’s loans was higher than most, based on FICO and LTV. IMO, this report wasn’t worth the paper it was printed on — FICO scores, while not completely worthless, became wildly overrated as predictors of mortgage defaults, and the LTV numbers didn’t take appraisal fraud into account, which was an epidemic at WaMu (see the eAppraiseIT settlement, etc). A more worthwhile study would have tried to measure loan documentation quality and other factors.
Sorry, just had to get that off my chest.
If they are not going to do meaningful drug testing then legalize it and tax it.
I’d expect investigators and judges to understand the difference between a home buyer who was encouraged to leave the form blank, and a speculator who wound up with several homes he couldn’t afford obtained via fraudulent mortgage applications.
There isn’t enough room in the prisons for people with false info on their mortgage apps. Dont forget, near the peak of the bubble houses were out of reach for just about everybody and if you were a first time buyer, you had to lie.
Then again, building more prisons and hiring prison guards would fall under the category of ‘infrastructure’ and ‘job creation’… maybe I’d better not give Obama any ideas!
LESS THAN ZERO,
Thats why i left corporate, i had ethics. But remember the studies just coming out about Cocaine, Meth and the kingdoms, drug dealers create. You would have numb gums and teeth after Susi, in Calif. People would use right on the counter. Congress men and Cocaine/Valium party’s in Malibu Cove (gated community). Ooh and don’t let O.J. near your pile, he used a garden hose.
Sounds like not much has change since then. Except they have switched to the ghetto drug culture. Bill Roberts response to little girls Christmas card, Don’t use crack its a ghetto drug lol.
Some day they will come up with a little wire to stick into the back of your head and unleash dopamine full bore as long as you like.
Wonder what kind of bubble that would create.
Skippy
«Even in the seemingly innocent early 1980s, a member of Goldman’s corporate finance department was known to use uppers and downers on what was presumed to be a daily basis. He made partner.»
That’s exactly the point! All those WaMu and inv. bank guys MADE A LOT OF MONEY and are going to GET AWAY WITH IT whatever they did.
Jimmy Cayne, Angelo Mozillo, Chuck Prince, Dick Fuld, and their minions have RETIRED WITH LOTS OF WEALTH to their account.
In Real America, this makes them WINNERS, and that’s all that matters to Real American voters, who are just hoping one day to have to same opportunities to take advantage of everybody else and get away with it.
«I’d expect investigators and judges to understand the difference between a home buyer who was encouraged to leave the form blank, and a speculator who wound up with several homes he couldn’t afford obtained via fraudulent mortgage applications.»
What about adults knowing what they are doing? Surely there is a matter of degree of guilt, but those in the former category surely knew what they were doing too, they were just trying to do it only on a smaller scale.
«Thats why i left corporate, i had ethics.»
In Real America, that translates to “I am a LOSER”. In Real America, winners do whatever it takes, and love it!
There is nothing new here. This type of behavior has been going on for centuries and always obtains when Politicos have the ability to use fiat money to cure all societal ills. Romer wrote a decent paper about it in 1994. The Politicos and their corporate bag men always win as nothing changes. Figure out the lies (which are most words out of their mouths) and profit. Use their fiscal malfeasance to your financial benefit. It is a simple and profitable game. No one beats a liquidity trap regardless of all the Politico lies from that to you can profit.
……………………………………………………………………………………………………….
Our theoretical analysis shows that an economic underground can come to life if firms have an incentive to go broke for profit at society’s expense (to loot) instead of to go for broke (to gamble on success). Bankruptcy for profit will occur if poor accounting, lax regulation, or low penalties for abuse give owners an incentive to pay themselves more than their firms are worth and then default on their debt obligations.
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=227162
Blissex,
Not really, got into a nich buisness. 75% net return on 150 to 250 dollar jobs. 2 to 3 weeks per job, 5 to 8 jobs a year. Two full time employees, then off to Costa Rica for a month.
But get your drift.
skippy
Look at the percentage of Americans taking legal mind altering drugs. One has to wonder if the increased use of serotonin uptake inhibitors contributed to the dot.com bubble. (By 2000, the proportion of adults using such drugs had nearly tripled, compared with the data set that ended in 1994.”) Or to the election of the Decider. Too many Americans are walking around on mind altering drugs, with a chemically altered view of the world. Instead of dealing with reality, people are medicating the very necessary red-flag warnings that result from the very real perceptions of what is going on in the world.
Maybe the meth was a factor in the velocity(speed) of money at that time! It sure has slowed down a lot lately.
I agree that appraisals were a huge part of the fraud but if you can’t quality because of DTI you’re toast.
Don’t forget to add in the army of realtors who had a grand time showing a massive supply of hot properties to drug dealers and driving them around to successive McMansions (in SUVs), as they blew smoke rings into the hazy eyes of the American Dreamers — and then took the money, as they ran to the next victim.
The no-doc loans and free-for-all mutual benefit subprime orgy was a match made in heaven for all these pimps and whores that depend on the lack of control from lenders that help provide services for laundering drug money. The home building mafia obviously loved being part of the network of collusion that connected them to a tsunami wave of cashflow, that flowed from drug dealer-to drug dealer into the Wall Street conduits that were the fuel pumps for Madoff-like ponzi schemes — which are still unwinding and pumping away.
For the lucky meth-using masses that are not in jail, they all will be eventually bailed out by Obama’s blank check altruism — just as TARP bails out the retarded and like-minded corrupted government organizations, entities and conduits which are linked, backed and connected to fraudulent derivative powered financial instruments, which will depend on updated false and misleading information.
They in general, or Obama specifically, will call this the mutual benefit of exchange and suggest that these people and institutions be given a third or fourth shot at defaulting, so that our chaotic society can attempt to wake up from rehab and regain euphoric confidence in our re-engineered American Stupor.
Bah Humbug! Where is justice in the land of the free and the home of the brave???
Also see, for some reason: All dreaded it–all sought to avert it. While the inaugeral [sic] address was being delivered from this place, devoted altogether to saving the Union without war, insurgent agents were in the city seeking to destroy it without war–seeking to dissole [sic] the Union, and divide effects, by negotiation. Both parties deprecated war; but one of them would make war rather than let the nation survive; and the other would accept war rather than let it perish. And the war came.
Meth? Too many side effects and dangerous to procure.
The speed drug of choice these days seems to be Ritalin. And you can get a script from a doctor or buy over the net.