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Whistleblower: Wall Street Has Engaged in Widespread Tampering of Mortgage Funds

propublica.org

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Re: Whistleblower: Wall Street Has Engaged in Widespread Tampering of Mortgage Funds

#41

Post by eli_gottlieb »

lotsofpulp wrote: post #36
rapind wrote: post #34

Earlier quoted context omitted.

The first step is to stop bailing out all this fuckery. Look at your politicians stance on wall street bailouts.

And then look at all the voters’ stances when they find out their 401k don’t look so great, or when their governments have to raise taxes to pay for pensions since the pension fund isn’t worth much.

Voter here. It's not just that I'm willing to subsist on dog kibble in 35 years to see most of Wall Street go to jail. It's that I'm willing to make that trade this year. If you founded a political party whose platform was "fuck Wall Street in every way possible, and damn the consequences", I think most of my generation would vote for that.

Re: Whistleblower: Wall Street Has Engaged in Widespread Tampering of Mortgage Funds

#42

Post by wnmurphy »

code4tee wrote: post #14

This makes complete sense and there’s no question commercial restate is turning into a bit of a house of cards. In some big cities you have many large buildings where their primary tenant was WeWork, which appears to be imploding, and now adding onto that the whole covid WFM shift where companies are starting to cancel and downsize future leases. When you start to dig into the revenue streams behind these buildings a…

Commercial real estate is going to be really interesting to watch. For a lot of mid-size companies, the building lease is 15% of your total operating expenses.

Re: Whistleblower: Wall Street Has Engaged in Widespread Tampering of Mortgage Funds

#43

Post by lotsofpulp »

eli_gottlieb wrote: post #41
lotsofpulp wrote: post #36

Earlier quoted context omitted.

And then look at all the voters’ stances when they find out their 401k don’t look so great, or when their governments have to raise taxes to pay for pensions since the pension fund isn’t worth much.

Voter here. It's not just that I'm willing to subsist on dog kibble in 35 years to see most of Wall Street go to jail. It's that I'm willing to make that trade this year. If you founded a political party whose platform was "fuck Wall Street in every way possible, and damn the consequences", I think most of my generation would vote for that.

It would be nice if people who thought that came out and voted (skewing towards younger population). Obviously, a larger portion of the older population who do have their wealth tied up are not going to be a fan, and they tend to be the ones with the funds and votes to dictate political discourse.

Re: Whistleblower: Wall Street Has Engaged in Widespread Tampering of Mortgage Funds

#44

Post by code4tee »

PEJOE wrote: post #24

Wait until Propublica learns that lenders are underwriting based on pro-forma forward Adjusted EBITDA net leverage, not past EBITDA leverage. The whole idea of Adjusted EBITDA is insane to me. We add back "one-time," expenses and other items, but the underlying business ends up seeing similar "one-time," costs every year. The result is that companies often borrow at a leverage ratio that looks 30% smaller than it act…

The bogus Adjusted EBITDA metrics popular with financially unhealthy startups and others really does need to stop.

In most cases these metrics may as well just say “Hey, if for a moment you ignore all the things about our business model that make it unsustainable our finances look quite good! Ain’t that cool.”

Of course the creative accounting that goes into these things tries to say they’re just “one time” expenses and other factors that justify ignoring these costs but of course most companies that play these games seem to have tons of “one time expenses” every quarter so...

Re: Whistleblower: Wall Street Has Engaged in Widespread Tampering of Mortgage Funds

#45

Post by huac »

JoeAltmaier wrote: post #39

This will continue as long as human beings are in the loop. If it were automated, code-reviewed and made secure we might have a system that could follow the rules.

I agree. We need real estate that is only inhabited by data centers or automated pizza machines, no humans in the loop at all, not even paying rent.

Re: Whistleblower: Wall Street Has Engaged in Widespread Tampering of Mortgage Funds

#46

Post by css »

PEJOE wrote: post #24

Wait until Propublica learns that lenders are underwriting based on pro-forma forward Adjusted EBITDA net leverage, not past EBITDA leverage. The whole idea of Adjusted EBITDA is insane to me. We add back "one-time," expenses and other items, but the underlying business ends up seeing similar "one-time," costs every year. The result is that companies often borrow at a leverage ratio that looks 30% smaller than it act…

There is nothing wrong with that if the banks are allowed to fail when the loans don’t pan out. Underwriting is supposed to be about managing risk, not completely avoiding it. The problem isn’t the analysis, rather it is not letting banks absorb the consequences of being wrong.

> The whole idea of Adjusted EBITDA is insane to me.

The straitjacket bank regulators have placed around the ability of banks to go outside of the government defined process of evaluating credit-worthiness doesn’t help. The rules (mainly FDIC insurance requirements) make it near impossible for many companies to get loans. This problem incentivizes companies to play games to get around the crazy restrictions.

This is also why there is an emerging trend of non-traditional lenders (e.g. some VCs and PE firms). I’m sure the government will find a way to regulate them eventually.

> This year we are doing "COVID-19" addbacks.

What’s wrong with that? Ability to repay is based on expected future cash flows. If COVID losses are believed to be non-recurring (a big if), then that makes sense.

Re: Whistleblower: Wall Street Has Engaged in Widespread Tampering of Mortgage Funds

#47

Post by caseysoftware »

wpietri wrote: post #16
jl2718 wrote: post #6

It’s sort of amazing how easy and widely accepted it is to submit, under oath, completely different corporate financial attestations depending on whether you are dealing with the IRS, the SEC, or FINRA. I can imagine 50 years ago, when they all got the ability to check electronically, and knew that everybody was cheating, but they couldn’t do anything because it would it would crash the economy, and also these comput…

My understanding is that after 9/11, a lot of federal law enforcement resources got retasked away from white collar crime and just never went back. And I think it's part of a general decline in interest in holding people with money to account; in the 1970s, the IRS used to audit 2.5% of returns. Now that's down to 0.45% and falling. This makes a fair bit of sense when you look at who has influence with legislators an…

I think you're right that it's about financialization. As an economy gets more focused on "moving money" as value creating versus creating as value creating then anything that adds costs (delay, taxes, risks) to that movement should be reduced and eliminated.

In the meantime, even now the primary target of those audits are the upper middle class. People who have enough that it's worth taking but not enough to defend themselves effective.. via legitimate or illegitimate means.

Re: Whistleblower: Wall Street Has Engaged in Widespread Tampering of Mortgage Funds

#48

Post by alexpetralia »

This is in part due to a search for yield (same as we saw with the housing crisis). There is such a glut of capital that it will invest in anything - even risky CMBS - without performing adequate due diligence. If you don't invest, someone else will. Unfettered "quantitative easing" distorts the price of risk. This is the not-so-surprising consequence.

Re: Whistleblower: Wall Street Has Engaged in Widespread Tampering of Mortgage Funds

#49

Post by anthony_r »

PEJOE wrote: post #24

Wait until Propublica learns that lenders are underwriting based on pro-forma forward Adjusted EBITDA net leverage, not past EBITDA leverage. The whole idea of Adjusted EBITDA is insane to me. We add back "one-time," expenses and other items, but the underlying business ends up seeing similar "one-time," costs every year. The result is that companies often borrow at a leverage ratio that looks 30% smaller than it act…

I present you - the EBIDTAC coffee mug: https://www.zazzle.com/ebitdac_mug-168211177356617433

It only gives brownie points if you purchased it before the blowup!

Re: Whistleblower: Wall Street Has Engaged in Widespread Tampering of Mortgage Funds

#50

Post by runawaybottle »

JoeAltmaier wrote: post #39

This will continue as long as human beings are in the loop. If it were automated, code-reviewed and made secure we might have a system that could follow the rules.

These people bet on bets. They will abstract the automation in some way as a financial instrument.

Or make automation that abstracts on top of the automation.

Finance is just dirty.

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