Comment by shawnee_ | Hacker News Reader

Comment by shawnee_ | Hacker News Reader

Hunt still remembers her first impressions of CitiMortgage’s O’Fallon headquarters, a complex of three concrete-and-glass buildings surrounded by manicured lawns and vast parking lots. Inside are endless rows of cubicles where 3,800 employees trade e-mails and conduct conference calls. Hunt says at first she felt like a mouse in a maze.

Accountability is a tough thing to manage when companies get to this stage. The larger the institution, the less accountable every individual within that institution tends to act. Organizational architecture pushes the risk downstream while pulling the reward upstream.

Workers had a powerful incentive to push mortgages through the process even if flaws were found: compensation. The pay of CitiMortgage employees all the way up to the division’s chief executive officer depended on a high percentage of approved loans, the government’s complaint says.

How does this organizational structure differ from the pyramid scheme, or MLM? With scrutiny, it really doesn't. This organizational structure is what has kept the Realtor-Broker model perpetuating for as long as it has: risk essentially becomes decoupled from the reward for Brokers; they can push their Realtors to pursue risky prospects because they get a cut every time. Furthermore, when Realtors collude with their Brokers, they have collective incentive to both negotiate prices upward and take as large of a cut as possible of that inflated amount. Missing from the equation is a system of checks and balances.

CitiMortgage mortgage brokers' compensation being tied to volume means that turnover in the housing market is something they aim(ed) for. There is something seriously wrong with this model.

The fact that nobody in the NAR or mortgage industry is being held accountable is puzzling.

> The larger the institution, the less accountable every individual within that institution tends to act.

I'm reading Liars and Outliers, by Bruce Schneier, and this is one of the big points he makes in his discussion of how trust and security balance to allow society to function.

There is a huge difference between personal morality and organizational morality, for instance. Even if every person working for Citigroup had been basically moral (in the sense that they wouldn't have committed fraud alone) this still could have happened, and probably would have.

The argument that gets repeated ad nauseum, that things like this are the fault of "a few bad apples", is just plain false. The bad apples certainly exist (especially given that our society and economy reward anti-social behaviors), but the incentive structure is the real problem. It's systemic, there's no getting around that fact.

> "Even if every person working for Citigroup had been basically moral (in the sense that they wouldn't have committed fraud alone) this still could have happened, and probably would have."

When you consider the compensation and review structure at financial institutions, it was absolutely inevitable.

Those who didn't participate, even in the tiny slice that was their domain, would have been pushed aside or replaced in favor of someone who would.

Big Business simply doesn't allow for under-performance. Even on legal/moral grounds. Those are long-term concerns in a world that measures only short-term performance.

TLDR: The more a company grows, the more inefficient and dysfunctional it becomes.

Try this: The more a company grows, the more efficiently dysfunctional it becomes...

Complex systems have unpredictable and often undesirable emergent properties that are not immediately obvious at design time. Engineers have always known this. That's why after running all the simulations, they still use good old-fashioned wind tunnels, for example.

> The argument that gets repeated ad nauseum, that things like this are the fault of "a few bad apples", is just plain false.

Philip Zimbardo, the architect of the Stanford Prison Experiment and author, more recently, of The Lucifer Effect, argues that it's not "bad apples" that spoil the barrel, but a "bad barrel" that spoils the apples.

Here's Zimbardo's TED talk on what makes people do evil:

http://www.youtube.com/watch?v=OsFEV35tWsg

It isn't three buildings. It's a three story building (and half a basement where they stuck me).

Almost all CitiMortgage employees get merit based bonuses. My department, on the other hand, gets shafted. Seven years working there and two years programming for them and running Oracle reports and I didn't even get a raise last year. (And now I see why since we lost so much money.)

Business has really slowed down and most people work in Lost Mitigation now.

I need out!

</rant> =) Sorry, just had to get that off my chest. Working at the O'Fallon headquarters of CitiMortgage is not where I want to spend my career. It's not even where I want to spend my Friday.

If you work in finance, you should know that raises and bonuses depend partially on company results, partially on individual results, and mostly on whether or not you have a counter-offer from somewhere better. Why should they give you a raise if you're not going to leave without one?

If you work in finance, you should know that raises and bonuses depend partially on company results, partially on individual results, and mostly on whether or not you have a counter-offer from somewhere better. Why should they give you a raise if you're not going to quit?

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