That article was absolutely on target. I was a loan officer for Production Credit Assn. in southwest Washington from 1974 to 1984, and while we had (modest) targets for portfolio growth, our paramount duty was to "mind the store"- make sure we didn't expose our company to bad loans, at least to the best of our ability. Local banks did the same thing, and are still doing so. I remember when I was first made aware of the concept of a "mortgage broker"- we bought a house in a suburb of Seattle, and the real estate agent recommended "Margie" as a "mortgage broker"- I asked what that was- she said, "She can get mortgages from many different sources- to fit your situation." "So how does she get paid?" I asked. "Well, on commission, of course." I remember thinking at the time, that this was going to be a problem eventually. It takes all the objectivity out of the loan "vetting" process when you don't get paid unless the deal goes through, and everyone in the process (real estate agent, mortgage broker, appraiser and even pest inspector) ends up conspiring to get the loan through to they can get paid. It all went up the line, aided by the fact that the fund managers, with billions of 401K dollars pouring in relentlessly, desperately needed "investment instruments" to put that money into. And what could be more impressive to clients than the high interest subprimes? Lenders could rationalize them by the fact that Congress was demanding that they loan to low income, disadvantaged and "under served" people, and Fannie and Freddie looked the other way when the "creative" packaging started- NINJA ("no income, no job or assets) loans (sometimes called "liar" loans in the business), "80/20's" (first mortgage at 80% of value, thereby avoiding private mortgage insurance), 2nd mortgage at 100% of the remaining equity- having the effect of using up all the collateral margin, but both loans being within their respective guidelines, and handily removing the only safeguard in the process. And I won't even start on all the shenanigans when the loans got "packaged" and sold into the investment market- but it was even more egregious than the making of the loans in the first place.
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Today's Featured Article - History of the Nuffield Tractor - by Anthony West. The Nuffield tractor story started in early 1945. The British government still reeling from the effects of the war on the economy, approached the Nuffield organization to see if they would design and build an "ALL NEW" British built wheeled tractor, suitable for both British and world farming.
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