I have diaried about the recent adoption by some Kossers of the Right Wing Meme to impotently focus the blame on the principle home borrower who might receive a measured assist, instead of the lenders, the flippers and speculators and the "recruiters" who conspired both through "willfull blindesss" and actual hard tack conspiracy to systematically pillage the lending system by what appears to me the most obvious potential group - money launderers who washed stacks of cash lending out drug profits, then immediately recouped their money when Wall Street purchased the loans from them.
Former Financial Regulator and White Collar Criminologist William K. Black writes:
The FBI has been warning of an "epidemic" of mortgage fraud since September 2004. It also reports that lenders initiated 80% of these frauds.
That's just initiated. We know they approved 100% of them. The other 20% are not defined. Possible parties would seem to include Mortgage bundlers and purchasers, brokers, real estate agents and borrowers.
From the Seattle PI
Both retired FBI officials asserted that the Bush administration was thoroughly briefed on the mortgage fraud crisis and its potential to cascade out of control with devastating financial consequences, but made the decision not to give back to the FBI the agents it needed to address the problem. After the terrorist attacks of 2001, about 2,400 agents were reassigned to counterterrorism duties.
"The FBI's Criminal Division has arrested 1,000 suspects and targeted 180 criminal enterprises since 2004," Kaiser said. "We targeted those lenders and buyers involved in multiple frauds or cases where the profits went to drug crews, gangs or organized crime. More investigations are ongoing. But the FBI is a law enforcement and intelligence agency, we are not banking regulators."
* nonprime lenders are overwhelmingly responsible for the epidemic
* the fraud was so endemic that it would have been easy to spot if anyone looked
* willful blindness was essential to originate, sell, pool and resell the loans
* the worse the nonprime loan quality the higher the fees and interest rates, and the faster the growth in nonprime lending and pooling the greater the immediate fictional profits and (eventual) real losses
* the greater the destruction of wealth, the greater the (fictional) profits, bonuses, and stock appreciation
* many of the big banks are deeply insolvent due to severe credit losses
* those big banks and Treasury don't know how insolvent they are because they didn't even have the loan files
One Further Black Conclusion-
* a "stress test" can't remedy the banks' problem -- they do not have the loan files
One document uncovered shows the reply to a professional credit rater at Standard and Poor's who actually wanted to investigate the mortgage loan files he was rating. A senior manager replied:
Any request for loan level tapes is TOTALLY UNREASONABLE!!! Most investors don't have it and can't provide it. [W]e MUST produce a credit estimate. It is your responsibility to provide those credit estimates and your responsibility to devise some method for doing so.
"produce a credit estimate"? Really?
Geithner's stress test will never come close to the truth of the situation. Unless, he produces one like Standard and Poor and the lenders "produced" their documents.
So, for everyone who would rather use the actions of a few bad borrowers to punish the innocent and their neighbors, and those who believe "liar loans" are suburban legends, please keep harping about "Foreclosure" queens and sleep easy because there isn't anyone out there who was defrauded by a bank, who didn't fall behind on a payment because of health issues and couldn't negotiate with their "note" holder because no-one knew who held their note. No borrowers are being unjustly treated.
There was no multi-faceted institutional fraud whatsoever and they have the paper work to prove it.
UPDATE - wavpeac diaried about it here
UPDATE II JRandomPoster added this link to Seattle PI coverage
UPDATE III Michelline linked to aTPM article - The banks want an out for all of the fraud they perpetrated. They don't want their "Minor Violations" to get in the way of foreclosures.
Thanks for the recs. My wife still doesn't understand why I'm happy about it. She's a DKos widow.