The problems associated with many financial collapses can be traced back to excessive greed. Today's mortgage crisis is no different as new reports surfaced showing that high-flying mortgage companies were hiding losses in order to ensure the bonuses kept coming for executives. These losses were hidden by illegally lowering its loan loss reserves even as it was forced to repurchase more and more from investors. As a result, the overall cash position remained neutral or positive despite a distribing trend to the contrary. To many, it sounds like another Enron scandel...

From The New York Times:
KPMG, one of the Big Four accounting firms, endorsed a move by New Century Financial, a failed mortgage company, to change its accounting practices in a way that allowed the company to report profits, rather than losses, at the height of the housing boom, an independent report commissioned by a division of the Justice Department concluded. The scathing 580-page report documents how New Century lowered its reserves for loans that investors were forcing it to buy back even as such repurchases were surging. Had it not changed its accounting, the company would have reported a loss rather a profit in the second half of 2006. The profit was important because it allowed executives at the company to earn bonuses and allay concerns that the company was healthy when in fact its business was coming apart, the report contends.