Credit Suisse Documents Point to Mortgage Lapses
By GRETCHEN MORGENSON, The New York Times
MARCH 9, 2014
The documents are noteworthy because Credit Suisse, unlike many other major banks, has refused to settle large lawsuits stemming from the mortgage crisis. The bank has long maintained that its operations were held to a high standard and that the mortgage investments it sold lost value largely because of the broad housing collapse, rather than its practices.
During the housing boom, Credit Suisse was a fairly big player, bundling $203 billion worth of mortgages into securities that it sold to private investors between 2005 and 2007. By comparison, Countrywide Financial, a more prominent mortgage lender, sold $277 billion of those securities during that period.
But the Swiss bank has come under the microscope in recent months. In late February, four of its top executives, including Mr. Dougan, testified before Congress about the bank’s involvement in helping United States citizens hide money overseas and avoid taxes. Mr. Dougan contended that only a handful of bank employees were involved in the questionable activities and that Credit Suisse had improved its compliance. And last year Kareem Serageldin, a former mortgage trader at Credit Suisse, was found guilty of hiding more than $100 million in mortgage bond losses at the bank by inflating the bonds’ value as the housing market collapsed. He was sentenced to two and a half years in prison.
Also included in the legal filing was a script circulated via email among executives at the Credit Suisse mortgage unit in June 2006. The script, describing mortgage lending, is based on the “You can’t handle the truth” courtroom scene between Jack Nicholson and Tom Cruise in the film “A Few Good Men.”
In the script, the role played by Mr. Nicholson is changed to that of a loan officer challenging an underwriter who is questioning the quality of his loans.
“You scoff at sales divisions and you curse our lucrative incentives, commissions and bonus plans,” the script reads. “You have that luxury. You have the luxury of not knowing what we know: that while the cost of business results are excessive, it drives in the loans. And my very existence, while grotesque and incomprehensible to you, drives REVENUE! You don’t want to know the truth because deep down in places you don’t talk about at staff meetings … you want me on that sales call. You NEED me on that sales call.”