Last Friday, the Federal Housing Finance Agency filed lawsuits against 17 of the largest banks and financial institutions in the world. FHFA is seeking a total of $196 billion in restitution from these institutions for not disclosing risky mortgages sold to Fannie Mae and Freddie Mac that went sour. The government news release said, “The complaints filed today reflect FHFA’s conclusion that some portion of the losses that Fannie Mae and Freddie Mac incurred on private-label mortgage-backed securities (PLS) are attributable to misrepresentations and other improper actions by the firms and individuals named in these filings.” (Click here to read the complete press release naming all banks being sued.)
“Misrepresentations and other improper actions,”—that’s it? This is all just sloppy work where the banks didn’t pay attention to the facts? What an outrage! There are still no criminal prosecutions, let alone any investigations of the major banks that caused a global meltdown. By the time this is over, millions of homes will be foreclosed upon. The bankers that caused the mess have been rewarded year after year with huge bonuses since 2008! The FBI and the SEC can’t find a single criminal act by a single one of these 17 institutions? The incompetent (and I think criminal) scoundrels responsible are still in charge!
Goldman Sachs was one of the 17 banks sued by the government. That complaint said, “Goldman Sachs Mortgage Company, GS Mortgage Securities Corp. and Goldman, Sachs & Co.’s misconduct was intentional and wanton. The immediate victims of Goldman Sachs Mortgage Company, GS Mortgage Securities Corp. and Goldman, Sachs & Co.’s fraud was Fannie Mae and Freddie Mac, two Government-sponsored entities whose primary mission is assuring affordable housing to millions of Americans.”
If there are allegations of “fraud,” why have there been no criminal prosecutions of Goldman Sachs or any of the other institutions? As early as 2004, the FBI was warning of widespread mortgage fraud. CNN reported, “Rampant fraud in the mortgage industry has increased so sharply that the FBI warned Friday of an “epidemic” of financial crimes which, if not curtailed, could become “the next S&L crisis.” Assistant FBI Director Chris Swecker said the booming mortgage market, fueled by low interest rates and soaring home values, has attracted unscrupulous professionals and criminal groups whose fraudulent activities could cause multibillion-dollar losses to financial institutions. ‘It has the potential to be an epidemic,” said Swecker, who heads the Criminal Division at FBI headquarters in Washington. “We think we can prevent a problem that could have as much impact as the S&L crisis,’ he said.” (Click here for the complete 2004 story from CNN.) The financial crisis cause by mortgage fraud was not even close to the size of the S&L crisis—it was at least 40 times bigger!! Why didn’t the FBI stop it, and why are they not prosecuting the crime now?
And what about the “robo signing” stories that came to light in the last few years? There were countless reports documenting the creation of millions of mortgage documents by foreclosure mills across the country. They were effectively forging documents, such as Promissory Notes, so banks could illegally foreclose on homes. The banks reportedly “lost” the proof they owned the property and had the right to take back millions of homes. If that was the case, how did the banks create mortgage securities without the required paperwork? Documents such as Promissory Notes are required to be filed with the mortgage-backed securities. No Promissory Note—no security. Why is the Securities and Exchange Commission not prosecuting securities fraud? If there were no documents in a large part of the securities, how did the ratings companies give triple-A grades to what are now called “toxic assets?” Why aren’t the ratings companies being pursued criminally?
The fact is, not a single high profile New York banker has been prosecuted criminally. But, hope springs eternal; Goldman CEO Lloyd Blankfein recently hired a high profile defense attorney. I am not holding my breath on any sort of criminal charges to be filed against Mr. Blankfein.
In closing, I just want to add what I think is one of the most preposterous things about the $196 billion lawsuit. Bank of America is being sued for $6 billion by the government. At the first of the year, Treasury Secretary Tim Geithner forgave B of A $127 billion in possible buy backs of sour mortgage debt sold to Freddie Mac. I wrote about this extensively in a post titled “B of A Settlement, Another Taxpayer Rip-off.” Just a few weeks ago, Fannie Mae agreed to buy $73 billion in troubled mortgage debt from B of A. These two deals amount to $200 billion in back door bailouts for just one of the 17 banks being sued. We gave B of A more than $200 billion from Fannie and Freddie alone, and the government is suing to recover $6 billion? I have to wonder, is our government stupid, corrupt or both?
The government has not investigated or prosecuted crime that is obvious to anyone with a 10th grade education. Federal officials are giving the bankers that caused the entire financial calamity huge bailouts while pretending to punish them with a slap on the wrist. I think if there were widespread and genuine criminal prosecution, the entire system would collapse. That is probably why unmistakable crimes are being ignored by most federal and state authorities. Until fraud is removed from the system and criminal acts are punished, the country will not recover. Vibrant economies cannot thrive in an environment of lawlessness and mistrust.
By Greg Hunter’s USAWatchdog.com