Here’s a great quote from the Financial Crisis Inquiry Commission report that was released earlier today:
“It didn’t take Sherlock Holmes to figure out this was bogus.” That’s from Prentiss Cox, then an assistant attorney general with the state of Minnesota. He was talking about loan applications he reviewed from a mortgage lender who later went bust,
Cox received 10 boxes of applications from the mortgage lender and began to pull out random files. Here a pretty healthy mortgage was given to a disabled borrower in his 80s who used a walker and was described in the loan application as being employed in light construction.
The FICC report was pretty much critical of all players involved: it especially hit regulators hard, from the Fed to the Treasury to the SEC. It criticized banks for not paying attention to the garbage mortgages they bought, leveraged and sold as mortgage-backed securities. It criticized ratings agencies. And it took a very hard look at two government enterprises, Fannie Mae and Freddie Mac, which were leveraged at 75 to 1.
The report concluded that anyone who said it was impossible to see this coming was, well, simply blind.