The most jarring Bear Stearns story of the day isn't in Kate Kelly's amazing piece of reporting. It's on National Public Radio, of all place. Today they are telling the story of a woman called Tracy Warren, who worked for a quality-control contractor that reviewed subprime loans for investment banks before they were sold off on Wall Street.
Warren says her biggest client was Bear Stearns. But more importantly, she says that her supervisors at Watterson-Prime, a company which performed loan audits for investment banks, regularly ignored her warnings.
"The QC reviewer who reviewed our kicks would say, 'Well, I thought it had merit.' And it was like 'What?' Their credit score was below 580. And if it was an income verification, a lot of times they weren't making the income. And it was like, 'What kind of merit could you have determined?' And they were like, 'Oh, it's fine. Don't worry about it.'"
She says that about 75 percent of loans that should have been rejected were still put into the pool and sold to investment banks. Ladies and gentlemen, aim your lawsuits here.
Auditor: Supervisors Covered Up Risky Loans [NPR]
Update: Tanta at Calculated Risk wonder if Warren simply didn't understand that different mortgage pools involved different types and levels of risk.