The remnants of the Bush administration are working hard to cover the tracks of their patrons who facilitated mortgage fraud:
The Bush administration is rejecting FBI pleas for more agents to investigate crimes that helped trigger the global financial meltdown, bureau sources said this week.
"They are bogged down big-time or there would be some indictments by now," said a recently retired bureau official who played a pivotal role in setting FBI policy after 9/ 11.
The FBI's response to the meltdown stands in sharp contrast to past financial crises, he said. "There are three comparable things ... the S&L crisis, corporate fraud like Enron and health care fraud. There was a clear, well-delineated effort there. I don't see it here."
Pre-9/11 FBI would have been all over this. The shift towards investigation of terrorism and other national security issues created a vacuum in law enforcement that created an environment in which financial crimes like mortgage fraud could be carried out. The further we get from the crime, the more opportunity perpetrators will have to cover their tracks and obfuscate their roles.
The scope of the task facing FBI agents is enormous:
He said that it is unclear how many more agents are needed to address the mortgage meltdown and related corporate fraud, because the full scope of the problem has yet to be uncovered. However, just on the basis of the current cases, the bureau needs at least 300 to 400 more agents investigating the financial crisis, the official said.
Bush's proposed budget calls for increasing FBI funding in 2009 by $451 million, to $7.1 billion. That includes funding 280 additional agents for national security programs, but adding none for criminal programs.
If the WOT is such a success as McCain has stated, then why not re-prioritize assets to squelch fraud?
One way the fraud was perpetrated wasthe application of pressure on mortgage industry workers to approve questionable loans. The approval of these loans ultimately benefited management of lending institutions like Washington Mutual:
As a senior mortgage underwriter, Keysha Cooper was proud of her ability to detect fraud and other problems in a loan application. She says a decade of vetting mortgage documents had taught her plenty.
But as a senior mortgage underwriter at Washington Mutual during the late, great mortgage boom, Cooper says she found herself in a vise. Brokers squeezed her from one side, superiors from the other, and both pressured her to approve loans, she says.
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When underwriters refused to approve dubious loans, they were punished, Cooper says.
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One loan file had so many discrepancies that Cooper was certain it involved mortgage fraud. She turned the loan down, she says, only to be scolded by her supervisor.
"She told me, 'This broker has closed over $1 million with us and there is no reason you cannot make this loan work,' " Cooper says. "I explained to her the loan was not good at all, but she said I had to sign it."
The argument did not end there. Cooper says her immediate boss complained to the team manager about the loan rejection and asked that Cooper be "written up," with a formal letter of complaint placed in her personnel file.
Cooper says the team manager told her to "restructure" the loan to make it work. "I said, how can you restructure fraud? This is a fraudulent loan," she recalls.
Cooper says that her bosses placed her on probation for 30 days for refusing to approve the loan and that her team manager signed off on the loan.
Four months later, the loan was in default, she says.
Cooper cites another example:
Vetting a loan one day, Cooper says she became suspicious when a photograph of the house showed one street address while documents deeper in the file showed a different address. She contacted the appraiser, who said he must have erred and that he would send her the correct documents.
"So then he sent me an appraisal with a picture of the same house but this time with the right number on it," Cooper recalls. "I looked the address up in our system and could not find it. I called the appraiser and said, 'Please investigate.' "
The appraiser came back, reporting that a visit to the California property had found everything in order and in agreement with the original appraisal. "I was so for sure that it was fraud I wanted to get on an airplane," Cooper says.
The $800,000 loan was approved, but not by Cooper. Six months later, it defaulted, she says. "When they went to foreclose on the house, they found it was an empty lot," she recalls.
So this borrower stole $800,000 from the banks depositors (including members of pension funds who had invested in WaMu), and the federal agency charged with investigating crimes like these cannot provide the human resources to prosecute because its budget authority is refusing to give it those resources.
Its hard not to be bitter when you contrast these kinds of administrative decisions with the huge bailouts offered to Goldman Sachs and AIG, especially in the context of news today that bailout funds will not be offered to General Motors. This federal government exists to only to benefit robber barons, and when called on to help working people, it does whatever it can to push their faces in the mud.