Draining the Swamp Continued

In early 2007, a group of Morgan Stanley bankers bundled a group of subprime mortgage instruments into a package they hoped to sell to investors.

[...]

Eventually they [...] sold the $500 million Collateralized Debt Obligation with a straight face to the China Development Industrial Bank. Within three years, the bank was suing a series of parties, including Morgan Stanley, to recover losses from the toxic fund.

[...]

Craig S. Phillips, then president of Morgan Stanley's ABS (Asset-Backed Securities) division [...] was the boss of this sordid episode, and it was his name on the [...] document that was presented to Chinese investors.

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Phillips worked in an area of investment banking that was highly lucrative and highly predatory. The basic scam in the subprime world in particular was buying up mortgages from people who couldn't possibly afford them, making those bad mortgages into securities, and then turning around and hawking those same mortgages to unsuspecting institutional dopes.

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This is just another detail in the emerging absurd narrative that is Donald Trump naming Phillips, of all people, to head up the effort to reform the Government-Sponsored Entities, Fannie Mae and Freddie Mac.

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Phillips headed a division that sold billions of dollars of mortgage-backed investments to Fannie and Freddie. Many of those investments were as bad as the ones his unit sold to the Chinese. In fact, [...] Phillips became a named defendant in a lawsuit filed by the Federal Housing Finance Authority (FHFA), which essentially charged, as the Chinese did, that Morgan Stanley knowingly sold Fannie and Freddie a pile of crap.

Morgan Stanley ended up having to pay $625 million apiece to Fannie and Freddie to settle securities fraud charges in that case.

[...]

Of those bad actors [who authored the securities scam], there is a subset of still-worse actors, who not only sold these toxic investments to institutional investors like pension funds and Fannie and Freddie, but helped get a generation of home borrowers – often minorities and the poor – into deadly mortgages that ended up wiping out their equity.

Phillips, who helped Fannie and Freddie into substantial losses and worked with predatory firms like New Century, belongs in this second category.

[...]

Donald Trump, then, has essentially picked one of the last people on earth who should be allowed to help reshape the mortgage markets.

  Rolling Stone

...but hey, do what you want...you will anyway.