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Green Slime Drives our Financial Crises | William K Black PhD | FINANCIAL SENSE -
April 13, 2012
Mathew A. Koeneker
"Green slime drove the current crisis, just as it did the Enron era frauds and the second phase of the S&L debacle. Studies of “liar’s” loans have shown their fraud incidence to be 90% — they are virtually all fraudulent. The Orwellian term that BPI used to disguise the nature of pink slime was “Lean Finely Textured Beef.” The Orwellian term the industry favored to disguise the nature of green slime was “Alt-A.” “A” signifies that the mortgage is of the lowest credit risk – it is “prime.” “Alt” is short for “alternative” and, falsely, implies that the loans were underwritten by an alternative process. Failing to underwrite, e.g., by verifying the borrower’s income, is not an “alternative” means of underwriting. Honest mortgage lenders do not make liar’s loans (the term that the lenders used in private to describe their green slime) because they create severe “adverse selection” and encourage endemic fraud. Both results mean that the expected value of making such loans is negative. In plain English, that means that the lender will suffer catastrophic losses and fail." -
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