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Former Regulator: Clear Fraud in Financial Crisis -- Why Isn't Anyone in Jail?
Posted Nov 21, 2008 12:47pm EST by Aaron Task in Newsmakers, BankingIn the aftermath of the corporate scandals earlier this decade, investor confidence was (partially) restored by a parade of "perp walks" of fallen chieftains like Ken Lay, Bernie Ebbers, and Dennis Kozlowski.
But nearly two years into the bursting of booms in housing and mortgage securities, scant few related arrests have been made — and most of those have been focused on individual mortgage brokers vs. major industry leaders.
"There is no poster child [for the housing scandal] because you need to investigate, and you need to bring cases and we haven't done either against the major players," says William Black, Associate Professor of Economics and Law at the University of Missouri — Kansas City and a former federal regulator.
Black, who was counsel to the Federal Home Loan Bank Board during the S&L Crisis and blew the whistle on the "Keating Five" in 1989, says investigations have shown fraud incidence of 50% at (once) major subprime lenders like IndyMac and Countrywide.
But even though the FBI warned of an "epidemic" of mortgage fraud in 2004, they subsequently made a "strategic alliance" with the Mortgage Bankers Association, which serves the major industry players.
In this case, the foxes truly were guarding the hen house.
Black notes it was only this year that the total number of FBI agents devoted to mortgage-fraud investigations rose to more than 200. By comparison, during the S&L and Enron investigations in the 1980s and '90s, respectively, multiple task forces totaling hundreds of agents were employed.
"The DOJ has refused to emulate its successes in the S&L debacle, and even dealing with Enron, by creating a large task force that would take on the major fraud participants," Black said. "In this context, that would mean creating a large task force to investigate major, nonprime lenders."
322 Comments
Yahoo! Finance User - Friday November 21, 2008 01:03PM EST
Not everything nasty is blocked, however.
Yahoo! Finance User - Friday November 21, 2008 01:03PM EST
Unfortunately, I don't see ANYONE going to jail, although massive fraud has been the 'daily bread' for Wall Street, even now, as we speak(write) there is fraud going on, yet nobody(regulators/SEC) seems to care???Why is that??? Because the cake is still big enough and they ALL want IN! Declaring an insurance policy a swap was one of the schemes...etc...etc....etc...and so on! And guess what? We are in for a real treat...a total colapse since the government's means are(were) limitted and they have no more!
ronover47 - Friday November 21, 2008 01:10PM EST
Meet the "new" BOSS", same as the old "BOSS" Sound familiar?
Yahoo! Finance User - Friday November 21, 2008 01:11PM EST
He is just implying that their probably is collusion occurring. Well, duh. Unless he has some evidence on specific people or companies, how is this a story? Anyone can point out possible issues. The hard point is pinpointing who is doing what and proposing solutions.
Yahoo! Finance User - Friday November 21, 2008 01:12PM EST
Hmmm... well... we have to show some patience so that we do not end up putting a Prez in jail before he becomes ex-Prez. And then Alan Greenspan looks too old to go to jail... Agree though... that we need to start rounding the wall street crooks!
chubach47 - Friday November 21, 2008 01:12PM EST
I am reminded of the "Golden Rule" Those with the Gold make the Rules. If Wall Street wasn't such a large contributor to the political parties, would they still be walking around free?
melech68 - Friday November 21, 2008 01:13PM EST
The fraud at the root of all of these frauds is fractional reserve banking and the federal reserve system. Since that is government authorized fraud, no one really deserving will ever be prosecuted.
Yahoo! Finance User - Friday November 21, 2008 01:13PM EST
My money says we dont know the half of this situation. Our Four Fathers must be rolling in their graves given what has happened in this country over the past decade. I grew up in the wrong century. It will get worse before it gets better. Hold on.
Mike W - Friday November 21, 2008 01:14PM EST
From Las Vegas to Wall Vegas,collapse of the Street & corruption is more so exposed to us-the public!I wonder how long the list would be of these crooks.Are these white collar crooks even worried?
Yahoo! Finance User - Friday November 21, 2008 01:15PM EST
Fraud? What fraud? Their armies of lawyers have made sure everything they do adhere to the fine prints of the laws. It is you -- the common people -- who are to ignorant to read the fine prints of the contracts. Welcome to America! (And wants to execute these crooks on vague charges, go to China or other non-democratic lawless counties. Those places, of course, have different problems.)
Yahoo! Finance User - Friday November 21, 2008 01:15PM EST
I'm in jail for holding up a 7-11. I got $125 dollars. Damn, should have been a overpaid, useless CEO.
Yahoo! Finance User - Friday November 21, 2008 01:17PM EST
Ronover - We got "fooled again" didn't we.
rzeemain - Friday November 21, 2008 01:17PM EST
Think about this folks. Paulson and the current Administration is in power, then suddenly around mid-September, Paulson rushes over to the WH and Congress and says:"I need a Trillion dollars in 72 hours. Don't ask me any questions, no court or body is to audit what I do with it". But the day before, and the day before, and the week before, and the month before, no warning to the public. Ah, but Nov. 4 was only a few weeks away. Keep the lid on. Then, bam, it all came unwound. Obviously, this meltdown was long in coming. We have been conned.
Johnny Ike - Friday November 21, 2008 01:18PM EST
WHY NOT POT THEM TO JAIL ALL THOSE GILTY GREEDY THAT MAKE THIS NATION AT MESS.......LET THEM EAT THEIR DOLLARS ON JAIL AS BREALFAST ,LUNCH AND DINNER. FOR 100 YEARS PRISON SENTENCE................
Johnny Ike - Friday November 21, 2008 01:21PM EST
DO NOT TOLERATE FOR ALL THE FRAUD. THEY MADE ...GO TO JAIL........PUT THEM IN JAIL FOR 100 YEARS.........
Yahoo! Finance User - Friday November 21, 2008 01:22PM EST
Arresting Paulson would be a GREAT START !
jpstud1 - Friday November 21, 2008 01:23PM EST
top 3 fraudsters: 1. JP Morgan Chase 2. Goldman Sachs 3. Henry Paulson Get rid of these parasites and our economy will flourish.
Yahoo! Finance User - Friday November 21, 2008 01:25PM EST
They'll roll out a few sacrificial lambs as usual.. but the big boys will walk.. nothing out of the ordinary here....
Grace - Friday November 21, 2008 01:25PM EST
No one is going to jail because the same people who would be convicting the Wall Street culprits are culprits themselves. Barney Frank, Chris Dodd, Pelosi, Paulson, Bernacke, Cox, etc, are all responsible for this mess.
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Whit Chambers - Friday November 21, 2008 01:00PM EST
Perhaps it is reality when you consider: (1) Government identifies absurd Corporate salaries, yet bail out so continue their huge salary with tax dollars. (2) Senators arrogantly chastising the Big Three, yet not acknowledging massive Government debt risk to the populace is in far more troubling. (3) Government Pensions are far worse ticking time bomb, but will divert the public’s attention to credit card debt instead. (4) Government at the Federal and State Level corruptly violate the Constitution, yet give standing ovations to convicted felon Senators. Sorry folks the upside-down pyramid is in collapse.