“Why there hasn’t been more robust prosecution is a mystery.”

-Raymond Brescia, visiting professor, Yale Law School

>

Reuters has an outrageous article detailing the absurdity of the lack of prosecution of financial crimes in modern America. It is a shocking to watch the United States, a nation that once followed the Rule of Law, slip into a banana republic.

“Four years after the banking system nearly collapsed from reckless mortgage lending, federal prosecutors have stayed on the sidelines, even as judges around the country are pointing fingers at possible wrongdoing.

The federal government, as has been widely noted, has pressed few criminal cases against major lenders or senior executives for the events that led to the meltdown of 2007. Finding hard evidence has proved difficult, the Justice Department has said.

The government also hasn’t brought any prosecutions for dubious foreclosure practices deployed since 2007 by big banks and other mortgage-servicing companies.

But this part of the financial system, a Reuters examination shows, is filled with potential leads.

Foreclosure-related case files in just one New York federal bankruptcy court, for example, hold at least a dozen mortgage documents known as promissory notes bearing evidence of recently forged signatures and illegal alterations, according to a judge’s rulings and records reviewed by Reuters. Similarly altered notes have appeared in courts around the country.

And it gets much worse.

• Despite laws against it, banks have foreclosed on active-duty U.S. soldiers who are legally eligible to have foreclosures halted. Attorneys representing service members estimate banks have foreclosed on up to 30,000 ACTIVE military personnel, mostly while they were in Iraq and Afghanistan.

• There has been — literally — “tens of thousands of fraudulent documents filed in tens of thousands of cases.” Sworn affidavits have been filed containing false information. This is easily prosecuted perjury.

• The size and scope of the fraud on the U.S. court system is unprecedented in U.S. history

• NY State court judge Arthur Schack, ruled in 2010 that pleadings by the Baum Law — who handle 40% of NY foreclosures — were “so incredible, outrageous, ludicrous and disingenuous that they should have been authorized by the late Rod Serling, creator of the famous science-fiction television series, The Twilight Zone.”  There has been no fraud prosecution to date.

• Banks have routinely filed falsified mortgage promissory notes — in some cases, six different documents have been filed, all claimed to be the original. At the least 5 must be forgeries — an easy felony to prosecute.

Read the entire article if you want to be outraged and send your blood pressure skyrocketing.

The fraud is rampant, self-evident, easy to prosecute. The only reason it hasn’t been done so far is that this nation is led by corrupt cowards and suffers from a ruinous two-party system.

We were once a great nation that set a shining example for the rest of the world as to what the Rule of Law meant. That is no more, as we have become a corrupt plutocracy. Why our prosecutors cower in front of the almighty banking industry is beyond my limited ability to comprehend.

Without any sort of legal denouement, we should expect an angry electorate and an unhappy nation.

>

Source:
Special Report: The watchdogs that didn’t bark
Scot Paltrow
Reuters Dec 22 2011
http://www.reuters.com/article/2011/12/22/us-foreclosures-idUSTRE7BL0MC20111222

Category: Bailouts, Legal, Regulation

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

56 Responses to “Unprecedented Fraud, Toothless Watchdogs”

  1. machinehead says:

    It just goes to show that if you’re going to lead a life of crime, GO BIG.

    Submitting a phony document in a small-potatoes civil suit will get you thrown in jail.

    Submitting hundreds of thousands of them in foreclosure cases will get you … a bailout.

    Formally, it’s known as Pareto’s Law of Criminal Profitability — crime pays, but it pays much better when it reaches a sufficient economy of scale to acquire legal impunity.

  2. mark says:

    We were once a great nation that set a shining example for the rest of the world as to what the Rule of Law meant.

    Really? You mean like when Nixon was pardoned? Or Caspar Weinberger? All that jail time for Ollie North? Those are just a few that come to mind. I do remember Boesky and Milken but those were exceptions not the rule. For the most part, the wealthy and powerful have always gotten away with it. Doesn’t excuse it but “a shining example”? Not in any history I’m aware of.

  3. constantnormal says:

    The biggest banana republic in history … banana republics tend toward a sort of “dynamic stability”, with lots of revolutions, failed revolutions, but absolutely zero change in the societal organization, their tiny fraction of ultra-rich crooks running a series of puppet governments never being in any danger of losing actual control.

    The time to stop banana republics is before they begin.

    Too late for that here.

  4. super_trooper says:

    @BR,
    “We were once a great nation that set a shining example for the rest of the world as to what the Rule of Law meant. ”
    (i) Once? when was that? Let’s see here….. robber barons, jim crow, japanese-american internment, use of torture, assasination of world leaders……
    That shining light was mainly visible to Americans themselves. You’re just upset because you got to see more than the top of the iceberg.
    (ii) At least they got Martha Stewart. Problem solved!

  5. mark says:

    And you might want to check out the history of lynchings in America. Families enjoying a picnic lunch watching a local uppity black man get strung up for looking at a white woman in the wrong way. One of the last lynchings occurred not too far from where I sit here in northern Delaware so it wasn’t just those southern crackers doing it.

    And let’s not forget the glorious history of jury nullification in cases like that of Emmett Till:

    http://en.wikipedia.org/wiki/Emmett_Till

  6. m111ark says:

    Where’s the mystery???

    Since 1913 only banks have the power to create money. That means every unit of currency in existence is a debt instrument.

    There is no recovery. Banks are looking for new untapped borrowers to create more money and they’re only in the far east. Europe dead. US headed for dead. Democracy as a political system can’t be allowed to exist in a world headed for dictatorship of the Oligarchs. That’s the rational for the destruction of the US – the new world power, China, must be the only power. You’ll see their military ascend over the next two decades to become the world’s new policeman. AND all because the banksters have performed the greatest feat of prestidigitation is the history of the world…

    they’ve conned the whole world into believing that ONLY banks should have the power to create money.

    “Until you change the way money works, you change nothing.”

  7. albnyc says:

    Same as it ever was. More visible to the masses, perhaps.

  8. ToNYC says:

    Does this quote ring a bell?

    “Permit me to issue and control the money of a nation, and I care not who makes its laws.”
    Mayer Amschel Rothschild

    Federal Reserve System controls the debt created implicitly with each note. As mathematics proves in exponential growth, the power of those debt obligations compromise sound judgment . A lender of last resort can be the National Bank of America which issues currency owed to the Treasury with transparent syndication.
    ZIRP is and abomination to risk-free savers. Savers provide the real Capital for sustainable growth beyond the next serial kidnap, holding hostage and release dramas now playing out the Capitol.
    Real money gets real interest.

  9. Raleighwood says:

    We were once a great nation that set a shining example for the rest of the world as to what the Rule of Law meant.

    From Wikipedia:

    In politics a noble lie is a myth or untruth, often, but not invariably, of a religious nature, knowingly told by an elite to maintain social harmony. The noble lie is a concept originated by Plato as described in the Republic.

    Things don’t feel so harmonious these days. What does Plato say when the “non-elite” catch on to the lie?

  10. royrogers says:

    i wish there were more people in the media like Barry to bring some pressure to these crooks.

  11. Jack Damn says:

    …slip into a banana republic.

    I get it. “Slip” … banana. That old 1920′s pratfall. Clever writing.

  12. Tutti says:

    Barry,

    It is both funny & sad that the SEC announces everyday (at least according to their twitter account) that some minor huckster has been charged or arrested. They are making a big deal of catching the nobodys and have completely ignored & given a free pass to the Great Villains.

    Its all smoke and mirrors. It’s all The Big Lie. We have been sold 10 lbs of Nothing and no one complains. The markets have been murdered, investors executed, nation states enslaved and no one is angry enough to to do anything.

    Is it any wonder that our leadership is the scum underneath the garbage at the bottom of the barrel?

  13. Lukey says:

    This is where I lose touch with the pro-regulation crowd. Every time we find ourselves in these situations where no one is being prosecuted for fairly obvious criminal behavior, the pro-regulation crowd starts pushing for more comprehensive regulations to address the failure to prosecute. But if we’re not enforcing the laws we already have that clearly criminalize the behavior we are witnessing, I don’t understand what good even more regulatory code will do.

    ~~~

    BR: “Every time we find ourselves in these situations where no one is being prosecuted”

    How often does THAT happen ?

  14. martin66 says:

    While it does not explain the inaction at the Justice Dept in DC, is it possible that “attorneygate,” the deliberate and illegal replacement of the Federal prosecutorial ranks with “their men” by the previous Administration, has anything to do with this?

  15. webmartians says:

    Wow! Every single one of the comments is of the “Oh well … it’s been done before” variety.

  16. gman says:

    “Why there hasn’t been more robust prosecution is a mystery.”

    -Raymond Brescia, visiting professor, Yale Law School

    The “golden rule”…he who has the gold, makes/enforces the rules!

  17. Ernst Tanaka says:

    The first truth is that the liberty of a democracy is not safe if the people tolerate the growth of private power to a point where it becomes stronger than their democratic state itself. That, in its essence, is fascism — ownership of government by an individual, by a group, or by any other controlling private power. ”

    — Franklin D. Roosevelt, April 29, 1938. Message to congress

  18. ktcgeo says:

    Three cheers for Scot Paltrow and investigative journalists everywhere for keeping the heat on!

  19. 6wksB4crash says:

    Niall Ferguson’s new book ‘Civilisation‘ makes a strong case that establishment of rule of law and with it protection of personal property rights is one of the six pillars that have supported the dominance of Western civilization (my preferred spelling). Its erosion is a great cause for concern, especially since there doesn’t seem to be a great outcry that justice be done — until the recent emergence of the Occupy movement. If you think about it, the rule of law is the principle for which so many were incensed by Richard Nixon during Watergate. That paucity of outrage tells me a lot has changed in 40 years — why is somewhat of a mystery.

  20. Petey Wheatstraw says:

    Lukey:

    True, regulation is useless without enforcement. That said, the executive branch’s negligence in failing to prosecute violations of laws and regulations doesn’t mean we should embrace deregulation. It means we should shitcan our political “representatives” and their appointees and prosecute the violators with even greater zeal.

    We need to make the penalties for violating the law by white-collar criminals so harsh that even thinking of going there makes those in a position to do so wet their pants.

  21. MayorQuimby says:

    Great post Barry. It all has to go or we will suffer through multiple 2008-type events with future ones potentially far worse.

    People here should SERIOUSLY read up on Denninger’s One Dollar of Capital concept which would essentially restore ‘old school’ banking with all fiat backed by real collateral meaning we keep fractional reserve but new money is tied to collateral instead of unbacked credit and derivs.

  22. theexpertisin says:

    Are we not dependent upon those trained as lawyers to determine who is ultimately prosecuted in our present society, and when? The cost and time wasted within the legal scheme is enormous. This was not always the case. In fact, it is a recent gameplan.

    Maybe things worked better when a State could present a case one day and shoot the guilty bastard the next.

  23. GeorgeBurnsWasRight says:

    The fix is clearly in with the failure to prosecute on the robo-signing and other foreclosure crimes, which would be easy to prosecute, and not just the temps who did the false documents, but quite high up in the banking executives.

    However, I’m less certain that the subprime mortgage fraud can be successfully prosecuted because the Justice Department lacks enough skilled trail attorneys, and, more importantly, I think the odds of finding an American jury which can understand a complex financial case is approaching zero.

    Related to the inability to find a dozen competent people, I had my car serviced yesterday and had to wait for the work to be done. As I entered the waiting room, I was struck by how mesmerized and dumb-looking the ten other service customers were as they sat watching the TV which was showing a Sham Wow commercial as if it was the most amazing thing they had ever seen.

  24. GeorgeBurnsWasRight says:

    That should be “trial” attorneys, not “trail” attorneys. Darn trifocals.

  25. Rick Caird says:

    Barry wrote:

    “The fraud is rampant, self-evident, easy to prosecute. The only reason it hasn’t been done so far is that this nation is led by corrupt cowards and suffers from a ruinous two-party system.”

    I am not sure what is meant by “… suffers from a ruinous two-party system.”. Is it the idea of a two party system or this particular incarnation of a two party system?

    However, a symbiotic relationship has been created between politicians and the finance industry. The industry supplies campaign contributions and access to IPO’s while the politicians go easy on finance, enrich themselves with insider trading, protect the industry from legal liability, and force delays that allow the statute of limitations to run out. As long as the contributions are coming in, Justice will continue to investigate, but will just miss the limitations deadline. Funny how that works.

    If we want fraud to be prosecuted, we need to change the politicians. They are on the gravy train right now. For some reason, though, the more corrupt the politician, the more he is revered.

  26. A says:

    Some would say this is all due to America’s leaders losing their moral compass: but as Muddy Water’s old blues song reminds us “You can’t Lose What You Ain’t Never Had’.

  27. ToNYC says:

    “BR: “Every time we find ourselves in these situations where no one is being prosecuted”

    How often does THAT happen ?”

    Every day in the white suburbs in the great War on some molecules.

  28. Bill Wilson says:

    I don’t know if we were ever a “shining example” of the rule of law, but after the Saving and Loan debacle of the 1980′s and the financial frauds of the late 1990′s (Enron and WorldCom), people certainly went to jail. As far as recent history is concerned, we seem to be backsliding on our willingness to prosecute financial crimes.

    It’s my belief that corrupt economies are much less productive, leading to a lower standard of living. So, the recent lack of respect for the rule of law is disturbing for practical as well as moral reasons.

  29. algernon32 says:

    @GeorgeBurnsWasRight,

    Mesmerized or whacked out on antidepressants?

    It seems to me only a small slice of the population can muster a clinical detachment to examine the elements of this poo storm. An even smaller slice will use the knowledge for anything other than personal gain.

  30. dina says:

    If you know how wall street works, how they do business it is not a surprise.
    http://www.youtube.com/watch?v=WoXooThB-_o&feature=channel_video_title

  31. Jack Damn says:

    webmartians wrote:

    Wow! Every single one of the comments is of the “Oh well … it’s been done before” variety.

    “A functioning police state needs no police.” ~William S. Burroughs

  32. Arequipa01 says:

    US Fed govt has gone completely rogue.

    Obama makes noises about Syria and the slaughter happening there. Hah, ha-fucking-ha. The monsters in this country will slaughter 100x as many people. Just wait you dumb m’f’ers.

  33. Arequipa01 says:

    Once Ross Perot sold his copy of the Magna Carta to the satan worshippers in the Carlyle Group the game was over. Over.

    Schiff´s interview with Ann Barnhardt about MF Global and the bankruptcy proceeding.

    http://jessescrossroadscafe.blogspot.com/

  34. Gnatman says:

    The WAPO editorial board has penned a article reasoning that the settlement over robo signing should go through.

    http://www.washingtonpost.com/opinions/time-to-sign-off-on-mortgage-relief-deal/2011/12/21/gIQA0gUPCP_story.html

    Doubt I will place much faith there again

  35. ES says:

    It is not really surprising to me. This is the same silent treatment that has been given to illegal immigration issues for over 20 years now. States can’t prosecute for illegal immigration and feds won’t.

    ~~~

    BR: Do you really believe that

    a) the crimes are similar?
    b) the reasons for non prosecution are similar?
    c) the enforcement difficulties are similar?

    Smells like a pet peeve . . .

  36. ES says:

    > Niall Ferguson’s new book ‘Civilisation‘ makes a strong case that establishment of rule of law and with it protection of personal property rights is one of the six pillars that have supported the dominance of Western civilization (my preferred spelling
    ————————————————

    Very true. The rule of law is the only thing that is still separating US from a banana republic. The rule of law is the US most presious asset, And I say that even though litigation level in the US and absue of the legal system for a quick buck is over the top. But I guess, this is the price we pay in order not to be a bana republic.

  37. Transor Z says:

    Once Ross Perot sold his copy of the Magna Carta to the satan worshippers in the Carlyle Group the game was over. Over.

    Eh?

  38. wally says:

    We don’t seem to mind filling up our prisons with pot smokers. I guess stealing money is OK but personal pleasure is not.

  39. 873450 says:

    The concept of government taking down a TBTF investment bank operating as a racketeering enterprise via RICO is unthinkable today.

  40. [...] Why hasn’t there been more prosecution of financial fraud?  (Big Picture) [...]

  41. Mutant_Dog says:

    These allegations appear to offer juicy possibilities for civil action, possibly class-action – some contingency-fee law firm ought to take up the specialty.

  42. MrPickle says:

    A very wise man on said, “The banks break the law because they have to.”

  43. janchup says:

    People talk about “politicians” as if it were abstract. There is only ONE politician and he and his orchestrated cover-up are ENTIRELY responsible.
    And keep the hell moving forward, no laws were broken.

  44. ES says:

    > BR: Do you really believe that

    a) the crimes are similar?
    b) the reasons for non prosecution are similar?
    c) the enforcement difficulties are similar?

    Smells like a pet peeve . . .

    —————————————–

    I live in Houston, which is practically overrun by illegal immigrants, gangs and drug cartels. It might sound like a pet peave to someone coming from area where illegal immigrants 1-5% of the population. When they are 30-50%, it is a problem, trust me. The city is becoming a ghetto fast. The schools are badly financed because, obviously, illegal immigrants are poor and pay little taxes. The prisons are full. The hospital emergency rooms have 48 hour waiting with people dying.

    The crime is actually similar – financial fraud. Most illegal immigrants steal identities in order to work. The ease of prosecution is there – the federal govenment knows all the fake / duplicate SSN numbers. But there is no will to prsecute because of the powerful interests involved.

    I am an immigrant myself. I went through 15 year IRS joy ride to get US citizenship. So, I am not really prejudiced. I am just telling it as I see it. Immigrants should contribute to the society in order for it to be sustainabe. Illegal immigrants contribute to corporate bottom line, but are a negative for the local society.

  45. Futuredome says:

    lol, considering that the banking system had fraud in it in 1960, 1920, 1890, 1870…….you get the point. Your saftey zone has just been ripped away.

  46. Futuredome says:

    “The rule of law is the only thing that is still separating US from a banana republic”

    What world are you living in man? The “rule of law” is for whoever owns the gold. We didn’t have a rule of law in 1887 nor 2011. The main difference was the government financed post-war industrial boom and then the private credit boom. They blinded all of you.

    You are a generation of people who have the easy life.

  47. senjapet says:

    To prosecute crimes as per the spirit of the law, one has to have an independent, accessible and affordable judiciary. American is not. To regulate effectively, one has to have an independent, prosecorial regulatory agency. American is not.
    The Republic has been lost for quite some time now, by Plutocratic stranglehold over the Representative candidacy which fashions loophole laws that ensure win-win for the Plutocrat and their servants in all of the branches of the government.
    The Republic can only be regained by a significant Constitutional amendment process that redesigns the checks and balances that were intended and should exist, but do not. Checks and balances must be done based on all available theory and practice of preventing abuse of fiduciary duty and continuously improving the results.
    It’s the elephant in the room and the proof of that is that it continues to go unspoken for.

  48. jadogsl says:

    It used to be that the issue was the Self Regulatory Organizations. Now we have a new SRO. The United States of America
    Regulatory Capture. It’s not just for certain industries anymore. It’s way the whole system operates now.

  49. StatArb says:

    Gotta love it when you stir up the Tin Foil Hat wackos

    Merry Christmas

  50. Bill Wilson says:

    Unwillingness to prosecute financial fraud is another problem caused by TBTF. It could also be called TBTP, too big to prosecute.

  51. 873450 says:

    MrPickle Says: “The banks break the law because they have to.”

    Banks don’t “have to” break the law. They do it because they can.

  52. 873450 says:

    Bill Wilson Says: “TBTP, too big to prosecute.”

    How about TBTS, too big to save?

  53. AtlasRocked says:

    The story of the year, a Pulitzer prize, will go to the reporter that outs why Obama isn’t prosecuting the list of crooks in the FCIC report, as featured on 60 Minutes.

    These are Bush era crooks – frequently listed as the “key perps” from left and right alike – but Obama/Holder are holding up prosecutions while they point at the 1% with OWS !!!

    Why would a President point at the 1% as “bad guys” after being a part of a scorned “secondary” class of US citizens for years? Why would he now relish the role of a bigot? While pointing at the 1%, he sits on a stack of indictments and subpoenas? And plays the role of bigot-in-chief?

    Who will be the news organization, the reporter, or blogger that wants to make a name for himself? Why the completely opposite behaviors regarding Obama’s allies, scorn, minority sensitivity, and prosecutorial stalling?

  54. [...] discretion.” Just what we want. Bloomberg on Obama’s signing statement. If (and I say if) the rule of law still exists, NDAA might not be as bad as some think. Then again, depending on how [...]

  55. [...] to express their disgust about government permissiveness toward such egregious conduct.  At The Big Picture, Barry Ritholtz shared his reaction to the Reuters article: The fraud is rampant, self-evident, [...]