How to make money as an investment bank, part 2

This one comes courtesy of JP Morgan Chase. Have employees that figure out how to game your automated mortgage approval system (Zippy), by following these simple steps, described in a leaked internal email called "Zippy Cheats &

1. Lump all of an applicant's compensation as the applicant's base income, rather than breaking out commissions, bonuses and tips.

2. Do not disclose use of gifts for down payments.

3. If all else fails, simply inflate the applicant's income. "Inch it up $500 to see if you can get the findings you want. Do the same for assets.

The story was first broken by The Oregonian, and further described in The Big Picture:

Anyone with even a modicum of experience in the mortgage industry will confirm the rampant disregard for lending standards and the corner cutting and shortcuts that were all but official corporate policy during the boom years. There was headlong rush to originate, process and securitize mortgages -- and the ability to repay the loans be damned. (Predatory Borrowing my ass!)

Exactly how deeply this attitude was in the business of making loans was revealed by this memo.


It provides a rare glimpse into the corporate mentality that has been a key factor in the current mortgage crisis. (A Chase spokesperson denied that Zippy Cheats & Tricks was official policy; thus we are reassured that this was only "unofficial policy).

Reminds me of the dotcom era fraud. In both cases, the heady euphoria of a bubble led to corner cutting and fraud. it's a good warning to be careful about investing in something new and exciting until more sober heads are prevailing. Unless you plan to get out before everyone else - and let the devil take the hindmost.

Share this