Com­ment: In FTR #690, we exam­ined indi­ca­tions that the mys­te­ri­ous Roland Arnall–“the John­ny Apple­seed of subprime”–may well have been an oper­a­tive for the Under­ground Reich and the Bor­mann cap­i­tal net­work. The dam­age done to Amer­i­ca by the finan­cial col­lapse pre­cip­i­tat­ed by the sub­prime cri­sis could not be exag­ger­at­ed.

How­ev­er, what­ev­er harm the Nazis have done and can do to our econ­o­my and our soci­ety is pred­i­cat­ed on a will­ful blind­ness on behalf of those over­seers who have  “over­looked” the obvi­ous.

An inci­sive op-ed piece from The New York Times demon­strates that the dev­as­ta­tion could have been pre­vent­ed.

“I Saw the Cri­sis Com­ing. Why Did­n’t the Fed?” by Michael J. Bur­ry; 4/4/2010.

Alan Greenspan, the for­mer chair­man of the Fed­er­al Reserve, pro­claimed last month that no one could have pre­dict­ed the hous­ing bub­ble. “Every­body missed it,” he said, “acad­e­mia, the Fed­er­al Reserve, all reg­u­la­tors.”

But that is not how I remem­ber it. Back in 2005 and 2006, I argued as force­ful­ly as I could, in let­ters to clients of my invest­ment firm, Scion Cap­i­tal, that the mort­gage mar­ket would melt down in the sec­ond half of 2007, caus­ing sub­stan­tial dam­age to the econ­o­my. My pre­dic­tion was based on my research into the res­i­den­tial mort­gage mar­ket and mort­gage-backed secu­ri­ties. After study­ing the reg­u­la­to­ry fil­ings relat­ed to those secu­ri­ties, I wait­ed for the lenders to offer the most risky mort­gages con­ceiv­able to the least qual­i­fied buy­ers. I knew that would mark the begin­ning of the end of the hous­ing bub­ble; it would mean that prices had risen — with the expan­sion of easy mort­gage lend­ing — as high as they could go.

I had begun to wor­ry about the hous­ing mar­ket back in 2003, when lenders first res­ur­rect­ed inter­est-only mort­gages, loos­en­ing their cred­it stan­dards to gen­er­ate a greater vol­ume of loans. Through­out 2004, I had watched as these mort­gages were offered to more and more sub­prime bor­row­ers — those with the weak­est cred­it. The lenders gen­er­al­ly then sold these risky loans to Wall Street to be pack­aged into mort­gage-backed secu­ri­ties, thus pass­ing along most of the risk. Increas­ing­ly, lenders con­cerned them­selves more with the quan­ti­ty of mort­gages they sold than with their qual­i­ty.

Mean­while, home buy­ers, con­vinced by recent his­to­ry that real estate prices would always rise, read­i­ly signed onto what­ev­er mort­gage would get them the biggest house. The incen­tive for fraud was great: the F.B.I. report­ed that its mort­gage fraud case­load increased five­fold from 2001 to 2004.

At the same time, I also watched how rat­ings agen­cies vouched for sub­prime mort­gage-backed secu­ri­ties. To me, these agen­cies seemed not to be pay­ing much atten­tion. . . .