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My reaction while reading most of this was "Why didn't any of you try harder to let someone know? Why didn't you email everyone? Why didn't you call all the peo

My reaction while reading most of this was "Why didn't any of you try harder to let someone know? Why didn't you email everyone? Why didn't you call all the people you emailed? Wasn't there ANYONE important who would listen!?" After reading the whole thing, I was a little shocked to realize the answer is "No, there was no one important who would listen." The accountant who essentially documented the impending collapse of Citigroup in less than 2 pages was interviewed by the SEC and then never heard from them again. Then there's this guy: > The congressional responses were, “Thank you for your letter, and thank you for your interest.” And, “We’ll look into this,” basically. > I also wrote letters to just about every television journalist, and network journalist that I could get my hands on. Sent as e-mail with attachments and never received any response. [I wrote to] CNN and Fox News. ABC News, NBC News, CBS. My daughter was working at that time with one of the network affiliates in Phoenix, and she knew how upset I was about this whole thing. So she put me in contact with their consumer reporter, who does the consumer complaints and that sort of thing. He came out to my house and interviewed me for about 45 minutes. And I gave him documentation, and tried to as best I could to explain the situation to someone that was basically ignorant of the mortgage industry. Never heard another word. … > During the mortgage meltdown, [Fox News host] Bill O’Reilly was having a temper tantrum on his show where he was going off about, “Why didn’t I hear about this? Why didn’t somebody tell me about all this that was going on?” And I almost threw my shoe through the television set. Ask my wife — I was screaming and yelling, “I did try to let you know.” ‘Cause he had been one of the ones that I had sent e-mails and attachments with all of this stuff. … What the hell are these people supposed to do? Start posting their warnings all over the internet and hope it goes viral? What are the chances that would work vs. the chances they'd all be dismissed as conspiracy theorist crackpots? It's easy to think "If I were in any of their positions, I would've gotten the entire country's attention", but it seems people at every level are determined to be ignorant as long as it's profitable.

arethuza 14y ago
Here is what you would face in a UK bank if you tried to warn anyone: "When I tried to resolve the previous difficulties with Jo Dawson [HBOS group risk director 2004-2005 who eventually replaced Moore], she leant over the table – she stood up – pointed at me and said 'I'm warning you. Don't you make an effin' enemy out of me'," he said." http://www.guardian.co.uk/business/2012/oct/30/hbos-whistleblower-threats-risk-taking http://www.guardian.co.uk/business/2012/oct/30/hbos-whistleb...
liber8 14y ago
It's not that a special somebody wouldn't have listened. This wasn't as big an information problem as most people make it out to be. As this, and many other articles explain, bankers and underwriters knew bank fraud was widespread. The general public, who took out the loans, knew they were defrauding banks. Wall Street knew the rating agencies were full of shit. But everybody was making a killing as long as real property kept appreciating, so nobody cared. They all thought they'd be out before the pop. Lots of people saw this coming. Peter Schiff, among other Austrians, were ringing alarm bells for years. That's part of the problem. People think, "How big a problem can it really be if you're on year number four of telling us what a problem this will be? Surely if it was as bad as you say, it would have happened already/we wouldn't be making all this money." If you read Michael Lewis' The Big Short, you'll get a nice profile of five or six guys who not only saw this coming, but actually timed it perfectly and made fortunes. You can't solve problems like these by convincing one "important" person of anything, even if its the truth.
- danielweber 14y ago
  But everybody was making a killing I think Upton Sinclair said "It is difficult to get a man to understand something, when his salary depends upon his not understanding it!" Everybody loved the real estate bubble. We were all going to be rich forever and not have to do any work. I think even if the President (regardless of party) had tried to stop the bubble, he would have been laughed out of office.
  - mseebach 14y ago
    This is an extremely important point - there was an epic mass delusion: Real estate can only go up. It permeated not only all of finance, but all of politics, regulators and the general public. The very same people who would have laughed the president out of office are somberly acting indignated that bankers get clean out of the mess they made. Everyone is washing their hands, and the one thing everyone can agree on is that we like banks the least.
- sillysaurus 14y ago
  As someone who is completely ignorant of investment strategies, would anyone explain how to make a fortune off of an impending financial collapse (when you predict the timing perfectly)? That sounds very interesting.
ultraswank 14y ago
There were people who were posting their stuff on the internet. http://www.calculatedriskblog.com/ http://www.calculatedriskblog.com/ was a great resource before the crisis documenting how far off the rails the mortgage business had gone. I wouldn't say it went viral, but it did garner a lot of attention for a finance blog. Paul Krugman even mentioned it on his blog. Of course almost everyone I talked to about it back in 2007 treated me like I just said Stanley Kubrick filmed the moon landing. Back then it was pretty hard to say "Alan Greenspan is wrong and the guy on this blog is right" and have anyone take you seriously.
- JackFr 14y ago
  "Tanta" who cowrote the blog with "CR" sadly passed away a few years ago. She knew more about mortgage backed securities than probabaly everyone at the SEC and the Fed combined. One of her blog entries, "The Ubernerds Guide to Mortgage Securitization" was footnoted in a paper from the Federal Reserve. CalculatedRisk was a pleasure to read. She and CR were not super bears. They were measured, cautious and thoughtful -- reason to be ignored when everyone else is making money.
groby_b 14y ago
They tried. People didn't want to know. They actively ignored. And no, let's not blame reporting for that. There were reports on radio/TV - and not exactly places focused on the economy - about the housing bubble issues, and a potential collapse of epic proportions as early as 2005, IIRC. It was bad enough in 2007 that I decided to pull entirely out of the stock market, and I'm anything but a financial expert. Everybody closed their eyes and hoped it wouldn't be them.
ChuckMcM 14y ago
"After reading the whole thing, I was a little shocked to realize the answer is 'No, there was no one important who would listen.'" There is a scene in the Fifth Element where Gary Oldman knocks a glass off the table to demonstrate how destruction is "good" for the world because it gives all the support actors a chance to play their role. Its a pretty chilling example when you realize that there are people who actually think that way on a daily basis. I heard a story when visiting London, which may have been completely fabricated, in the context of comparing the morals of banking vs gambling. It told of a book maker who learned that a critical soccer player's girlfriend was planning to commit suicide. Rather than report that information to the authorities to save the girl he used it to bet against the team (the favorite) and won a much bigger return than he would have otherwise when her attempted suicide kept their star from playing. Part of our discussion was whether or not the 'criminal element' which was attracted to gambling (I grew up in Las Vegas just as they were cleaning out the Mafia influence there) was the same or different than the people attracted to Banking. In both contexts 'score keeping' was a simple metric of how much money you had. If you are an "important person" and someone communicates to you that something is rotten in the bowels of the system and its going to come exploding out in a vile smelly mess. You might ask yourself, "What am I going to do with this information?" What would a gambler do? What would a banker do? What would a politician do? If you are a TV news conglomerate you might say, "Hmm its one small story of abuse now, but if it really does take out a big chunk of the financial industry its going to be huge! Lets sit on it and plan on how we're going to get big market share from people tuning into us for our indepth coverage!" If the person getting the information convinces themselves that there is nothing they personally can do to stop it, they can give themselves permission to exploit it (which is usually, but not always, easier). If you can profit handsomely if it happens, and not so much if it doesn't, then what? You see a shark in the water do you yell "Shark!" or do you start recording video thinking about the 10 million YouTube views this will get if you catch it eating someone? Its Ethics 101. It's why you fire people in your company for even minor ethical violations. It's why you volunteer to run oversight on a local public utilities commission or school board. It's why you go back into the store and return the extra $10 they gave you in change, or pay for product you absently stuck in your pocket and wasn't charged for. It's why you stop interacting with people who aren't ethical.
- 14y ago

arethuza 14y ago

Here is what you would face in a UK bank if you tried to warn anyone: "When I tried to resolve the previous difficulties with Jo Dawson [HBOS group risk director 2004-2005 who eventually replaced Moore], she leant over the table – she stood up – pointed at me and said 'I'm warning you. Don't you make an effin' enemy out of me'," he said." http://www.guardian.co.uk/business/2012/oct/30/hbos-whistleblower-threats-risk-taking http://www.guardian.co.uk/business/2012/oct/30/hbos-whistleb...

liber8 14y ago

It's not that a special somebody wouldn't have listened. This wasn't as big an information problem as most people make it out to be. As this, and many other articles explain, bankers and underwriters knew bank fraud was widespread. The general public, who took out the loans, knew they were defrauding banks. Wall Street knew the rating agencies were full of shit. But everybody was making a killing as long as real property kept appreciating, so nobody cared. They all thought they'd be out before the pop. Lots of people saw this coming. Peter Schiff, among other Austrians, were ringing alarm bells for years. That's part of the problem. People think, "How big a problem can it really be if you're on year number four of telling us what a problem this will be? Surely if it was as bad as you say, it would have happened already/we wouldn't be making all this money." If you read Michael Lewis' The Big Short, you'll get a nice profile of five or six guys who not only saw this coming, but actually timed it perfectly and made fortunes. You can't solve problems like these by convincing one "important" person of anything, even if its the truth.

danielweber 14y ago
But everybody was making a killing I think Upton Sinclair said "It is difficult to get a man to understand something, when his salary depends upon his not understanding it!" Everybody loved the real estate bubble. We were all going to be rich forever and not have to do any work. I think even if the President (regardless of party) had tried to stop the bubble, he would have been laughed out of office.
- mseebach 14y ago
  This is an extremely important point - there was an epic mass delusion: Real estate can only go up. It permeated not only all of finance, but all of politics, regulators and the general public. The very same people who would have laughed the president out of office are somberly acting indignated that bankers get clean out of the mess they made. Everyone is washing their hands, and the one thing everyone can agree on is that we like banks the least.
sillysaurus 14y ago
As someone who is completely ignorant of investment strategies, would anyone explain how to make a fortune off of an impending financial collapse (when you predict the timing perfectly)? That sounds very interesting.

ultraswank 14y ago

There were people who were posting their stuff on the internet. http://www.calculatedriskblog.com/ http://www.calculatedriskblog.com/ was a great resource before the crisis documenting how far off the rails the mortgage business had gone. I wouldn't say it went viral, but it did garner a lot of attention for a finance blog. Paul Krugman even mentioned it on his blog. Of course almost everyone I talked to about it back in 2007 treated me like I just said Stanley Kubrick filmed the moon landing. Back then it was pretty hard to say "Alan Greenspan is wrong and the guy on this blog is right" and have anyone take you seriously.

JackFr 14y ago
"Tanta" who cowrote the blog with "CR" sadly passed away a few years ago. She knew more about mortgage backed securities than probabaly everyone at the SEC and the Fed combined. One of her blog entries, "The Ubernerds Guide to Mortgage Securitization" was footnoted in a paper from the Federal Reserve. CalculatedRisk was a pleasure to read. She and CR were not super bears. They were measured, cautious and thoughtful -- reason to be ignored when everyone else is making money.

groby_b 14y ago

They tried. People didn't want to know. They actively ignored. And no, let's not blame reporting for that. There were reports on radio/TV - and not exactly places focused on the economy - about the housing bubble issues, and a potential collapse of epic proportions as early as 2005, IIRC. It was bad enough in 2007 that I decided to pull entirely out of the stock market, and I'm anything but a financial expert. Everybody closed their eyes and hoped it wouldn't be them.

ChuckMcM 14y ago

"After reading the whole thing, I was a little shocked to realize the answer is 'No, there was no one important who would listen.'" There is a scene in the Fifth Element where Gary Oldman knocks a glass off the table to demonstrate how destruction is "good" for the world because it gives all the support actors a chance to play their role. Its a pretty chilling example when you realize that there are people who actually think that way on a daily basis. I heard a story when visiting London, which may have been completely fabricated, in the context of comparing the morals of banking vs gambling. It told of a book maker who learned that a critical soccer player's girlfriend was planning to commit suicide. Rather than report that information to the authorities to save the girl he used it to bet against the team (the favorite) and won a much bigger return than he would have otherwise when her attempted suicide kept their star from playing. Part of our discussion was whether or not the 'criminal element' which was attracted to gambling (I grew up in Las Vegas just as they were cleaning out the Mafia influence there) was the same or different than the people attracted to Banking. In both contexts 'score keeping' was a simple metric of how much money you had. If you are an "important person" and someone communicates to you that something is rotten in the bowels of the system and its going to come exploding out in a vile smelly mess. You might ask yourself, "What am I going to do with this information?" What would a gambler do? What would a banker do? What would a politician do? If you are a TV news conglomerate you might say, "Hmm its one small story of abuse now, but if it really does take out a big chunk of the financial industry its going to be huge! Lets sit on it and plan on how we're going to get big market share from people tuning into us for our indepth coverage!" If the person getting the information convinces themselves that there is nothing they personally can do to stop it, they can give themselves permission to exploit it (which is usually, but not always, easier). If you can profit handsomely if it happens, and not so much if it doesn't, then what? You see a shark in the water do you yell "Shark!" or do you start recording video thinking about the 10 million YouTube views this will get if you catch it eating someone? Its Ethics 101. It's why you fire people in your company for even minor ethical violations. It's why you volunteer to run oversight on a local public utilities commission or school board. It's why you go back into the store and return the extra $10 they gave you in change, or pay for product you absently stuck in your pocket and wasn't charged for. It's why you stop interacting with people who aren't ethical.

14y ago