New Proof Wall Street Knew Its Mortgage Securities Were Subpar: Clayton Execs Testify

[kpete]

Source: Huffington Post

New Proof Wall Street Knew Its Mortgage Securities Were Subpar: Clayton Execs Testify

First Posted: 09-25-10 06:56 PM | Updated: 09-25-10 09:46 PM


During a little-noticed hearing this week in Sacramento, Calif., a firm hired by Wall Street to analyze mortgages given to borrowers with poor credit, which were then packaged and sold to investors during the boom years, revealed that as much as 28 percent of those loans failed to meet basic underwriting standards -- and Wall Street knew all along.

Worse, when the firm flagged those loans for potential issues, Wall Street banks ignored its recommendation nearly half the time and likely purchased those loans anyway -- selling them to unwitting investors who were never told that the biggest home loan due diligence firm in the country had found potential defects in these mortgages.

The revelations give a better picture of what many have likely known for years: Wall Street firms knew they were buying lead yet passed it off as gold to investors who had no knowledge of the alchemy behind the scenes. But it also has real-world implications: the data released Thursday could bolster pension funds and other investors in their pursuit to force Wall Street banks to take back the bogus mortgages they peddled. An untold number of lawsuits have been filed in the wake of the subprime mortgage crisis and subsequent housing market collapse. Thus far, Wall Street has been winning that battle.

Clayton Holdings, a Connecticut-based firm that analyzes home mortgages for banks, hedge funds, insurance companies and government agencies, provided its data Thursday to the Financial Crisis Inquiry Commission, a bipartisan panel created by Congress to investigate the roots of the worst financial crisis since the Great Depression. The FCIC held its last public hearing in Sacramento, the home of the panel's chairman, where two current and former top Clayton executives testified under oath about the firm's role in the mortgage securitization chain.

Read more: http://www.huffingtonpost.com/2010/09/25/wall-street-subprime-crisis_n_739294.html

[UpInArms]

1. these criminals - for that is what they are - shoud be stripped of their assets

and be imprisoned for life.

[Gin]

2. and nothing happened to any of them, in fact, they were all rewarded

with bonuses...the angry mood in the country is partly because of this heist by banksters who got away.

The only people who suffer consequences in this country are the little people.

[earcandle]

3. We need some action taken on forcing the banks to eat all of these mortgages. One big ponzi scheme

has been acted out and if we don't put the correction in (like
we also need to do with 911) we will face recurring problems,
lack of confidence, and insecurity (bucked up by the police
state to protect corporations) forever.

Act now.  Vote out the criminals, only put educated
intelligent fearless people in. 

[dixiegrrrrl]

4. This is NOT new news, yet the media acts as if it is.

the various frauds have been going on for years, covered up by the highest level of regulators,
including the administrations involved.
Looks like the slew of lawsuits if finally getting the truth out, tho.

[galileoreloaded]

5. The banks got clipped and the government now holds as much subprime as before....

via FNM and FRE.

That's right, once the private's got out, the twins jumped right into subprime with both feet.

We deserve what is coming I think. Collectively, we might be too dumb to keep ourselves fed.

[Blue_Tires]

6. k+r