From the Wall Street Journal, no less. (Their investigative reporting remains excellent even as neanderthals lumber across their editorial page. Lest we forget, it was WSJ that broke the Enron story. Two of their reporters went digging and said, whoa, these numbers do not add up.)
Twelve years ago, Lehman Brothers Holdings sent a VP to look into making loans to First Alliance Mortgage Co. The VP reported back that First Alliance was 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.’ ”
Lehman apparently left their ethics out the door too, as they loaned First Alliance $500 million, then sold $700 million in bonds backed by the loans. The company cratered and a federal jury found that Lehman “helped First Alliance defraud customers.”
So why would investment banks knowingly back such risky loans? “Because most of the risks that loans would go bad were passed to investors.” Once the loans were packaged as bonds and sold, the investment bank had little or no exposure left. Should the loans go bad, well that would be someone else’s problem, because they were making millions.
It has always astonished me that the vilest of editorial pages outside (so far) of Murdoch still manages to produce world-class news stories. But such is the Wall Street Jouranl which, despite its limited coverage, probably unearths and reports pound for pound more hard news than any other newspaper in the country. (You would be aghast, Bob, to see the rapid decline of the LA Times since you left.)
Even the editorial pages (as opposed to the editorials) of the WSJ often amaze and astound. Before the ill-conceived expedition into Iraq was launched–back in 2002, I think–Brent Scowcroft wrote an opinion piece on the editorial page that accurately predicted exactly what happened. For the most part, however, the editorial pages should be avoided by people with any conscience whatsoever, lest they develop stroke-level blood pressure after reading the calumnies and lies that are what pass as “opinion” on the right.