Finance CEOs made their own beds

During this whole federal bail out of investment companies, there have been a lot of 'analysts' on cable news programs arguing that no one in the industry saw this coming.

I call bullsh**t.

Before Justin.tv, before I went to college, I was a work-a-holic employee at Wells Fargo Home Equity for almost five years. I had started with the company as a temp in the fax department right out of high school, and at that time (in July '02), my supervisor would say "this housing market is going to collapse, don't get too comfortable". Years went by, with apprehension in the air as anyone with at least a double digit IQ who worked in home finance WAITED for the housing market to fall apart. Each interest rate increase inevitably brought up the question: is this the end? The job I held for two years, before I left the company, required knowing federal regulations on property assessment for loan applications in order to maintain a low level of risk. Basically, I ordered and reviewed property value and ownership based on the company's credit policy and the law. This gave me not acute insight into the federal regulations for loans, but also what other banks were doing in order to process their own mortgages/home equity loans in the most profitable way.

I hear on the news things like, "no one saw this coming" or "you can't hold these people accountable for fluctuations in the economy". During my appraisal/title ordering work, I would get to argue with customers and their bankers who felt that the valuation of their property was insufficient, or even that their property shouldn't have to be inspected at all. They would send in appraisals from previous mortgages or home equity applications with other banks (ie, WaMu, First National, etc) with absolutely brainless valuations. Comparable values from completely different cities, sometimes even different states, no on site inspections, significant property damage that we discovered wouldn't even be mentioned within these appraisals, as well as just plain inaccurate recording of square footage and amenities. In most cases, these were appraisals that were required for legal compliance, and they were trash. Towards the end, I had to be a part of firing several appraisers for not abiding by legal standards. They argued that all the other lending institutions didn't care about the regulations, why should we?

Customers would rant and rave about their neighbor's house getting a high valuation through a different bank, and loan processors within the center would sometimes let these sentiments get to them. If our regulations weren't so strict, we would have even more business (therefore more overtime hours and more bonuses). Some of these employees left to go work for commission at these other banks, and many times they would return with horror stories of mandatory 80 hour work weeks, a severe lack of ethical consideration in underwriting, and pure lawlessness in their procedures. The feds would inspect other banks just as they did ours, but what they searched for was always surface level. Rarely did anyone dig too deep.

I left Wells Fargo to attend U of A in Tucson and got a part time job in a different mortgage company. This newer company (which shall remain unnamed) was the unethical side of the coin I had always heard about, but never witnessed. My job was essentially to file deeds/titlework/appraisals for loans bought from other lending institutions. Some of these were horrifically illegal, and this company I worked for had actually paid money to acquire the risk in them! I couldn't believe the shuffling some of these loans were going through; four or five mortgage servicing turn overs within five years. This company seemed to aggressively purchase whatever they could get their hands on, and sell them with no apparent rational behind the decision. What they seemed to hold on to, the cream of the crop per say, were loans for customers with a history of credit problems. Why? Late fees and adjustable interest rates. New employees at this company would, in their severe ignorance, ask why anyone would want loans from customers with low credit scores. Most would eventually grow to trust their CEOs, "they must know what they are doing", but I never did.

When I brought up this concern to a supervisor, I was promoted out of the department a week later, away from the junk loans. I didn't stay with that company very long. By this point the housing bubble was starting to fall apart, and that ship was going down fast.

My point is simply this; everyone from mail room workers to CEOs saw this coming. Everyone knew the law, and the only company I personally knew of that followed the law is now seeing rising stock prices amid federal buyout plans and acquisitions. I don't think anyone is surprised by this; everyone in investment/finance knew exactly what they were doing, and what they were doing was taking advantage of massive deregulation. More than once, I noticed that Wells stuck with policies even after the legal requirements necessitating them were overturned. The amount of risks these banks and investment companies were taking on these junk loans was absolutely outrageous, and these CEOs made massive profits off of them. Sure, buy them out, but these CEOs sunk their battleships. They should have to live with that.