Not to belabor this, but it needs to be pointed out that this work in an academic forum meshes perfectly with so much of the data that has been bobbing to the surface since we’ve all moved on from the crisis to cover the Whale, Libor, and various other financial-industry disasters.

The lawsuits brought by Fannie and Freddy’s conservator, the Federal Housing Finance Agency, against Goldman, JP Morgan, Bank of America, and practically every other brand name in finance, are a treasure trove of data similar to the Columbia study.

Here are just a few bits of data (among thousands) from a suit against Merrill Lynch that shows that when Merrill told the buyer loan-to-value rates underlying a security was 80 percent or less, there was a good chance it was a misrepresentation, and that as much as 18 percent of the time, there was no equity in the house at all. This is just a scrap of one table in one suit:


As Barry Ritholtz wrote last December, it’s easy to see why plaintiffs are getting traction in the legal war.

Add these to a few of the other important ratios we’ve heard. Richard Bowen, one of Citigroup’s top underwriters, famously warned Robert Rubin (yes, that one) in November 2007 that the bank’s Quality Assurance department was turning up an inordinate number of loans that either “fell outside of policy criteria” or had documents missing.

“QA for recent months indicates that 80% of these files fell into the category.”

Then there’s the 2007 under-appreciated epic study by The Wall Street Journal’s Rick Brooks and Ruth Simon that found that more than 60 percent of subprime loans in 2006 went to people who actually had prime credit, FICO scores of 620 or higher.

And this obviously just a few bits of the trash continent that has bobbed to the surface since the crisis. Just imagine what will come with more time and study.

The crisis narrative can only go in one direction.

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Dean Starkman Dean Starkman runs The Audit, CJR's business section, and is the author of The Watchdog That Didn't Bark: The Financial Crisis and the Disappearance of Investigative Journalism (Columbia University Press, January 2014). Follow Dean on Twitter: @deanstarkman.