Battle Of Lawyers!

Market Ticker - Karl Denninger...
This promises to get amusing; two headlines:

"Countrywide sues AIG unit over its failure to cover loan losses"

and

"AIG Sues Countrywide for Misrepresenting Mortgages"

You can't make stuff like this up; here's a few choice quotes from both stories (you match 'em!)

Eggert added, "Here Countrywide displays a huge amount of chutzpah because it's suing because its loans went bad, and it claims United Guaranty should have done better underwriting, when it's the failing of underwriting by loan originators that got us into this stuff."

United Guaranty said in the complaint that it had reviewed loan files that showed that most mortgages covered by 11 policies for asset-backed securities were either underwritten in violation of Countrywide’s own guidelines or contained defects, such as missing documents, misrepresented credit scores or false social security numbers.

You just have to chuckle at the "ready fire AIM!" chutzpa here.

Never mind the obvious appearance of bribery found in this nugget:

Countrywide was also a focus of attention Thursday in Washington, where Rep. Darrell Issa (R-Vista) released a 63-page report detailing the company's practice of giving discounted mortgages to influential people, particularly key lawmakers, staffers and other government officials.

No really? I wrote about this when it first came to light.  You don't think that Countrywide was perhaps "buying" a little willful blindness, do you?

There's nothing particularly wrong with issuing no-documentation "I don't care about credit quality" loans, provided you don't lie about what you're doing - to anyone!  That is, if investors are willing to buy unrated paper (you can't rate a loan without knowledge of what you underwrote, and if the answer is "I didn't" then it is NOT POSSIBLE to rate the deal) with full knowledge that someone working at WalMart may have claimed a $300,000 income, that's fine.  The free market will dole out reward (or harm) as it should.

But when you have people claiming that these loans were "underwritten" when in fact no such thing happened - there were either blanks on the forms or worse, blatant falsehoods, that's a major problem and people will get defrauded - that is, ripped off - and they did.

Quite some time ago I said that I wished there was a way to go long lawyers, because this entire mess would be the lawyer's full employment act for the next decade. 

It appears that we're just getting started in this regard.


Market Ticker - Karl Denninger...