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FCIC Should Ask Bear Stearns Execs About EMC Mortgage

Posted by Larry Doyle on May 5, 2010 12:04 PM |

Will America ever truly learn the full extent of fraudulently underwritten mortgages that lie at the foundation of our overall economic crisis?

Aside from a less than fully transparent hearing with executives from Washington Mutual, the Financial Crisis Inquiry Commission (FCIC) has not drilled down to fully expose the fraud within these mortgages. Former bank regulator William K. Black recently highlighted the pervasive nature of this fraud in an interview with Bill Moyers.

Why doesn’t the FCIC dig deeper to reveal which firms were involved with this activity?

The FCIC is not upholding its charge to fully expose the root causes of our crisis if it does not take this path. To this end, the FCIC should require Bear Stearns executives facing the music today to open the books of an outfit known as EMC Mortgage. What does this originator have to do with the crisis? EMC was owned and operated by Bear Stearns. Let’s navigate further.

How did Bear benefit from owning EMC? In short, the mortgage collateral originated by EMC provided a wholesale source of product which they in turn packaged, securitized, and distributed. For Bear executives to blame the crisis on market rumors and other weak excuses is a continuation of the shirking of responsibility by Wall Street management. Make no mistake, the core of the Bear Stearns culture was greed. That greed drove Bear’s management to allow EMC to originate some highly questionable and likely fraudulently underwritten products. Bear’s senior management was also exceptionally arrogant.

If the FCIC wants to be deemed credible, they should drill Bear on this topic. They should do the same to the crowd from Lehman in regard to its mortgage operation known as Aurora.

While topics of lax regulation, phoney ratings, excess leverage, and insufficient disclosures are all key factors in our crisis, they are secondary to fraudulent mortgage underwritings.

America needs to learn more of what was going on at EMC, Aurora, Countrywide Mortgage, Washington Mutual, and Wells Fargo Mortgage if it truly wants to understand how, why, and to what extent our country got into this crisis.


  • Mike

    so basically EMC and Aurora acted as the frontline forces for the creation of Bear and Lehman’s soon to be very toxic MBS portfolio which they offloaded to dumber investors?

    They were the ones who were handing out huge mortgages to anyone with a pulse during the boom of 04 – 07? I assume this was to make people think that EMC and Aurora had nothing to do with Bear and Lehman

    Smells awful! What is the FCIC waiting for?

    • LD


      People in the industry were very well aware of the role that EMC and Aurora played. To the general public, EMC and Aurora were unknown entities.

      The fact is Bear and Lehman ramped these efforts up to compete with the origination pipelines that were core parts of commercial enterprises at Citi, JPM, and BofA.

  • Marya

    The FCIC has a website and a contact form. I just sent them this article and your website. Of course, I gave credit to you for the information. I just pasted and copied it right on to their contact form. Oh, what fun!

    • LD


      You further inspired me and in the process your comment prompted my morning post. Thanks for the inspiration!!

  • Wolf

    So we can expand the lies by Cioffi and Tannin that not only did they package lots of 2006 subprime loans into their hedge funds, they knowingly packaged 2006 fraudulently-originated EMC loans direct from their internal Bear Stearns pipeline? If they didn’t know, someone at BS had to know…or the left hand did not know what the right was doing. Either way, what an indictment!

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