While the American public and Capitol Hill lawmakers appear to blame wrongdoing on Wall Street as the primary cause of the global financial crisis, federal law enforcement agencies have had little success in finding and prosecuting instances of fraud at the nation's major investment firms.
That's because they're not looking - that is, they're willfully blind.
The article goes on to assert:
"Originating risky mortgages on its own does not violate the federal securities law," Ms. Shapiro said
That's true.
But lying about the quality of what you're selling both violates Federal Securities Law and in addition violates ordinary fraud statutes. When such solicitations are sent over wires (e.g. electronically) or via the mail both wire and mail fraud statutes are violated. If and when two or more people collude to take such an action federal racketeering statutes may be violated as well.
Ms. Shapiro testified that the SEC had reached settlements with six Wall Street dealers to settle charges of fraud in connection with the auction-rate securities. The SEC secured $60 billion through the settlements to provide full refunds for investors in the securities.
But Ms. Shapiro (and Eric Holder of the Department of Justice) didn't and still won't pursue the larger issue, which was the issuance of literal trillions in securitized debt in 2004, 2005, 2006, 2007 and 2008 following FBI and HUD warnings that very high percentages of mortgages contained in these securities were rife with fraud - yet the offering circulars omitted any mention of these findings and warnings.
Indeed, the "auction rate security" issue - and the "pursuit" of Wall Street on these securities - rests on the precise same issue as does the above - that is, the willful and intentional misrepresentation of risks in the offering circulars for these securities in which self-dealing and the understatement of risk associated with same was intentionally omitted from the prospectuses.
The simple fact of the matter is that there's no crime in speculating and being wrong.
But there are multiple crimes committed when one intentionally obscures, either through omission or commission, risks that one knows of and/or has been explicitly warned about.
Henry Boerner, chairman of the Governance and Accountability Institute, said the publics rage against Wall Street is focused not so much on suspected criminal activity as on the unfairness, lack of ethics and irresponsibility of bankers. However, he said, it is the regulators who should be faulted for allowing Wall Street bankers to take risks, shatter the economy and walk away with big bonuses.
"Voters, constituents, investors, employees, borrowers, homeowners, public officials, entrepreneurs — all have been impacted by the risky and at times reckless behavior of the leaders of the nations largest financial services organizations," he said.
Those who choose to accept risk, knowing fully what they're doing, are not now and never have been the issue. Such people deserve what they get - either for good or bad.
Attention has not been but should be focused on the willful and intentional lack of disclosure of known risks. Given the fact that The FBI was warning of an epidemic of fraud in "alternative" mortgage loan products as far back as 2004 and there were multiple investigations and disclosures in both the media and by HUD in 2006 and 2007 there is absolutely no excuse for the lack of full, fair and proper disclosure in the "products" that Wall Street created and sold on in the years 2004, 2005, 2006, and 2007 - without which neither the bubble or collapse would have occurred.
It has been and is my assertion that massive violations of the law were in fact committed during this faux "boom" and the ensuing bust, that the so-called "earnings" reported during that period in fact were not earned, and that buyers of this "debt" were in fact sold securities that, had the actual known characteristics of the loans contained in them been disclosed, were utterly unmarketable.
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Not that they will do anything about it, but both Holder and Shapiro were asked specifically if they knew about the FBI warnings ("no") and would investigate it ("yes"). It's now up to the commission to follow up, i. e. "what exactly did you investigate?" and "what were your findings?". Don't think our cynicism will be challenged by their efforts, but that's who has the ball.
"But Ms. Shapiro (and Eric Holder of the Department of Justice) didn't and still won't pursue the larger issue, which was the issuance of literal trillions in securitized debt in 2004, 2005, 2006, 2007 and 2008 following FBI and HUD warnings that very high percentages of mortgages contained in these securities were rife with fraud - yet the offering circulars omitted any mention of these findings and warnings".
The witch hunts will come, but not now, and none of the current players will be implicated or punished. Do any of you remember the S&L fiasco of the '80s-'90s? Remember that fine fellow Franklin Raines, the guy who Clinton appointed to oversee the snake pit? Survived the S&L crash, the investigations that followed, and did all right for himself (cha-ching $$$) as I recall. He and Angelo Mozillo probably talk shop about their yachts.
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"In a mania, all investments are at the mercy of the greater fool. As in: if you can’t find one, you’re it." -- Alex Daley
Lrombes, the graph was updated for the 12/10 Fed Z1 release. Final GDP numbers for 2009 won't be in until mid-year 2010; those graphs are updated as the data comes out.
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I don't care if it makes sense -- only if it makes money. -- Me Bank (n): See scam, fraud and theft.Eat a bankster -- they're low-carb. What part of "shall not be infringed" was unclear?
If neither Holder or Shapiro ask Takavoli to "help" their hopelessly inept and/or criminal enterprises, then what is left to ask of wall street, congress and regulators? I am feeling especially aggrieved since, even with a very good connection to Sen. McCain, it is not looking like I will be heard before the Bernanke vote even by a high placed staffer. The evidence mounts by the day that they just don't want to know.
---Attorney General Eric H. Holder Jr.s testimony before the Financial Crisis Inquiry Commission last week, while boasting of thousands of cases against small-time defrauders running mortgage scams, was notable for the absence of a single example of successful prosecution of crimes by the big firms on Wall Street. ---
Now I get it:
1. We are good at getting the little folks ---- the big ones scare us. 2. Wall Street and K Street are much more important than Main Street. (the sardonic nature of comments intended)
3. From Gen:
Quote:
---The simple fact of the matter is that there's no crime in speculating and being wrong.---
Yup, AND if you speculate and guess wrong "We the people" should not be relegated to a level of penury because we had to pay for your mistakes, while you take your $145 billion and lead a life of obscene sybaritic pursuits.
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"---the politicians---they think the laws of mathematics are suggestions." K. Denninger
"The greatest shortcoming of the human race is our inability to understand exponential function." Al Bartlett
i thought i read that buyers of mbs were not allowed to examine the content of them but were only allowed to judge them according to the letters put on them??
Etz3l - yeah - she was grinning because she has em...
I remember that same feeling when I was fighting in the late 90s with [edit:] XXXX regarding my doing his tax return... "Look x, I don't give a hoot if you and your son are president and vice president of the United States... if I'm doing YOUR tax return, I got skin in this game."
[edit:] "I did not spend 10,000s of dollars and over six years extra schooling to become a CPA and tax strategist so that one tax return client can pull me under." XXXX was a powerful client - long life member of CFR.
Thanks Etz31 for the Max Kaiser interview of Janet Tavakoli. I have had this debate with Yves Smith at Naked Capitalism, and she surprisingly believes that no fraud had been committed as everything had been disclosed to the buyer of the bogus securities! Even to the layman, that is impossible to believe. It is always the MO of the fraudster to plead ingorance when cornered.
Of course, America must come to grips with the fact that the USA had as a recent Treasury Secretary a major league felon who committed massive fraud. What kind of fooked up country is this?
So Gen, and readers, what can the "little guy" do? If a sitting Treasury Secretary perjures himself in front of Congress, i.e., Geithner stating that he was not a regulator at the Fed when the NY Fed's website clearly contradicts Timmy - can the average citizen bring charges against him?
Although not widely reported, Geithner also perjured himself in front of Congress when he testified that he first learned of the AIG exec bonuses from his staff in March 2009, even though it had been widely reported in late 2008.
Also, although not widely reported, were Obama's troubling remarks on the Jay Leno show in early 2009 when he quipped to Leno that while the meltdown was serious, no crimes had been committed by Wall Street. This without any investigation!
It is time for folks to take action, but what can be done legally?
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I have a reading comprehension problem and the owner banned me for repeatedly displaying it after being warned.
I have had this debate with Yves Smith at Naked Capitalism, and she surprisingly believes that no fraud had been committed as everything had been disclosed to the buyer of the bogus securities! Even to the layman, that is impossible to believe. It is always the MO of the fraudster to plead ingorance when cornered.
It was eh?
Ok, find me the FBI or HUD warnings in ANY of the prospectuses issued in 2004, 2005, 2006, 2007 or 2008 for ALT-A securitized RMBS.
Just find one.
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I don't care if it makes sense -- only if it makes money. -- Me Bank (n): See scam, fraud and theft.Eat a bankster -- they're low-carb. What part of "shall not be infringed" was unclear?
I've been reading a Collosal Failure of Common Sense. I'm only two thirds into the book. I hope the author (Lawrence McDonald) doesn't mind my making an occaisional, but small quote.
Before I do, it is deserving of a free plug. It's an excellent read, and well worth buying. He's down to earth, doesn't hide any of the fraud, and has at least a thousand passages worth quoting. Any typos would be my own.
Quote:
"He also never mentioned that not only were the mortgage holders running for their lives but U.S. investors were finally saying no--and that finance houses appeared to have no alternative but to start moving those toxic loans abroad in ever-greater volume. That way they could cripple the entire globe, instead of just America. Chris attempted to belittle the importance of this development by mentioning, somewhat loftily, that subprime mortgage securitization accounted for less than 3 percent of Lehman's total revenues. What he did not say was that there was a growing mountain of these things piling up, not sold, unloved, massive potential liabilities, yet deftly removed from the balance sheet by means of qualified special-purpose entities. In other words, accounting sleight-of-hand, witchery, trickery, sorcery, or skullduggery. Now you see it, now you don't.
Just read this outrageous mangling of the language to conceal the truth at any price."
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=========================================================== " October is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February."
and lead a life of obscene sybaritic pursuits. 