Two Sentences that Explain the Crisis and How Easy it Was to Avoid

July 12th, 2013

Published on It’s Our Economy (first on New Economic Perspectives), by William K. Black, July 10, 2013.

Everyone should read and understand the implications of these two sentences from the 2011 report of the Financial Crisis Inquiry Commission (FCIC): 

“From 2000 to 2007, [appraisers] ultimately delivered to Washington officials a petition; signed by 11,000 appraisers … it charged that lenders were pressuring appraisers to place artificially high prices on properties. According to the petition, lenders were ‘blacklisting honest appraisers’ and instead assigning business only to appraisers who would hit the desired price targets” (FCIC 2011: 18).

Those two sentences tell us more about the crisis’ cause, and how easy it was to prevent, than all the books published about the crisis – combined.  Here are ten key implications.

  • 1. The lenders are extorting the appraisers to inflate the appraisal.
  • 2. No honest lender would inflate an appraisal, the lender’s great protection from loss.
  • 3. The lenders were overwhelmingly the source of mortgage fraud.
  • 4. The lenders were not only fraudulent, but following the “recipe” for ”accounting control fraud.”  They were deliberately making enormous numbers of bad loans.


  • 10. The U.S. government did nothing in response to the appraisers’ petition warning about the black list of honest appraisers.  The federal banking agencies’ anti-regulatory leaders’ hatred of effective regulators caused them to do nothing in response to the appraisers’ petition.  The anti-regulators did nothing for years, as the number of appraisers signing the petition grew by the thousands and surveys and investigations confirmed their warnings about lenders extorting appraisers to inflate appraisals.  The appraisers put the anti-regulators on notice about the fraud epidemic for seven years beginning in 2000.

(full text).


Chinese To Spend Billions On American Real Estate, on Forbes, by Kenneth Rapoza, July 10, 2013:  Wealthy Chinese with a few million yuan to burn will spend billions on U.S. real estate in the years ahead, according to a report released Wednesday by CB Richard Ellis, a large global real estate firm;
The United States is the country of choice for China buyers.  Canada and Australia come in next at No. 2 and No. 3 respectively …;

Profit and Investment: Does More of One Mean Less of the Other? on It’s Our Economy, by Dean Baker, July 8, 2013;

Has Education Paid Off for Black Workers? on Center for Economic and Policy Research CEPR, by Janelle Jones and John Schmitt, June 2013;

Full Report, 25 pages.

Comments are closed.