The Broker Who Called the Crisis and Was Ignored

Watch this video, published on the Real News Network, 9.46 min, last updated: October 10, 2010:
Michael Blomquist: From 2003 I wrote letters, made calls, even filed a lawsuit but nobody listened.

WASHINGTON — Former Treasury Secretary Henry Paulson, Federal Reserve Chairman Ben Bernanke and other top government officials have said they didn’t notice the dangers that Michael Blomquist saw in the runaway California housing market until five years after he did … //

… Over the next four years, Blomquist futilely tried to dissuade clients and friends from putting their life savings into pricey homes. He wrote letters warning federal regulators and members of Congress that mortgage fraud was creating “a perfect storm” in the housing industry. 

Acting as his own attorney, he even waged a federal court fight against some of the biggest subprime players, as well as Paulson and other top federal regulators, accusing them of conspiring to fraudulently inflate home prices and asking the court to bar the issuance of one widely used type of risky mortgage.

Responding to Blomquist’s letter on Sept. 1, 2005, Democratic Sen. Dianne Feinstein of California assured him that she was “monitoring the situation closely.” Suzanne Killian, an assistant director of the Federal Reserve’s consumer unit, advised him later that month that his concerns would be considered.

In the end, however, his warnings brought no serious action until the bubble began to burst.

Did Blomquist, with his inside view of the market, have a better understanding than did Bernanke and his predecessor at the Fed, Alan Greenspan, who failed to rein in subprime mortgage lenders? Could Blomquist, with a two-year college degree, have a better grasp of the danger than did Paulson, who oversaw Wall Street giant Goldman Sachs’ investment in subprime mortgage securities and was the treasury secretary when the market crested?

That’s hard to know … (full text and Video Transcript).

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