Duck Carnage

by Joan Trice

I was in Washington DC a few weeks ago and it was raining and a little cool. That wasn’t that unusual except for one thing. The weatherman was announcing clear skies and a heat wave. So with all of the sophisticated modeling, radar and prognostication all the weatherman could have done was look out the window.

Rule number one in risk management…keep it simple. If it walks like a duck, it is a probably a duck.

While walking down M Street in the rain I called a friend of mine, a regulator. I had this bizarre out of body experience when his assistant answered the phone. I thought she answered the phone “RTC”. My mind was racing…. Really? When did that happen? Was this some sort of time warp? I had a brief moment of relief followed by a realization that the street noise and some serious wishful thinking and perhaps a bit of senility had merged to create such a bizarre thought.

When my friend finally came on the phone he said “ lovely weather for ducks”. I was thinking the only ducks on Capital Hill were lame ones.

I met with a couple of gentlemen from Germany during this DC trip. It is fascinating to listen to the European perspective. Sit down for this one…. they analyzed their loans in default and discovered that the single biggest problem was bad appraisals as a result of lack of independence.

We are suffering from a couple of issues- fear of the unknown and a failure to actually accept that we have a real mess on our hands. Hand wringing is not a solution. Denial doesn’t work… just ask the Greeks. At the very core of our housing markets is a crisis of confidence. No one is going to gamble on mortgage backed securities when they don’t have any faith in the value of the underlying collateral.

The resounding theme in conversations among my circle of friends is “ this really isn’t that hard to fix”. So then why don’t we actually do something? That is a good question. It would appear we lack the political will. That would mean someone would actually have to stand up and acknowledge that we have a mess. It would require a lot of finger pointing. There are lots of people invested in the status quo. It would mean that we acknowledge that we cannot make the riskiest loans to those with no down payment and bad credit. The latter group represents a lot of voters.

We need to get our ducks in a row.

Joan N. Trice is the founder and CEO of Clearbox, LLC, publisher of Appraisal Buzz, and host of the annual Valuation Expo, the largest conference for the valuation community. Joan also hosts the Collateral Risk Network, a members-only group of more than 300 dedicated chief appraisers, collateral risk managers, regulators, and valuation experts who are focused on resolving the many challenges facing our profession.

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