FICO Is A Four Letter Word
by
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In this book we will detail operations in the state of
The small loan companies and the pawn shops had virtually the same statutes. Of course the pawn brokers got possession of the collateral and thereby suffered very little losses as they were most conservative on their advances. A low cash to value was the order of the day. Loan companies were permitted to charge 36 percent interest on the first $150.00 dollars. Thereafter, the rate dropped to 18 percent.
Of course the banks got first shot at every potential loan. Then after being rejected the loan companies would get their chance. Bear in mind, any loan they made that turned out good was a bank mistake. But there were plenty of them as the city of
Household Finance was one of the two largest loan companies nationwide and one of the two oldest. They trained probably 80 percent (or more) of those that were employed in the industry
Maybe they were not the best loan men but they were some of the best collectors. Their discipline was second to none, not even the US Marine Corps. But if you spent a few years with them, you knew something about collecting and you knew something about obtaining information about your prospective clients. During the 50's they would do what they called nearby's, the would contact your neighbors to check your pulse. It really didn't serve any purpose. They were just stumbling around in the dark, attempting to find justification to "make" a deal. Unlike the banks they understood that new loans were the life blood of their business. Income must be generated if you wish to pay your overhead and make a profit. During this period of time a few attempts were made to devise a credit scoring model to remove human error and become more efficient. It never worked then for the same reasons it does not work now.
These problems that exist today were in vogue then. During the 60's "Atlantic Acceptance" was a loan company that surfaced. It had spectacular growth. More over its pro formas were outstanding. They had lines of credit with all of the major lenders on the east coast, not the least of being the "Ford Foundation".
No one bothered to audit this company but was granted credit based on 'who they owed'. The rationale being that if they were good enough for the big boys they were good enough for us. Then someone insisted on doing an audit that would include the branches where the loans were made and collected. This house of cards collapsed in a matter of days and I don't think there were enough assets to pay the attorneys that handled the liquidation. At that time, Boise Cascade charged off $451 million dollars.
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About the Book
THIS IS THE BOOK THAT FINALLY EXPOSES THESE CAUSES AND THE CULPRITS OF THIS SO CALLED SUB PRIME FIASCO. THIS BOOK WILL IDENDIFY BOTH THE HEROES AND THE VILLIANS. IT NAMES NAMES AND EXPLORES THE HISTORY OF CONSUMER CREDIT AND THE REASONS FOR ITS RISE AND FALL.
AND THERE IS A SMOKING GUN. IT’S THE HUNDREDS OF THOUSANDS, IF NOT MILLLIONS, OF BAD LOANS NOW OUTSTANDING. MADE ON THE PREMISE THAT CREDIT SCORES BASED ON INCOMPLETE, FRAUDULENT INFORMATION COULD SOMEHOW BE MEANINGFUL IN A POSITIVE WAY. LOANS APPROVED AND FUNDED ON THE BASIS THAT FICO SCORES HAD SOME VALIDITY AND SOME CORRELATIONS TO THE CREDIT WORTHINESS OF CONSUMERS IS A MAIN CONTRIBUTOR. THESE LOANS HAVE BEEN THE CAUSE OF LOSSES NOW REACHING FOUR TO FIVE HUNDRED BILLION DOLLARS TO THE INSTITUTIONS INVOLVED, WITH ESTIMATES OF POTENTIAL LOSSES NOW EXCEEDING AN AMOUNT OF MORE THAN ONE TRILLION DOLLARS. THIS IS THE PRIMA FACIE EVIDENCE THAT IS THE SMOKING GUN. THESE MASSIVE LOSSES AND THE BASIS UPON WHICH THEY WERE FOUNDED IS INDISPUTABLE. IN ADDITION TO THE DIRECT LOSSES OF THOSE THAT GENERATED THESE SECURITIES THERE ARE TRILLIONS OF DOLLARS THAT HAVE BEEN LOST IN THE STOCK MARKETS AS A CONSEQUENCE OF THESE ACTIONS. NOR DOES IT SEEM TO INCLUDE THE VAST LOSSES SUFFERED BY THOSE PURCHASING THE SECURITIES PAWNED OFF BY THESE HUCKSTERS.
THIS BOOK DELVES IN THE WHY AND HOW IT WAS POSSIBLE TO CRIPPLE THE GREATEST FINANCIAL SYSTEM EVER DEVELOPED. HOW GREED, IGNORANCE, INCOMPETENCE AND EVEN CRIMINAL CONDUCT BY THOSE INVOLVED HAS BEEN YEARS IN THE MAKING. THE PLAYERS WILL BE IDENTIFIED. AMONG THE MOST PROMINENT WILL BE THE CONGRESS OF THE UNITED STATES OF AMERICA. HOW AND WHY THEY WERE COMPLICIT. ALSO HONORED FOR THEIR GUILT IN COMMITTING HIGH CRIMES AND MISDEMEANORS WILL BE THE BANKS, THE INVESTMENT BANKS, THE STOCK BROKERS, LOAN BROKERS, THE HEDGE FUNDS AND ALL OF THE OTHER CO-CONSPIRATORS
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AS THEIR PARTICIPATION IS EXPOSED AND ANALYZED, IT WILL EXPOSE THE PART PLAYED BY THE RATING AGENCIES. MEANING THE NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATIONS OR NRSRO’S SUCH AS FITCH, MOODYS AND STANDARD AND POORS. THEIR FAILURE TO PERFORM ADEQUATE DUE DILIGENCE CAN BE QUESTIONED AS TO TOTAL INCOMPETENCE OR FRAUDULENT INTENT. OF COURSE THEY CAN ALL BLAME THE CREDIT REPORTING AGENCIES OF TRANSUNION, EQUIFAX AND EXPERIAN. THEIR REPORTS ARE BASED UPON THE FICO SCORES WHICH HAVE BECOME THE GOLD STANDARD IN THE PAST TWENTY YEARS AND THE VALUE OF WHICH IS OBVIOUS FROM THE RESULTS NOW IN. THIS IS THE FOUNDATION UPON WHICH THIS HOUSE OF CARDS RESTED. A HISTORY OF CREDIT WILL BE INCLULDED. IT WILL SUMMARIZE ALL THE DETAILS EXPLAINIG HOW HOME OWNERSHIP AND RELATED BENEFITS BECAME ONE OF THE STRONGEST, MOST VITAL SEGMENTS OF OUR ECONOMY. THE DETAILS WILL GIVE RECOGNITION TO THE GROWTH AND DEVELOPMENT OF REAL ESTATE MORTGAGES AND HOME BUILDING AND HOW IT BECAME SUCH A FORCE IN THE ECONOMY.
THEN THE ROOT CAUSE OF THE DAMAGES INFLICTED BY THE CHARLATANS, THE MANIPULATORS, THIEVES AND SCOUNDRELS, POSING AS HONEST, LEGITIMATE BUSINESS PERSONS WILL BE EXPOSED FOR WHAT IT REALLY IS. IT WILL EXPLAIN HOW THE ACTS OF CRIMINALITY BY THESE UNSCRUPULOUS VIPERS AND THEIR ENABLERS TORE DOWN THE BULWARK. FOR A FEW PIECES OF SILVER, THEY LET THE INCOMPETENT, THE CRIMINALS RUN RAMPANT TO DESTROY THE GREATEST FINANCIAL SYSTEM EVERY CONCEIVED OR CREATED. THE DAMAGES CONTRIBUTED BY THE UNITED STATES CONGRESS WILL BE EXPOSED. HOW THE GLASS STEAGAL ACT AND THE SAFEGUARDS IT PROVIDED WERE REMOVED WILL BE HIGHLIGHTED.
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