I saw Mr. Santelli's CNBC rant on Thursday. A “tea party” on Lake Michigan? Rather than inviting them to tea, why doesn't Mr. Santelli call “capitalists” to account? He's happy to throw the mortgage holder into the drink, but is he “carrying the water” for a failed industry? We've heard enough about borrowers, let's consider these facts before we talk about “personal responsibility”:
- Hold-to-maturity mortgage writers are the only ones left standing.
- There is a direct, positive correlation between the likelihood a mortgage of any grade will default and the intention of the writer or packager to sell it to a distant investor.
- Even where borrowers were found to have lied about their incomes, judges have found that mortgage writers were making loans based on collateral, not income.
- Mortgage writers colluded with crooked and captive appraisers to inflate the prices of that collateral, increasing loan risk.
- Mortgage writers asked for less and less income documentation, even avoiding documentation to which they had ready access, increasing loan risk.
- Mortgage packagers regularly ignored instances of mortgage fraud, including fictitious properties and fictitious borrowers.
- Mortgage writers and packagers barely acknowledged drastic increases in default rates among FICO cohorts and kept lending, faster than ever.
- The largest mortgage writers and packagers have become insolvent, every CEO lying about his firm's viability until and even after the day it crashed.
- The largest mortgage writers and packagers have already been forced to pay reimbursements for deceptive loan practices and selling fraudulent loans.
- Mortgage packagers and reluctant customers have indicated that bond insurance claims on private-label RMBS are uncollectable, clearly implying fraud.
- Both Fair Isaac and the ratings agencies have been forced to completely overhaul their systems, which hid massive misconduct.
- Thousands of mortgage-backed securities are inarguably worth less than the underlying credits.
- The mortgage-backed securities market is now a Market For Lemons, indicating extensive securities fraud.
- The catastrophic performance, failed structure and unsaleability of thousands of tranches of mortgage-backed securities rated AAA constitutes prima fascie evidence of extensive fraud.
- We have discovered that every area of the securities industry – from commodities to clearing to CDS – is riddled with record-breaking manipulation, tax cheating and fraud.
- The proud “capitalists” at banks, broker-dealers and insurance companies have, in a single year, become the biggest recipients of government welfare in human history.
- The richest, most-powerful capitalists in human history consistently blame everyone but themselves, spinning preposterous tales to excuse their malfeasance and incompetence.
- The only top executive in the securities industry - the only one - who has accepted full personal responsibility for his actions is Bernie Madoff.
Nassim Taleb said the first sign of recovery would be the ouster of the failed “capitalists”. I agree. Rick calls himself an “Ayn Rander”. He's claimed he wants the whole system to crash. Does he really? Is he really calling out the failed “capitalists” or just singing their tune in a different key? I'm no Ayn Rander, but I would love for Atlas to shrug these jokers into Lake Michigan before it's too late.
Let's see what – or whom – Rick and his crew are really willing to throw overboard.
