A Ponzi scheme that enriched the wealthy by recording nonexistent profits…
So how did it happen that so many Americans are at risk of losing their homes? It turns out that under Bush’s watch financial regulators changed the rules of what was considered acceptable business practice. Government regulations were rewritten to say it was okay for financial lenders to claim as revenue the amount of the highest payment option for the option ARMS even if the homeowner paid the lowest amount. The changes allowed mortgage holders to record huge profits on revenue that might never be realized. James Grant of Grant’s Interest Rate Observer wrote that the negative-amortization accounting is “frankly a fraudulent gambit. But what it lacks in morality, it compensates for in ingenuity.”
This was a deliberate, fraudulent transfer of money from the working class to the wealthy.
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My wife Sue is a forensic accountant and says such financial gyrations do not meet SEC requirements for recognizing revenue, SAB 101, to be exact.
She also asks, how did they get away with it???