US Treasury mortgage fraud crackdown myriad days late, billions of dollars short
Monday, April 6, 2009 at 3:05PM
Mortgage foreclosure image from FBI.gov.Warning: this borders on a rant.
Treasury secretary Tim Geithner is rattling the government saber, promising to “fight mortgage and foreclosure scams.” Geithner’s declaration comes myriad days and [at least] billions of dollars short. I first brought rampant mortgage fraud to the forefront in July, 2008following up with a column in September. I cited a letter from Kenneth Kaiser, Assistant Director, the Criminal Investigative Division of the FBI. Kaiser sent the letter to the editor of the L.A. Times after the paper, Kaiser wrote, “implied that if the FBI had made more arrests for mortgage fraud, the crisis could have been averted.” Kaiser’s letter is worth reading, the newspaper’s column isn’t worth your time.
After all, social advocacy policies endorsed by newspapers like The Times helped encourage slack lending practices that provided the kindling for the bonfire that melted the global economy—a mortgage and a second in every kitchen drawer!
Once easy credit took hold, greedy people saw a money-making loophole that is the biggest target of all time—the US government. Banks and hedge fund managers saw more than one money-making loophole, and many who profited got away without so much as a hand slap.
While President Barack Obama has apologized to the world, it’s hard for a realist to feel sorry for other countries—countries that lost money in this debacle invested because they stood to make a lot of money as well. As a matter of fact anyone who invested stood to lose money because risk is inherent in investment.
The meltdown is a perfect example of the domino effect that occurs when government puts its mouth where it should not—the banking and mortgage industries, from the Community Reinvestment Act to the Clinton Administration’s landmark deregulation. That’s not the narrative you’re hearing from establishment and pop media, but it should be.
Bill Moyers interviewed William K. Black, former Director of the Institute for Fraud Prevention, who now teaches Economics and Law at the University of Missouri, Kansas City. Black is also the author of ‘The Best Way to Rob a Bank Is to Own One.’ That book incidentally was written after the savings and loan meltdown in the late 1980s. Speaking to Moyers Apr. 2 for the PBS show ‘Bill Moyers Journal,’ Black said fraud began in the board rooms and CEO offices: “Well, the way that you do it is to make really bad loans, because they pay better. Then you grow extremely rapidly, in other words, you're a Ponzi-like scheme. And the third thing you do is we call it leverage. That just means borrowing a lot of money, and the combination creates a situation where you have guaranteed record profits in the early years. That makes you rich, through the bonuses that modern executive compensation has produced. It also makes it inevitable that there's going to be a disaster down the road.”
What Black didn’t get to was the responsibility of the borrower and the interference of the government, two more factors that no one’s giving a nod to.
Black points directly to Geithner's previous endeavors: "Geithner has, was one of our nation's top regulators, during the entire subprime scandal, that I just described. He took absolutely no effective action. He gave no warning. He did nothing in response to the FBI warning [2004] that there was an epidemic of fraud. "
Geithner was president of the Federal Reserve Bank of New York.
A great deal of money was made from shaky securities and outright fraud. Additional money was made by political elitists who were in the right place at the right time and some of those people are still serving in government posts. Bloomberg News reported (Apr. 3) Obama’s director of the National Economic Council Larry Summers—the king of deregulation under Clinton—collected millions in speaking fees from Bank of America, Citigroup and Goldman Sachs before the companies got taxpayer funds in the bailout. Other Obama appointees/hires received compensation and fees from hedge funds, Chevron and the AFL-CIO.
Remember when the Associated Press reporter quizzed GOP candidate Mitt Romney about lobbyists during the primary? That reporter didn’t quiz Obama in the same manner. None did. Establishment and pop media were too busy advocating for a candidate. Meanwhile, millions of voters opted for the Democratic Party platform, viewing it as the “party of the people.” Delusion is easily accomplished via social media experts and Democratic newspapers and networks. Media bias is a liberal politician's best friend.
I’d like to ask: wouldn’t you like to be one of those people receiving fees of $2.7 million from banks the taxpayer bailed out?
Meanwhile, the FBI is handling a super-sized case log, investigating more than 2,100 mortgage fraud cases. The FBI is bearing the burden of lack of oversight by Congress and political favors and de-regulation gone awry.
Geithner’s response on behalf of the Treasury, with efforts that could exceed $1 trillion in the long run, comes just a little too late and many dollars short. Where was federal oversight in the first place? The FBI is a law enforcement agency. Would somebody please tell the rest of the government and the L.A. Times? Kaiser hit the nail on the head in his letter to The Times: “[T]he FBI is a law enforcement and intelligence agency, we are not banking regulators.”
Meanwhile, maybe AP reporter Glen Johnson who quizzed Romney 60-Minutes style and later described then Sen. Hillary Clinton as “regal” and “calm” after the hostage crisis at her campaign headquarters in New Hampshire (hundreds of miles away from Clinton in Washington), well, just maybe watchdog Glen could quiz our president and his colleagues about lobbyists, influence and delusion in general. There may have been a really good reason the financial sector and Democrats in Congress didn't want someone with Romney's experience poking around in the records room.
Geithner's crackdown is too little too late. In coming months, more and more voters will hopefully understand my rant.
US Treasury mortgage fraud crackdown myriad days late,billions of dollars short by Kay B. Day
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