Totally agree, Russell. Most people didn’t realize what they were getting into, and fraud (or “fudging”, if you will) was so pervasive that it was more or less considered acceptable practice. “Everybody’s doing it”, as they say.

But, since analyst’s argument is legal and not moral, we can take that line to its logical conclusion. Many mortgage brokers should probably be in jail, if law was to be followed. Some borrowers, too. And a lot of other people up and down the chain. You know, those loan documents have quite a few dotted lines to sign on, for all parties involved. I remember a post by Tanta at CR, long ago, about “representations and warranties”. Every party in the chain makes “representations and warranties” to the next party that the loan docs are basically sound. The borower promises the mortgage broker that he didn’t lie, the broker promises the mortgage lender, the lender promises the Wall Street bank, and the Wall Street bank promises the final bagholder investor. If fraud is found, each party supposedly is entitled to shove the loan back down the chain or to sue the party preceding it, down to the borrower. But, in the go-go days, nobody really gave this a thought, it was only CYA fine print. As Tanta said, people didn’t give any more thought to the possibility of being sued that they did to the possibility of house prices falling.