CFO.com reports about the mortgage industry’s poor management using New Century Financial’s collapse as an example. The U.S. bankruptcy court’s report paints a ridiculous picture of a company and industry that is out of control:

….a company infected with a corporate culture much like that of other subprime lenders — a culture that “encouraged production, sales, and growth,” except that it further emphasized beating the competition for business. “New Century had a brazen obsession with increasing loan originations, without due regard to the risks associated with that business strategy,” the report said, noting that originations soared from $14 billion to $60 billion between 2002 and 2006. The report analyzes numerous cases of how it “made frequent exceptions to its underwriting guidelines for borrowers,” lighting the fuse for the “ticking time bomb that detonated in 2007.” Early that year, New Century collapsed into one of the nation’s largest finance-company bankruptcies. And in that sense the report offers a vivid case study illustrating elements of the whole industry’s plunge.

KPMG was their accountant who did nothing while the collapse occurred:

But it was the underpinning in its poor accounting decisions — and KPMG’s failure to challenge them — that provide the primary colors on the canvas. According to the report, lower-level KPMG employees were frequently reversed by higher-ups, apparently fearful of losing the account.

Can you believe this? It supports my contention that we must pass laws regulating credit rates and practices in order to protect our economy and millions of people who suffer from what should be illegal activity.

What do you think?

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