Some views: (extremely oversimplified to make a point)
(1) Poor people scammed the banks into giving them bad loans.
(2)You can think that Banking industry took advantage of the deregulation and bank friendly laws to make risky investments.
(3) Knowing that there was no meaningful oversight, the banks committed incalculable amounts of fraud in all of it's forms.
Number 1 is just stupid and completely factually wrong, but it allows conservatives to blame the poor for something, which is no doubt why many of them believe this myth.
Number 2 is right and very important, but is also far from the whole story.
Number 3 is also right, and is something I still don't think most people fully understand about the crisis.
Back to my point earlier, your view of what occured is very imporant in setting the course for how to clean up the mess. Based on Obama's response to the crisis this isn't particularly surpising, but it's very upsetting to hear him say this: (via dday)
“Banks are in the business of making money, and they find loopholes,” the President said.So he's right that businesses find loopholes and exploit them, but he's spectacularly wrong that no one broke the law. It's a convenient thing to say when your Attorney General is doing nothing to prosecute those people, but that doesn't make it true. Yves Smith:
Many of the practices on Wall Street “weren’t necessarily against the law but they had a huge destructive impact,” said the President.
Is breaking IRS rules a “loophole”? How about making repeated false certifications in SEC filings? Or as Dayen points out, fabricating documents? Or making wrongful foreclosures, aka stealing houses?There were crimes committed. If you're just trying to rebuild a broken system, you can't whitewash a major part of the problem. Unfortunately the White House seems hell bent on doing just that.
The Administration’s strategy for maintaining this posture is by being anti-investigation and anti-transparency. As we’ve discussed, the stress tests were a sham. The foreclosure task force didn’t even try to look serious, it was a mere 8 week investigation and of 2800 cases chosen for review (in no scientific manner), only 100 were foreclosures. The US Trustee’s office found a level of servicing errors more than 10 times that asserted by banks and happily parroted by Federal banking regulators. We expect readers could add to this list just as readily as we can.
There are plenty of grounds for legal action. Contrary to the Obama/Geithner position, this is a target rich environment. And some of the violations were persistent and deliberate enough that they might well raise to the level of being criminal. This is a mere illustrative tally:
1. Violation of REMIC (real estate mortgage conduit) rules, which are IRS provisions which allow mortgage backed securities to be treated as pass-through entities. As we’ve indicated, the violations were clear cut and are easily documented. Moreover, when the senior enforcement officer in the IRS was alerted last year, she was keenly interested. But the word that came back was the the question had gone to the White House, and the answer was to nix going after these violations: “We are not going to use tax as a tool of policy.” So this is not a case of creative use of “loopholes,” this is prima facie evidence of an Administration policy of protecting the banks.
2. Consumer fraud under HAMP. Catherine Masto of Nevada has already delineated this case in her second amended complaint against numerous Bank of America entities (in fact, the evidently clueless President could find a raft of other litigation ideas in her filing). All the servicers engaged in similar egregious conduct.
3. Securities fraud by mortgage trustees and serivcers. While the statute of limitations for securities fraud for the sale of toxic mortgage securities in the runup to the crisis has now passed, securitization trustees and servicers are making false certifications in periodic SEC filings. In layperson terms, the trustee certifies that everything is kosher with the trust assets. As readers well know, in many cases the custodians do not have the notes or they were not conveyed to the trust as stipulated in the pooling and servicing agreement (as in they were not properly endorsed through the chain of title).
Now of course, pursuing this sort of litigation would blow up the mortgage industrial complex. But it represents a powerful weapon to bring unrepentant bankers to heel.
4. Widespread risk management failures as Sarbanes-Oxley violations. As we’ve discussed, Sarbox provides a fairly low risk path to criminal prosecutions. And we believe the SEC has been incorrectly deterred by an adverse ruling in the early stages of its case against Angelo Mozilo. In that case, the judge (with no explanation of his ruling) barred the SEC from claiming SEC violations (which this case did) and double dipping by adding a Sarbox charge (securities fraud statutes parallel Sarbox language; indeed, that was one of the complaints re Sarbox, that many of its provisions were already represented in existing law). That’s far more significant than it appears. As we argued in an earlier post, the language in Section 302 (civil violations) tracks the language in Section 906 (criminal violations). A win on a Section 302 case would thus set up what would appear to be a slam dunk criminal case.
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