From 1994 to 2004 I followed the stock market very closely. During that time I saw a lot of securities fraud perpetrated by stock promoters, public companies and ratings groups such as S&P. It was a known joke that a buy rating actually meant hold, hold meant sell and sell meant that you already lost your ass. I assumed everyone knew this and didn’t rely on their ratings calls. Seems I was wrong.
S&P gave a good rating to mortgage backed securities which were bad investments. This was 2005 to 2007 when the real estate market was in full swing right before the bust. The government had relaxed lending requirements and mortgage brokers made a ton of money refinancing all the equity out of people’s homes. I was getting at least five letters a day asking to refi my home. No doc loans were the norm. Some mortgage brokers were still doing the fake tax returns and asset statements. There’s a reason all mortgage brokers owned Turbo Tax Pro during this time. Everyone knew this even though this is bank fraud. Banks were not allowed to check returns with the IRS. Mortgage brokers always had borrowers sign blank applications then they’d fill it in with the “proper” data.
I was telling people in 2006 to not buy real estate as I thought that was the peak. It wasn’t the peak. The real peak was mid to late 2007. I’m generally a pessimist and tell people to sell early and buy in late. At least people won’t lose money that way.
I thought real estate would probably lose 30-35% value just like the last two busts I’d witnessed. In this case I was an optimist. I did not consider the effect of losses from trading mortgage backed securities that would make the entire house of cards collapse taking banks and jobs with it.
Below is an article which goes into the fraud perpetrated by S&P and the other reviewers. They were paid to review the investments! That doesn’t make any sense. Of course they will give them a great rating.
I’m a real estate appraiser. The owner of the property cannot contract with me directly for an appraisal for a loan for purchase or refinance that is backed by the government. Why did the government allow the investment owners to pay S&P for a review?
Time and time again these things happen in our country. The government in cahoots with some big businesses relax government restrictions or turn a blind eye. They allow their friends to defraud smaller investors. Years after everyone has lost their investment, the companies go bankrupt or get bailed out by the government. The investors who lost money don’t recoup their losses. They money goes to the companies that ripped them off! They promise this money will save jobs which will trickle down and help the rest of the economy. Doesn’t seem like a wise investment to reward people who defraud others.
Read the story below for the specifics.
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