We keep trying to figure out just what caused the mortgage meltdown and credit crisis, and one might very well ask,
“Didn’t anyone know what was going on? Did anyone ask? Did anyone care?”
The truth is – many of us did. And were ignored.
When I say here we go again, it’s because it doesn’t seem we’ve learned. Allowing Fannie and Freddie to go down that path yet again – by loosening credit standards and mortgage restrictions may well cause another credit avalanche.
Perhaps you’ve heard my story before. I was the Business Chief underwriter at Citimortgage, a subsidiary of Citigroup. My job was to oversee the credit quality of $90 billion of mortgage loans, which had been purchased by Citi from mortgage companies and banks. Many of these loans were sold to Freddie Mac and Fannie Mae – which were ultimately put into conservatorship with the Government.
I noticed that over 60% of these loans did not meet accredited guidelines. I attempted to warn everyone in my business unit that Citi had a serious problem with these mortgage loans. That problem eventually escalated from 60% to 80% of these loans not meeting quality standards, and thus they were defective. Yet, I was ignored.
After attending a UT-Dallas Institute for Corporate Governance seminar, and listening to Michael Oxley, one of the key writers of Sarbanes-Oxley, I realized I had no ethical choice but to take further action regarding the continued ignoring of the warnings I kept sending about the extreme shareholder risk. Yet, while investigations proceeded, little to nothing was done. My complaints were given little to no attention.
Well you know the rest of the story.
I took further action and blew the whistle on Citi, warning the board of directors of the potential losses and even asking for an outside investigation. The outcome? I was relieved of my responsibilities – and today I’m no longer with Citi.
The McCuistion Program, featured a story on whistleblowing and I was honored to be a guest, along with Dr. Wayne Shaw, Helmut Sohmen Distinguished Professor of Corporate Governance; KPMG Institute for Corporate Governance at Southern Methodist University.
Wayne Shaw was not surprised by my story. According to Wayne, most people who take this step usually lose their jobs and are shunned. They are often not able to get work in their former industry again.
Ultimately, becoming a whistleblower is a choice – and one with, perhaps, heavy consequences. Yet, the ultimate question may be one of personal integrity.
If something is wrong, do you keep quiet so as to protect yourself?
Or stand up and take the risk – knowing you are doing the right thing?
How about you? What would you do? Please leave your thoughts in the comments below.
See the video at:
McCuistion TV: Whistleblowers: Inside the Mortgage Meldown
Pictures courtesy of Niki McCuistion. Used with permission.
Richard Bowen is widely known as the Citigroup whistleblower. As Business Chief Underwriter for Citigroup during the housing bubble financial crisis meltdown, he repeatedly warned Citi executive management and the board about fraudulent behavior within the organization. The company certified poor mortgages as quality mortgages and sold them to Fannie Mae, Freddie Mac and other investors.
