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 FINANCIAL CRISIS INQUIRY COMMISSION REPORT

In , news reports were beginning to highlight indications that the real estate
market was weakening. Home sales began to drop, and Fitch Ratings reported signs
that mortgage delinquencies were rising. That year, the hedge fund manager Mark
Klipsch of Orix Credit Corp. told participants at the American Securitization Forum,
a securities trade group, that investors had become “over optimistic” about the mar-
ket. “I see a lot of irrationality,” he added. He said he was unnerved because people
were saying, “It’s different this time”—a rationale commonly heard before previous
collapses. 
Some real estate appraisers had also been expressing concerns for years. From
 to , a coalition of appraisal organizations circulated and ultimately deliv-
ered to Washington officials a public petition; signed by , appraisers and in-
cluding the name and address of each, it charged that lenders were pressuring
appraisers to place artificially high prices on properties. According to the petition,
lenders were “blacklisting honest appraisers” and instead assigning business only to
appraisers who would hit the desired price targets. “The powers that be cannot claim
ignorance,” the appraiser Dennis J. Black of Port Charlotte, Florida, testified to the
Commission. 
The appraiser Karen Mann of Discovery Bay, California, another industry vet-
eran, told the Commission that lenders had opened subsidiaries to perform ap-
praisals, allowing them to extract extra fees from “unknowing” consumers and
making it easier to inflate home values. The steep hike in home prices and the un-
merited and inflated appraisals she was seeing in Northern California convinced her
that the housing industry was headed for a cataclysmic downturn. In , she laid
off some of her staff in order to cut her overhead expenses, in anticipation of the
coming storm; two years later, she shut down her office and began working out of her
home. 
Despite all the signs that the housing market was slowing, Wall Street just kept go-
ing and going—ordering up loans, packaging them into securities, taking profits,
earning bonuses. By the third quarter of , home prices were falling and mortgage
delinquencies were rising, a combination that spelled trouble for mortgage-backed
securities. But from the third quarter of  on, banks created and sold some .
trillion in mortgage-backed securities and more than  billion in mortgage-
related CDOs. 
Not everyone on Wall Street kept applauding, however. Some executives were
urging caution, as corporate governance and risk management were breaking down.
Reflecting on the causes of the crisis, Jamie Dimon, CEO of JP Morgan testified to the
FCIC, “I blame the management teams  and . . . no one else.” 
At too many financial firms, management brushed aside the growing risks to their
firms. At Lehman Brothers, for example, Michael Gelband, the head of fixed income,
and his colleague Madelyn Antoncic warned against taking on too much risk in the
face of growing pressure to compete aggressively against other investment banks. An-
toncic, who was the firm’s chief risk officer from  to , was shunted aside: “At
the senior level, they were trying to push so hard that the wheels started to come off,”
she told the Commission. She was reassigned to a policy position working with gov-