View Full Version : Market Bubble Detritus

06-28-07, 11:24 PM

Recall what washed up on shore after the tide of stock market bubble money rolled out? The trash that was floating unseen below the pristine surface. After the tide went out... very stinky.

The really big chunks of trash, such as Enron and WorldCom, we all remember. If you have a strong stomach, go to F'ed Company (http://www.fuckedcompany.com/hof/index.cfm?startrow=1) (yes, they're still around), where you will find 1,006 other pieces, large and small, famous and obscure, that washed up on shore.

During a market bubble the trash under the surface goes unseen not because it is not visible, but because no one is motivated to look for it.

For example, we've had numerous communications with mainstream media reporters over the years about what we think is a great story. With the notable exception of BusinessWeek (http://www.businessweek.com/the_thread/hotproperty/archives/2005/10/mortgage_abuse.html), a publication which has consistently taken the side of consumers, there has been little interest in the story. Odd, because the story, it seems to us, is irresistible.

How's this for an opportunity for The Fourth Estate (http://www.citypaper.com/columns/story.asp?id=13775) to take a stand.
More than 9,000 professionals in the industry, representing at least 25% of the total number of licensees in their profession, sign an online petition providing their name and address
They complain that their clients, who are supposedly regulated by state and federal government agencies, frequently demand that they break laws–and in some states commit felonies–in the course of conducting business
They claim fraud is systemic and threatens the integrity of the market for the product their industry sells
They complain that if they do not break the law, they are blacklisted and put out of business by competitors who are willing to break the law
They appeal to regulators and authorities to simply enforce existing laws–no new laws are required–in order that they can make a living without being out-competed by others in the profession who are breaking the law
All petition signers have to provide a name, addresses, and unique IP address, thus putting their livelihood at risk for airing their grievance
With more than 9,000 signers to call, the group's claim can be verified–all reporters have to do is pick up the phone (that's what we did)
The petition has been online for more than eight years, since 1999
Nothing has happened, no senate committee has been formed to investigate, and not one major story has appeared in the mainstream media about this scandal Who are these petitioners? Workers at poison cat food, fake drug, or defective tire factories across China?

Nope. Here's a clue.
Petition signer #1 is Robert D. Ipock, 1218 Heatherloch Drive, Gastonia, NC
Petition signer #9299 is Carolyn Bailey, 7122 Bunion Drive, Jacksonville, FL, 32222Need another clue?

One petition signer included the comment, "It makes it easy for the crooks to get all the business."

Another, "There needs to be a confidential reporting site that appraisers can report lenders that commit fraud."

And the answer is...


The petition is appraiserspetition.com (http://www.appraiserspetition.com) and the petitioners are U.S. home appraisers. Above is our analysis from Price Deflation Risk Due to Overpriced Appraisals (http://www.itulip.com/forums/showthread.php?t=488) October 7, 2006 (iTulip.com). We analyzed thousands of signatures and assigned an inflated appraisal "pressure rating" to each state based on the number of petition signers, adjusted for state population. It indicates which states have the highest incident of reports of inflated appraisals and are therefor more likely to see most significant price declines in a down market.

Inflated Appraisal Top Five

#1: Florida
#2: Pennsylvania
#3: Texas
#4: Colorado
#5: New York

This petition provides strong evidence of systemic fraud in home appraisals over a period of more than eight years, primarily driven by lenders. Not only have home buyers been the victims, the housing market itself is at risk due to over-pricing. One of the appraiser said, in a comment echoed by many petition signers, "Without legitimate appraisals, we have NO idea what true market prices are... look out below!"

For many years the effects of toxic credit industry products and practices have collected under the surface of the U.S. economy. Just how big and how ugly is the pile of credit industry detritus below? iTulip's Aaron Krowne's Mortgage Lender Implode site (http://ml-implode.com/) is up to 92 "defunct" lenders and counting. The tide is rolling out. But based on the length of the previous real estate down cycle, which lasted more than five years (http://www.itulip.com/forums/showthread.php?t=887) when more than 1,000 banks went out of business, safe to say low tide is still years away.

James Scurlock in his book and documentary Maxed Out (http://www.itulip.com/forums/showthread.php?p=9012#poststop) notes that some of the most hazardous products in America are credit products, yet the dangers of these products and the often unseemly ways they are sold are not addressed until millions of consumers have been defrauded, and in the case of mortgage market, until the health of the U.S. economy, and its credit and financial markets, are already showing signs of distress.

Between a health insurance industry that denies health care to the ill and a credit industry that sells toxic financial products to millions, Americans are starting to wonder what happened to the government that is meant to serve the public good or at least protect them from abuse, and to the press that is supposed to keep that government honest. Both are overdue for radical and fundamental change. But, as we have said before, likely these changes will come only after a major financial and economic crisis results.

iTulip Select: (http://www.itulip.com/forums/showthread.php?t=1032) The Investment Thesis for the Next Cycle™

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06-29-07, 01:32 AM
There's an article today by Michael Hudson on WSJ Online (I read it here (http://www.realestatejournal.com/buysell/mortgages/20070628-hudson.html?refresh=off)) entitled "How Wall Street Stoked The Mortgage Meltdown". He looks back at Lehman's involvement with First Alliance Mortgage Co. (The article says First Alliance was shut down back in 2000, but there appears to be a First Alliance (http://www.firstalliance.com/) in operation today; different company?)

Not much new for iTulipers, but here's a few bits anyway:

The vice president, Eric Hibbert, wrote a memo describing First Alliance as a financial "sweat shop" specializing in "high pressure sales for people who are in a weak state." At First Alliance, he said, employees leave their "ethics at the door."

The big Wall Street investment bank decided First Alliance wasn't breaking any laws. Lehman went on to lend the mortgage company roughly $500 million and helped sell more than $700 million in bonds backed by First Alliance customers' loans. But First Alliance later collapsed. Lehman landed in court, where a federal jury found the firm helped First Alliance defraud customers.
At a hearing in April, Sen. Robert Menendez (D., N.J.), said Wall Street firms "looked the other way" as they profited from questionable loans, "fueling a market that has very little discipline over itself."
Twenty-five former employees said in interviews that front-line workers and managers exaggerated borrowers' creditworthiness by falsifying tax forms, pay stubs and other information, or by ignoring inaccurate data submitted by independent mortgage brokers. In some instances, several ex-employees said, brokers or in-house employees altered documents with the help of scissors, tape and Wite-Out.

"Anything to make the deal work," says Coleen Columbo, a former mortgage underwriter in California for Lehman's BNC unit.and my personal favorite::p

In one instance, the lawsuit said, a loan officer submitted a loan on a duplex that was "not a home or duplex at all but merely a greenhouse."

06-29-07, 09:26 AM
Let's face it, Wall Street is today's Mafia. You have massive payoffs (protection money) paid via political contributions to Washington DC. Wall Street is the number one giver to both political parties. This money is protecting them from lawsuits. After the Dot.Com meltdown there was one large settlement for a few billion when Wall Street made hundreds of billions. This was rushed through to protect Wall Street from lawsuits.

There are so many problems here you can not even discuss them all.

Do they know they are selling crap. You betcha.

06-29-07, 10:05 AM
<a href="http://www.bloomberg.com/apps/news?pid=20601087&sid=aN4sulHN19xc&refer=home">The tide seems to be receeding...</a>

06-29-07, 11:47 AM
The tide seems to be receeding... (http://www.bloomberg.com/apps/news?pid=20601087&sid=aN4sulHN19xc&refer=home)

Rosner estimates that collateralized debt obligations, which have packaged thousands of bonds and derivatives into new securities, will lose $125 billion. Institutional Risk Analytics, a Hawthorne, California-based company that writes computer programs for the four biggest accounting firms, says 25 percent of the face value of CDOs is in jeopardy, or $250 billion.
Losses may rival the savings and loan crisis of the 1980s and 1990s. The Resolution Trust Corp., formed by the U.S. government to resolve the thrift crisis, sold $452 billion of assets at a cost to taxpayers of about $140 billion.

Did I hear RTC?
Looks like we are headed for a real estate liquidation and the political connected companies will be the beneficiaries of such purchases

06-29-07, 11:54 AM
Welcome to the Corporate State in its purest form. Remember the Bush administration was billed as the nation's first CEO presidency? A number of historical factors have delayed its arrival but fellow iTulips, its here and isn't it a beaut!

"I think we have been through a period where too many people have been given to understand that if they have a problem, it's the government's job to cope with it. 'I have a problem, I'll get a grant. I'm homeless, the government must house me.' They're casting their problem on society . And, you know, there is no such thing as society."

We now know what Margret Thatcher meant by that line. Society, and specifically government, is a conduit to loot the public wealth, period. No exceptions.

07-02-07, 09:13 AM
Excellent post, EJ. This story, the appraisers's petition, has all the classic elements of a prize-winning newspaper story. It's one of those stories that has already written itself--all a reporter would have to do is interview some signers. And it's hardly an unknown story. The fact it has not been done by the NYT or the Washington Post, much less the WSJ (haha) indicates the role the mainstream press has played in the creation of the housing bubble. I would think the LA Times or SF Chronicle might do it now. EJ, I am confused by your link to BusinessWeek. It appears that those posting comments mentioned the petition--has the petition ever been the subject of a full, staff-written BW story?