STEVE INSKEEP, HOST:
A relatively rare event occurs today. Someone will be sentenced for crimes linked to the real estate collapse of several years ago. David Marshall Crisp is his name. He ran a real estate agency in Bakersfield, California at the height of the housing boom; you know, back when you could buy a house with no money down and prices were soaring.
Crisp entered a guilty plea to arranging property deals with fake buyers. They would flip the real estate back-and-forth at ever-greater prices - all the money borrowed - and they were defrauding banks and investors of about $30 million in the process.
Gary Silverman has covered the Bakersfield fraud for the Financial Times. And the characters in this story include Bakersfield itself.
GARY SILVERMAN: We all know it from "The Grapes of Wrath" and books like that where, you know, people from Oklahoma and the Dust Bowl all came out West and wound up in Bakersfield.
SILVERMAN: And it gave the town a kind of unusual character. It's a country music capital. It's were Merle Haggard is from and Buck Owens is from.
SILVERMAN: But then Bakersfield evolved and became a big boom town. And what happened in the last decade was really like a lot of boom towns in the Sun Belt where there were a lot of people moving in, created a lot of property activity, created a lot of interest and lenders to lend to that activity, and then there were people who took advantage of that all along the supply chain, if you will.
INSKEEP: And the underlying thing happening here was that it was easy to get a bank loan. So if you could find some way to fake a bank loan, you'd get that money for yourself.
SILVERMAN: It was easy not only to get a bank loan, but it also goes back to the way mortgage financing became done over the last few years, which is that money from mortgages comes from global investors. And investors all around the world in the last decade wanted to buy bonds backed by American mortgages. Then there were people in the country in places like Bakersfield and other towns, and what they could do is create, you know, essentially fake mortgages, fake buyers, get the financing for the mortgage, hold the house for a few months - a year or two years - flip it for incredible profits; all this being financed by essentially investors who were hundreds or thousands of miles away who had no idea what was going on in Bakersfield.
INSKEEP: And I'm thinking about what this means for a neighborhood. If there is a straw buyer buying a house for too much in my neighborhood as part of a fake transaction, the increased sale price of their house makes me think my house is worth more - and in fact, I could go get a home loan for more and it's all a delusion. But I'm getting actual cash and now I owe money on a loan based on this delusion.
SILVERMAN: Well, this is the mechanics of a bubble, you know, one thing leads to another, leads to another. And what happened in the last decade is that everything conspired to keep pushing property prices up, which created more people taking an interest in this and that's where you do wind up with a collapse. In a place like Bakersfield, prices went up sharply during the middle part of the last decade and then they came down just as hard.
INSKEEP: So who is David Marshall Crisp, this man being sentenced?
SILVERMAN: David is part of a team, David Crisp and Carl Cole, they were Bakersfield property agents called Crisp and Cole. And they create this sort of like high gloss, high fashion property agency in Bakersfield. They had a dress code where the men all wore black suits and white shirts and sharp ties and the women were all beautiful and he had bodyguards with him everywhere he went. And they hit it big until it all came crashing down when property prices went down.
INSKEEP: Have Crisp and Cole, either of them, talked about why they did what they did and how they got to this point?
SILVERMAN: Well, Crisp has been very quiet and has avoided the press. Carl Cole's explanations, you know, basically boiled down to the idea that he came to see himself as an investor and he came to see the people around him as investors. Their argument is, you know, that they were just playing the game as it was being played. The result of that game was it created losses at banks. And by creating losses at banks, you know, they're in an almost Bonnie and Clyde like position, you know, there was money in that bank and they took it out, and now they're being sent off to prison for that.
INSKEEP: Gary Silverman is national editor of the Financial Times. Thanks very much.
SILVERMAN: Thank you.
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