Thursday, March 20, 2014

151.6 - Outrage of the Week: fraud about prosecuting mortgage fraud

Outrage of the Week: fraud about prosecuting mortgage fraud

Four years ago, with the debris from the 2008 financial meltdown still clogging our streets and our lives, with millions losing or facing losing their homes, foreclosures at record levels, much - most - of it due to outright criminality on the part of the major players in the mortgage industry heavily engaged in robo-signing, doctoring, or even forging documents, in that atmosphere, Barack Obama, the Amazing Mr. O, promised to crack down on mortgage fraud. At a mortgage fraud summit in 2010, Attorney General Eric Holder declared that “In cities across the country, mortgage fraud crimes have reached crisis proportions. But we are fighting back.”

It was all bullshit and lies. According to a report by the Justice Department’s inspector general, the Obama administration has made mortgage fraud its lowest priority and has closed hundreds of cases after little or no investigation.

The White House claims that the government is holding people responsible for the collapse of the financial and housing markets, but the report shows that the FBI considered mortgage fraud to be its lowest-ranked national criminal priority. In several large cities, including New York and Los Angeles, agents either ranked mortgage fraud as a low priority or didn't even rank it at all.

And this was despite receiving significant additional funding from Congress to pursue exactly those sorts of cases.

What's more, the claims the administration made of progress and aggressive pursuit of violaters were repeatedly inflated or just nonsense.

For example, Holder said in 2012 that prosecutors had charged 530 people over the previous year in cases related to mortgage fraud. It turned out it was 107. And most of them, it appears to me based on a web search I did, were smaller players, not the big boys.

Holder also claimed that those cases involved fraud that had cost homeowners more than $1 billion. It turns out that actual figure was more like $95 million, less than one-tenth as much. Which is what happens when you focus on the smaller players rather than the big boys.

As if that wasn't enough, the Justice Department kept repeating the inflated figures for months after it was obvious, after they knew, they were wrong.

Why has the DOJ had such a hands-off approach to the too-big-to-fail crowd? Well, you already know the answer but let me tell it to you this way.

The blogger Digby noted the other day that "everybody's having lots of fun" looking over recently-released transcripts of meetings of the Federal Reserve Board of Governors in 2008. One thing that became clear from those transcripts is that the Fed really just didn't know what was going on around it. For example, at a meeting on March 18, 2008, just days after the collapse of Bear Stearns, the first sign of the coming apocalypse, concerns that US banks were undercapitalized were dismissed. In fact, Tim Geithner, who was then the president of the New York Fed and vice chair of the Fed’s Board of Governors, said that the real problem was people suggesting there was a problem.

Move forward seven or eight months to find the world financial system in free-fall as undercapitalized banks and other financial institutions fall like dominoes. Then move forward a couple of months more to January 2009, with the crisis unabated, and who does the newly-elected Barack Obama want to be his Treasury Secretary? Who was "the only man" who could save us all? Tim Geithner, the man who said the only problem was saying there was a problem.

Why has the White House gone so easy on the big boys and the big banks? Why has Obama been such a lamer on mortgage fraud? Because he's on their side. And don't you forget it. It's the Outrage of the Week.


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