One of the great “mysteries” of the post financial crisis era is why obvious criminality has not been prosecuted. We have been told it is more complex than it appears; that the securitization process has made determining exactly who was harmed complicated; that this complexity makes convincing a jury a crapshoot.

All of these arguments fail to withstand even cursory scrutiny when it comes to foreclosure fraud. The Robo-signing, document fabrication and mass perjury were fish in a barrel for even a newbie prosecutor. Why did the government fail to go after the perpetrators of mass fraud?

An Inspector General’s report released this week by the Justice Department raises that exact question.

A quick reminder: The high speed assembly line production of subprime mortgages led to a series of errors in the securitization of these mortgages. This was facilitated by an extra-legal entity names MERS (they facilitated the securitization process with very sketchy behavior worthy of a column itself). The pressure to push these mortgages rapidly along led to lots of avoidable errors: Missing mortgage notes, bad or outdated information, error-riddled underwriting. Who actually owned the underlying note often was unknown.

As these poorly assembled sub-prime mortgage began to collapse, banks were faced with an expensive legal issue: How to process a massive number of foreclosures. Rather than perform this in a prudent and legal manner, some banks made the decision to take inexpensive – and illegal – shortcuts. They hired firms like the now defunct DOX to fabricate documents for court. DOX even published a list of docs they were for willing to artificially manufacture for trial. This “DOX perjury price list” was one of many factors that eventually led to its demise.  continues here

 

Category: Foreclosures, Legal, Really, really bad calls

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.

19 Responses to “The Cowardly Failure to Prosecute Bank Felons”

  1. Moss says:

    Much like the failures to hold anyone accountable for ‘Enhanced Interogation’. Eventually what goes around comes around.

  2. DeDude says:

    How to rob a bank? —- get one of your boys to be in charge of the DOJ.

  3. rd says:

    There was nothing cowardly about it. It was a classic case of crony corruption where the stability of the people inside the financial firms was viewed by the regulators as being as important as the stability of the TBTF firms themselves.

    I do a lot of work for the industrial sector. It has been clear to me over the past decade that it is very important to that sector of the S&P 500 that they represent their liabilities accurately in their financial statements because of SarbOx and other laws. We are frequently providing information so that their accountants can accurately assess their liabilities. None of those executives want to go down for Enron-style book-keeping. We may see bad decisions and overpaid executives in that sector, but I would be surprised if there were many major financial shenanigans going on.

    However, it was made very clear to everybody that the DoJ had no intention of pursuing individuals in the financial sector for fraud in the financial crisis. They will go after the traditional soft belly of insider trading but they don’t want to go after their friends at the banks. There were so many opportunities to even use the little things like the gross abuse of notary public stamps to unzipper the organizational structure from the bottom up over the past five years, but they refused to even start the process.

    Unfortunately, I think that the refusal to even investigate is indicating to the financial sector that it is open season with no bag limit. I suspect that we will again find a lot of people swimming naked in illegal waters when the tide recedes in the next crash. The cycle will continue to repeat until DoJ decides to act and put people in jail. Corporate fines won’t do anything unless the companies can retro-actively claw back bonuses based on the illegal activities or the fines are so big that they materially impact profits to the point that crime does not pay.

  4. Concerned Neighbour says:

    Great column BR. I especially like point #2. Non-prosecution implies the system is still believed to be extremely fragile. It further feeds the perception that some people, by virtue of their position, wealth, and resulting influence, are above the law. Whether grounded in reality or not (I tend heavily to the former), this perception has a profound effect on citizen morale and confidence, and that can’t be good for the economy.

  5. VennData says:

    Well, who should be charged with what crimes?
    GIve us the list. Otherwise, it’s arm-waving.

    ~~~

    BR: See these posts for a laundry list

    Legal

    Foreclosures

    • VennData says:

      Just never see a list of actual names and crimes. Not post aboot how angry folks are.

      Mozillo copped a plea. Who else exactly and what crimes? That would be useful.

      • VennData says:

        Here is what I read there have been 107 people indicted and the banks paid $25B. Who did they miss? Quote from linked NY Times article…

        “… 107 peopele were charged…”

        Who did they miss? And what did the people they miss do?

      • rd says:

        Here is the scale of the prosecutions in the 1990s S&L crisis. There were over 30,000 recommendations for prosecutions form the regulatroy teams that went in to clean up the S&Ls. This led to a thousand individuals with felony convictions.

        http://billmoyers.com/2013/09/17/hundreds-of-wall-street-execs-went-to-prison-during-the-last-fraud-fueled-bank-crisis/

        The mortgage servicing industry alone could probably have yielded a thousand felony convictions from the rampant document procedure abuse. We will never know who really should have gone to jail because you actually have to investigate to figure that out. In many cases post 2008, the DoJ didn’t even issue subpoenas for documents or depose people. The statute of limitations has run out on most of the bad behavior that led to the financial crisis, so that chance is gone.

        The fines the firms pay are just a cost fo doing business, similar to havng to pay for parking. It is jail time that gets attention.

      • VennData says:

        rd states, “…he mortgage servicing industry alone could probably have yielded a thousand felony convictions from the rampant document procedure abuse…”

        All I’m asking for is proof of claims like this.

        The Govt’ dropped hundreds of cases. Why? Because they couldn’t prosecute people fo doing things that were legal.

        Why aren’t the AIG execs who were the real problems – writing Insurance against bank collapses like Lehman’s – out away? because what they did was/is LEGAL in London.

        Why didn’t any Lehman execs get “put in jail” for leveraging up to 50-1? Because Bush’s ownership society MADE IT LEGAL.

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

        I don’t like gov’t protection for so-called risk takers in finance anymore than any commentors or our esteemed host, but the fact is that laws were not broken.

        The media take that “Holder’s original estimates are way off” is a a lie. It’s the flip side of like the Bush government every year estimating an $1,000B deficit and when it was “only” $980B Fox would trumpet how Bush’s policies saved us $20B.

        Holder tried to prosecute. They found that most of the “fraud” was not “fraud” but LEGAL.

        I’m sorry you’re all so angry about the lack of prosecutions. I’m more angry about why the laws were not there in the first place. THAT is the problem. What does it take to get people to understand that?

  6. biotrekker says:

    BR keeps (correctly and eloquently) pounding away at this issue, but will come of it, i wonder? These people all belong to the same “club” regardless of their largely meaningless political affiliations. So they shield each other from accountability and foment the fraudulent concept that prosecuting banksters would lead to economic collapse.

  7. Derektheunder says:

    Amazing that people actually come out to defend them.

  8. biotrekker says:

    No high level indictments, only prosecutions of minor players for fraud against the ‘poor’ banks; and that $25B came out of shareholders’ pockets – not management.

  9. James Shannon says:

    I read your Blog everyday. You are essentially yelling FIRE in a crowded theatre of deaf mutes, and yet you continue on. Please do not stop!
    My brother, 1LT Marine Corps Viet Nam Tet Veteran and Southern California Teacher of the Year, would always start his class with “What is the First Casuality of WAR” to which his class would reply “The Truth”. The truth is “Rule of LAW” does not apply to those who write the rules. The truth is our Government has been corrupted by money, and “Liberty and Justice for ALL” does not exist.
    Americans are being ruled by greed and kept in fear and we all have ourselves to blame for allowing it to happen. A radical change to the TAX CODE would change the WORLD. Unfortunately for the WORLD, government sanctioned GREED is writing that RULE OF LAW.
    Clearly, the RULE OF LAW does not apply to the CentaMillionaire$ and Billionaire$ and that is just a fact of our collective reality, a reality we can do nothing about.

  10. jbegan says:

    Iceland sure did. Lets face it, the US is a corporate monopoly where the CEOs can rape and pillage at will.

    Iceland’s jailed bankers ‘a model’ for dealing with ‘financial terrorists’ — RT Op-Edge http://rt.com/op-edge/iceland-bank-sentence-model-246/

  11. 873450 says:

    China executes banksters and corporate CEO’s found guilty of “Crimes Against the Economy.”

  12. Blissex says:

    «The Robo-signing, document fabrication and mass perjury were fish in a barrel for even a newbie prosecutor. Why did the government fail to go after the perpetrators of mass fraud?»

    Because of the reversion clauses in derivatives, which allow the buyers of derivatives to return them for a 100% refund (even if the market value is pennies on the dollar) if they are found to be tainted by fraud.