U.S. Banks Bulk Up Mortgage Departments

The Financial Times reports that major American banks and mortgage lending institutions, having suddenly discovered that gambling takes place in their casinos, have embarked on a hiring binge. Their goal is to bulk up their mortgage lending departments, so that inconvenient details, such as accurate documentation, are properly handled by qualified personnel.

This curious development comes on the heels of certain banks' statements that they had all the mortgage experts they needed. Those assertion now appears in play. (For more on how both political parties were notably absent from expressing election year dismay over Foreclosuregate, read Francesco Guerra's FT piece.)

As the mortgage scandal unfolds, its unsavory narrative is akin to bad news that only gets worse. One incredible aspect of the mortgage story involves the qualifications one needs to become part of certain institutions' mortgage team. This excerpt from the FT story sums up this sorry situation:

A posting for a bankruptcy document preparation expert on the website of Everbank, a financial services company based in Jacksonville, Florida, describes a job opening: “Provide temporary relief to the document execution team. Access various systems and print out supporting documentation necessary for the signing officer to review, thus enabling them to attest to personal knowledge of loan status....”

Everbank said that all new employees are required to go through formal training and that on any given day it posts more than 100 job openings.

Most of these jobs are lower level and require no more than high school diploma, according to advertised listings. Mr. Bove said that banks have a good reason for not wanting to talk about their hiring plans. “Saying you are hiring is the same as admitting you have a problem,” he said.

Wells Fargo's Mortgage Market "Oops"

Wells Fargo announced it planned to "correct and resubmit" 55,000 documents that, if competently used, would get many homeowners The New York Times story expresses skepticim toward the Wells Fargo line.

The significance of the story is that Wells Fargo's stonewalling broke down. It had been the last major bank to try to dodge and weave through the housing crisis. The story seemed to have its own life, with Wells' heaping on the denials while other banks waved the white flag.

The photo shows a Wells Fargo strong box from a very different time.

Rogue Traders

A French court passed sentence today on so-called rogue trader Jerome Kerviel, whose unauthorized trades supposedly put the august French financial institution Societe Generale (Soc Gen) in jeopardy of financial collapse. The former trader was convicted of forgery, breach of trust, and unauthorized use of computer systems. He received a prison sentence and a fine of nearly five billion Euros. That's right -- billion.

The sentence, the fine, the accusation should be considered in light of Soc Gen's reputation as masterful derivative traders, skilled risk takers, and core members of the French power structure. It is extremely unlikely that an institution with a disposition toward firm control, such as Soc Gen, would have let a rogue trader run wild for a couple of years. When things were good for Soc Gen and its rogue, the bank made billions from his trades. When events challenged Soc Gen's business, Kerviel became a convenient fall guy.

The severe fine was precisely levied to send a message to French society: the elite can pretty much get away with anything. This warped ethic is not unique to France. Recently, a judge in the United States (clearly a rogue in his own way) compelled a mortgage company to produce appropriate documentation relating to foreclosures. The firm couldn't do it. The case expanded, and we now understand that the American mortgage business, already battered from the subprime catastrophe, has again displayed a breathtaking embrace of corrupt practices. A significant number of homeowners were booted from their homes, while the court system provided easy, no-questions-asked process that essentially mocked the rights of those whose homes were being foreclosed. Now, thanks to a "rogue" judge, that process has been temporarily halted, with members of Congress now asking the Department of Justice to investigate "irregularities" committed by Ally, J.P. Morgan Chase, and other firms.

The American housing disaster includes many elite institutions where "the best and the brightest" work. The episode should be a source of shame for those trained to lead. Instead, they have been absolutely brilliant at shamelessly exploiting retail customers while arrogantly harming the financial fabric of our country. However, the American elite will soon show their French peers that they, too, can find fall guys for their fiscal folly and their degradation of even minimal moral business standards. After all, people need to get the message that crime doesn't pay.