Nye Lavalle - Financial Market Predictions

Financial Market Predictions

At the 2000 National Consumer Law Conference in Broomfield, Colorado, Lavalle released two reports that described wide scale mortgage abuse and fraud, including robo-signing practices.

EMC Mortgage was later found by the FTC to be in widespread violation of various consumer laws and abuses that Lavalle detailed in his report and was fined $28 million.

However, more pertinent predictive quotations in Lavalle's report on Bear Stearns included: "This report also details what could be one of America's largest financial scandals ever, resulting from the development, placement and sale of various mortgage backed securities and "derivative" products by Bear Stearns. "This report is the story of one of America's largest Wall Street investment bank's "direct" involvement in the development, making, and support of a nationwide system of predatory lending practices, frauds and abuses." "The effects of Bear's behavior has a wide range effect on many, not just the EMC customers being abused. This includes Bear Stearns’ own shareholders,investors, government and the public." Lavalle predicted the effects of Bear Stearns’ actions on financial markets would include: (a) devaluing of various mortgage derivative products; (b) failure of major banks and wall street firms; and (c) reluctance of corporations, mutual funds and other investors to invest in legitimate mortgage backed securities.

Lavalle's most dire prediction came from the second report he released at the 2000 National Consumer Law Conference in Broomfield. Lavalle's report, authored in 1999, foresaw the impending collapse of the mortgage and credit markets and the failure of major Wall Street firms and banks over their subprime mortgage investments. On pages 30 to 33 of Lavalle's 21st Century Loan Sharks Report, Lavalle wrote: "The effects of a predator's behavior has a wide range effect on many, not just the borrowers being abused. This includes the predator's own shareholders, investors, government and the public. "The effects of predatory lenders and the subprime mortgage market on these constituencies and the financial markets include: 1) devaluing of various mortgage derivative products; 2) failure of major banks and Wall Street firms; 3) reluctance of corporations, mutual funds and other investors to invest in legitimate mortgage backed securities; 4) increased government regulation and supervision; 5) illegal stripping of equity of customer's homes; 6) outcries from shareholders and constituents; 7) credit downgrading of mortgage backed securities; 8) reduced value and marketability of mortgage backed securities; 9) reduced stock and option prices; 10) elimination of jobs due to cuts and layoffs; 11) overpayment of false and fraudulent claims by federal government; and 12) increase in foreclosed and abandoned homes in communities across America." Virtually each of Lavalle's predictions came true in the collapse of the international mortgage and financial markets that was precipiated by the collapse of two Bear Stearns hedge funds specializing in MBS products in the summer of 2007.