The Con, We Were All Sold a LIE
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The Con, a 5 part docu-series premiering August 5, 2020 at 8pm EDT, is an in-depth investigation into the 2008 financial crisis nine years in the making. Through interviews with regulators, former officials, foreclosure victims, industry whistleblowers, and journalists, THE CON connects the dots to what America used to be and where we’re headed in 2020, as nearly 40 million Americans are currently claiming unemployment. Stay tuned for a live conversation with the filmmakers and voices from THE CON after the screening.
William Black: “Most things viewers “know” about the Great Financial Crisis (GFC) are false…. The GFC was not a “subprime” crisis. The twin appraisal fraud and liar’s loan fraud epidemics caused the GFC.
In nearly every case, it is lenders and their agents (principally loan brokers) that extorted appraisals to inflate dramatically reported home values. They did so by blacklisting honest appraisers. The borrower does not hire the appraiser and can virtually never inflate it. By 2006, 90% of appraisers reported pressure to inflate appraisal values that year, up from 60% in 2003.
No honest home lender would ever inflate, or permit loan brokers to inflate, the appraisal value because it is the lender’s great protection from loss. Massively, and extensively inflating reported home prices optimizes elite bank CEOs’ fraud and predation schemes.
The Con is the first documentary to introduce viewers to one of the most important principles of economics, white-collar criminology, and effective regulation – the “Gresham’s” dynamic. Epidemics of appraisal fraud are classic examples. George Akerlof, a Nobel Laureate in Economics (2001), created the term in 1970 in one of the most famous and influential economics articles. He used the term to describe the results when unethical CEOs gain a competitive advantage by cheating. Market forces then become perverse and bad ethics drives good ethics from the markets. The Con shows how elite financial CEOs created such perverse dynamics in appraising, auditing, loan brokerage, and credit rating. The goal, which they achieved, was to aid their fraud and predation efforts.
A liar’s loan is a loan in which the bank CEO chose not to verify the borrower’s income. Regulators always warned against making such loans. The purpose of liar’s loans is to inflate massively and in huge numbers borrowers’ reported income. To state what should be obvious – this makes zero sense if the (fictional) CEOs’ goal was making loans to the poor to satisfy (nonexistent) Community Reinvestment Act (CRA). Inflating borrowers’ income dramatically would be a nonsensical means of proving that your bank was lending to the poor. “Shadow” financial sector lenders not subject to the CRA made the overwhelming bulk of liar’s loans. Those “Shadow” lenders overwhelmingly sold their liar’s loans in the secondary market to Shadow sector firms not subject to the CRA.
Bank CEOs loved liar’s loans because their loan brokers and loan officers used to them to inflate borrowers’ income, which maximized the CEOs’ bonuses. The fraud incidence on liar’s loans was 90% according to the lenders’ own anti-fraud experts.”
— The Con (@TheConSeries) July 27, 2020