JD: Nobody ever came right out and said on the record “Jeb Bush appointed us and he’s not a big fan of government, so we didn’t do it.” One of the more telling things that one of the higher-ups at the agency told me; he said “Look, my whole career has been spent regulating guys in silk suits. These mortgage brokers, they’re not bankers. They have little storefronts. Those are guys in polyester suits.”

He said that, and that kind of summed it up for me. These were kind of white-shoe regulators, and the mortgage brokers were, you know…

TA: They didn’t want to get their fingernails dirty.

JD: Take a couple of examples. There was a guy in the story, Scott Almeida, he stepped out of prison, he was a convicted cocaine trafficker. He admitted that on his application, and he had a letter of reference from his mom and another letter of reference from a guy in the mortgage business who, by the way, ultimately was charged with $100,000 of grand theft himself.

When I talked to the regulators, they took what he sent them in his application and decided he’s okay. What they didn’t do—what any cub reporter would have done—was get the police report from the arrest. That tells you the narrative of what the guy did. Had they seen that, they never would have licensed him—they told me that. The guy was arrested with a massive amount of cocaine and a small arsenal.

There was another guy, he lied on his application about the fact that he’d been in prison for strangling his wife and throwing her in Tampa Bay. And they found out about it, but by the time they’d found out about it it was a day late, so they’re “eh, what’re you gonna do?”

TA: One thing I like was you continued to pull the thread. You started with the background checks and did some reporting and got this Almeida guy. And then recently you’ve followed him up the chain to Orson Benn (the lender, who worked for Argent Mortgage, a subprime shop bought by Citigroup last year).

JD: That was always my intention from the start—the mortgage brokers, it’s kind of retail.

Everybody knew there were some crooked brokers out there. I wanted to go up the food chain, and the first step was the regulators. I’ve never seen an agency so disorganized and just not prepared to do its job. But also, the fact of the matter was, in order for the brokers to get away with just blatantly forging documents, there had to be a banker willing to accept those and Orson Benn was just wonderful [for these guys].

He was an aggressive young guy with no real banking education who just saw if you don’t scrutinize the income statements and don’t really care that the credit report looks like it’s been cut and pasted, you can make a lot of money. And they just went wild.

TA: Who was funding him? Was he securitizing those things to Wall Street?

JD: Absolutely. In one of his statements to police they touched on it really briefly. He said when the guys from Wall Street came in to buy groups of mortgages that they would then go off and bundle, he said they actually had to pay more if they wanted to scrutinize them first. And very few people did. There was absolutely no culture of checking at Argent, the lender he worked for, which became the biggest subprime lender in the country for awhile.

TA: My operating assumption is that Wall Street saw they could package these things and make tons of fees off them and kept this meat grinder going and put pressure on down the chain. The mortgage brokers are the little guys, sort of like your…

JD: Street-level dealers

TA: …right. Street-level dealers compared to your don up on Wall Street. Is that what you saw after looking at this for a year and a half?

JD: Yeah. It absolutely is. I know from interviews all up and down the chain of the industry. The sense that I got down here was that Countrywide and IndyMac—if Countrywide was willing to accept, say, a 600 credit score, two weeks later IndyMac would come back and say 580.

Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.