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JUNE 11, 2008
JPMORGAN’S ‘CHEATS &
TRICKS’ – by Jim Hightower
To understand today's
current mortgage crisis and spreading recession, look to an internal
memo from Wall Street banking giant, JPMorgan Chase. For something that
ended up so badly, the memo begins with a fun title: ‘Zippy Cheats &
Tricks.”
The Cheats & Tricks
document, written on corporate letterhead, is addressed to the broad
network of mortgage brokers associated with Morgan. The memo tells these
brokers how to get risky, sub-prime loans okayed by “Zippy,” which is
the bank's in-house automated loan-approval system. In the days of the
housing boom, Morgan executives clamored for brokers to bring in more of
these loans, because they could be packaged and sold at high profits to
wealthy investors.
However, many of the
homebuyers being hustled to take those sub-prime loans had low incomes,
no assets, and little prospect of being able to keep up their payments.
Normally, the Zippy approval system would reject their applications,
unless cheats & tricks were brought into play. The memo tells brokers to
falsify the income numbers on the borrower’s application: "Inch it up
$500 [per month] to see if you can get the findings you want,” the memo
gaily urges. Since it was bank policy not to bother verifying the income
and asset information, these bad loans zipped right through Zippy,
brokers collected their fees, Morgan made millions in sub-prime profits,
and all was right with the world –- until financially strapped borrowers
began to default in droves.
Of course, JPMorgan
honchos have disowned the Cheats & Tricks memo as the work of some
unnamed rogue operator. But the top executives can't hide. They're the
ones who created the whole sub-prime con-game, who put loan volume ahead
of loan quality, who chose not to verify, who set the ethical tone, and
who put their own greed ahead of the interests of their customers and
their country.
--
For more information on Jim Hightower’s
work – and to subscribe to his award-winning monthly newsletter, The
Hightower Lowdown, visit
www.jimhightower.com -- A photo of Jim Hightower is available at:
www.minutemanmedia.org
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