Floyd Norris’ column asks: [Do big bank mergers lead to more crime? And is that a reason to toughen antitrust enforcement? [NYT]](http://select.nytimes.com/2006/03/17/business/17norris.html). His article is based on a study published in the Journal of Finance: [Bank Mergers and Crime: The Real and Social Effects of Credit Market Competition](http://www.afajof.org/journal/abstract.asp?ref=0022-1082&vid=61&iid=2&aid=847&s=-9999)
The study uses micro-evidence that:
>Neighborhoods that experience more bank mergers are subject to higher interest rates, diminished local construction, lower prices, an influx of poorer households, and higher property crime in subsequent years.
_A First-Hand Appraisal Professional Testimonial_
We can see this specifically within the appraisal profession. I have been talking about this for more than a decade. The wave of bank mergers has removed local oversight from the appraisal review function. In other words, appraisers that are _morally flexible_ have been able to thrive because of this disconnect.
Large bank mergers generally result in a system of central controls and as a result, national vendors get appraisal contracts over locals. The irony here is that the national venders, known as appraisal management companies (AMC’s), track appraisers based on speed and whether they have a license, with a fee structure that is half the going rate.
Guess what happens? AMC appraisers can not afford to purchase reference materials and data. But it doesn’t really matter since they are only worried about turn times.
The pressure on reputable appraisal firms remains incredible.
If this is what happens in a fairly _cut and dry scenario_, I can only imagine what happens in more complex financial transactions.
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“In other words, appraisers that are morally flexible have been able to thrive because of this disconnect.”
Let’s think about this. In how many occupations that require a college diploma, is “moral flexibility” a financial asset?
Morally flexible accountants?
Morally flexible lawyers?
Morally flexible investment bankers?
Morally flexible advertising?
Morally flexible doctors deciding how to bill insurance companies?
Morally flexible insurance executives deciding whether to pay doctors?
Morally flexible CEOs deciding, while on each others boards, how much to pay themselves?
Etc. Etc.
Lots of moral flexibility in public policy.
Given the nature of our society, perhaps extra credit should be given in college for cheating on tests.
Perhaps moral inflexibility is a luxury. I’m glad I can afford it. But given our society’s tendency to upgrade the cost of a “middle class” life every year (particularly health care, education and housing) how many can? Or even want to?
Now the AMC’s are actually dictating the market values by hiring regional Staff Appraisers to conduct oversight / leverage and review over the local appraisers. Any appraiser “selling out” to these AMC’s in exchange for employee benefits or lower professional fees CAN NO LONGER call themselves “Unbiased”, the foremost STANDARD FOR APPRAISAL PRACTICE (USPAP).
As these AMC’s serve (or are owned by) their Client’s best interest (lenders), they’ve stepped over the line of ETHICAL and MORAL Obligation(s) by allowing the lending industry to make up ALL THE RULES and enforcing professional extortion. Guess who is ultimately going to pay? Your personal share of the national debt already hovers around $500K, what do you think it will exceed when the government bails out the lending industry this time around?
The Government needs to ACT instead of REACT with regard to this landslide enveloping the appraisal industry. Federal Legislation needs to occur immediately BEFORE the industry is overrun by cheats and moral incompetency. Will the last ethical appraiser leaving Florida, please bring the American Flag? Without firing a shot, the lending industry is one of several groups TRULY controlling this country. Because lenders have the money, who do you think the politicians(s) (legislative process) listen to? A nation that thrives on “Show me the money” is Financially and Moraly Inept and will eventually lose it all, unfortunately, maybe someday our “so-called” Freedom.
Too late to stem the hemorrhaging. The Fed needs to notify the banking industry that this time there won’t be any “Supervised bailout” and watch the lending rigors flourish.