FBI Investigations and Government Bailout Schemes

The last few days have created a lot of conversation from people and Congressmen. It seems like some are beginning to wake up and smell the wilted roses.

Following are reprints of comments I have made recently on FlippingFrenzy.com. The article title is linked to the site for your reference. I am reprinting my comments as they describe my beliefs and point of view.

I am not in favor of this or any other bailout plan. Let the free market dictate who survives and who does not. As you will see in my last comment below, I believe there is a far greater plan in effect here that is not for the benefit of the people of this country.

None of these bailouts directly impact or offer badly needed help to Main Street, you and me. Why then you must ask is our government dong this.

Your comments are welcome.

Mortgage Fraud and the Housing Bailout by Ralph Roberts

Comment 1:

Finally!

Maybe someone out there has been listening. Ralph, you are finally beginning to put the blame where it should be.

As I have been saying and writing for many months now, “how high the fraud”? Perhaps now we can vindicate many of the mortgage brokers in the sub prime industry for being wrongfully accused of creating this crisis, however late it may be. It is much like letting a person out of prison after years of confinement only to find them innocent. You can’t give back the years they lost and you can’t give back the industry and jobs lost by the hundreds of thousands.
The corporate executives of these companies now under investigation knew full well what the end result of their schemes would be. After all, they are intelligent with a full understanding of how the system works. They worked the system, enriched themselves along with their inner circles and select employees at the expense of the entire nation.

Indeed, they formulated a plan, executed the plan and sold the concept of “free” money through real estate acquisition to an all but too willing population wanting a better life. In other words, they took advantage of people’s dreams and desires, they dangled a carrot and sucked everyone in. They wrote the book “Fraud For Dummies” and it was a best seller.

They said, we’ll give you something for nothing, in fact, you can have as much as you want for nothing, all we want is your signature. It is a fact that every signature they got they were able to multiply up to sixty times the value of the note. For every dollar you signed for they could make up to $60.

In my article posted here back in February, The Credit Crisis – Subprime Mortgages and Various Idiots, I said, “This could be the greatest Ponzi scheme in the history of the world, and the perpetrators have the nerve to blame it all on mortgage brokers.”The total count of corporate investigations given by the FBI is 26 although they do not name any of the others. I would only hope that Merrill Lynch and Bear Stearns are being investigated as well. I have long laid blame on them as well. Merrill, Bear and Lehman were the sub prime industry. They created the programs, issued the underwriting guidelines and sold the securities to a long line of waiting investors – also duped in believing these were AAA rated issues.

Perhaps J.P. Morgan should be investigated for planning a Sunday evening rescue of Bear Stearns with the aid of the privately and secretly owned Federal Reserve Board, much of which has been controlled for years by J.P. Morgan through his seat on the Board of The New York Federal Reserve Bank. J.P.’s Chairman, Mr. Dimon, still retains that seat. Was this 11th hour rescue to the tune of $55 Billion of taxpayer money just a cover up? Maybe the FBI will discover the truth and the truth needs to be known by all Americans.

The AIG bailout is probably another cover up as would be the $700 billion currently being proposed. None of these bailouts trickle down to any of us, it only obligates each and every one of us and many future generations to this debt.

So FBI, if you do browse this blog as it is said you do, my congratulations for doing your job and protecting the interests of the people of this country. You have the power. Use it to maintain the integrity, honesty and most of all the American way of life for your fellow citizens.

Comment by Larry Rubinoff — September 24, 2008

Comment 2:

“Give me control of a nation’s money and I care not who makes her laws.”Mayer Amschel Rothschild (February 23, 1744 – September 19, 1812)

Rothschild basically founded the central banking system and was instrumental in its formation in the U.S. His colleagues and partners were none other then August Bush – George W’s great grandfather – who headed up The Bank of New York – which in turn financed Hitler and J. P. Morgan – helping him create his empire. These two were instrumental in the formation of The Federal Reserve and The Federal Reserve Bank of New York where as I said earlier, J. P. Morgan still maintains a seat. It is said that by controlling The Fed Bank of N.Y. you control the Fed itself.

Do your research on Rothschild and you will find that he laid out a plan in the late 1700’s – an economic plan that would control most of the world’s economy. In part he called it “The New World Order”. Sound familiar? His plan, which is published and can be found on the internet is being executed today. President Bush is so quick to socialize our financial institutions with almost dictatorial powers. If you read about Rothschild and the Bush/Morgan connection you will understand why. There is no doubt in my mind that the Bush’s are part owners of The Federal Reserve.

Steve, you are correct. The old saying, “he who has the gold rules” has never been more evident then it is today. In fact, that is what Rothschild was saying and what our government is doing today.

Politics have always been dirty but never as it is today. Socialism is a very close cousin to communism which is a first cousin of facism.

Continuing to allow these massive bailouts – a cover up – will mean total control by government – now an entity unto itself and no longer representative of the people. The government will decide if and under what terms you get a mortgage, a car loan, a student loan and perhaps even a job. If you don’t belong to the right party or totally support it you may be denied your loans, a home and transportation.

Don’t think it can’t happen. My father, a Holocaust survivor, back in the 50’s attempted to get his electrical contractors license for several years in the town we lived in. Each time he failed the test by just one or two points. Since he had an excellent reputation as an electrician and was well respected at City Hall, some one at the city suggested he change his party affiliation from Democrat to Republican and he would get his license. He did that and yes, the very next time he took his exam he passed with flying colors.

If we as citizens continue to behave as “sheeple”, allowing the greed and fleecing of America by our elected officials and their corporate cronies, we are doomed.

Comment by Larry Rubinoff — September 24, 2008

Comment 3:

This was all an orchestrated, collaborative effort between government and the private sector financial institutions driven by greed on both sides.

Our politicians dance to the tune of the same drummer, The Fed.

During the Clinton years we saw the emergence and tremendous growth of sub prime. Lenders went from a handful – like Ford Motor Credit – to hundreds of bank subsidiaries around the country. And yes, it was at the governments request that more money in the form of credit was made available.

Sub prime was not the problem. Criteria such as Debt to Income, reserves and value were all taken into consideration. There were no problems then and we did see a period of declinging markets and values. The only difference was a much higher rate as those borrowers already exhibited a poor payment history.

Rates were as high as 16% but again, the borrower had to prove that they could afford it. Having bad credit did not mean you did not have the ability to pay.
The problem arose when the rules of engagement were changed. Eliminating any evidence of ability to pay and offering multiple loans to everyone.

To mask a depletion of our surplus and to take the emphasis over an ever increasing unprecedented deficit and an unpopular war draining trillions out of the economy, the only option left by the Fed and government (they are not one in the same) was to create a credit based (no real cash money involved) economic growth pattern in the only major industry left in this country. By doing so prosperity proliferated the society and society was too consumed by their new found material wealth – real estate, cars, electronics, leisure travel, etc. – to pay attention to or care about the rest.

This is not a normal capital market failure. This appears, to me at least, to be a well planned and orchestrated occurrance.

Pay close attention to the Rothschild quote I gave above.

Comment by Larry Rubinoff — September 25, 2008

Also go to: http://www.TheForeclosureDetonator.org

The "SEC Jihad" and More Truth From the New York Times

A must read article published in the New York Times on line September 19, 2008 written by Joe Nocera. His reference to the SEC not doing their job, calling it the “SEC Jihad”, further points out the lack of oversight that occurred. His analysis and observations, I believe, are right on target.

After reading the NYT’s article then read the next one from a local hometown publication. It raises the question a very important question.

Hoping a Hail Mary Pass Connects
By Joe Nocera
New York Times published September 19, 2008

Henry Paulson at a news conference to announce an insurance program for money market

After reading the NYT’s article, read this one from a small local hometown paper. It raises a very good question.

Asia makes big screens and we just watch TV
Published: Saturday, September 20, 2008 1:38 AM EDT

by Chris Powell

What is it about the United States that every generation it must have a catastrophically mistaken imperial war and a catastrophically expensive rescue of its predatory financial class?A generation ago the catastrophically expensive rescue of the financial class arose from the collapse of savings-and-loan institutions, which had recklessly lent into a real estate boom against deposits insured by the government even as the government paid little attention to what the banks were doing. Today the catastrophically expensive rescue of the financial class arises from the failure to regulate the great New York financial houses, which were allowed to create and misrepresent bogus financial instruments, now called derivatives, and poison the world financial system with them. Ten years ago a few members of Congress proposed regulating these instruments, but Congress was dissuaded by worthies such as Federal Reserve Chairman Alan Greenspan, who testified that derivatives would diminish risk by dispersing it and thus should be left alone. Of course as it turned out so much risk was created and dispersed that it took the world’s economy hostage.

While he now is thundering emptily about accountability, Connecticut’s U.S. Sen. Christopher J. Dodd facilitated this failure of regulation from his seat on the Senate Banking Committee. Dodd was a leading advocate of unleashing the financial houses to do whatever they wanted, as by repeal of the Glass-Steagall Act in 1999. But Connecticut’s other members of Congress were just as negligent and approved staffing the financial regulatory agencies via the revolving door from Wall Street. Of course they financed their campaigns largely with financial industry contributions.Now the country is bankrupt and lemon socialism is replacing free-market capitalism, with the government desperately extending taxpayer guarantees to cover every bit of corporate irresponsibility as the country loses its sovereignty to the nations that hold its proliferating bonds. Asia makes big-screen TVs and Americans mainly just watch television — but not, it seems, much news.

Also go to: http://www.TheForeclosureDetonator.org

Who’s Gulty…We’re Beginning To Hear The Truth

For over a year now, I have been saying that much of this economic crisis and the fraud surrounding it has come from the top. The top being the government, as in lack of oversight by the Securities and Exchange Commission (SEC), top executives of the major Wall Street bankers, the rating agencies and various insurers.

Focus was initially put on mortgage brokers. Wall Street and the banks selling their creative programs tried to avoid any direct involvement by doing so.

While bashing and destroying the mortgage broker industry, the other cause of the problem was put on the sub prime mortgage programs. Mortgage brokers were described as “putting people” into these bad and sometimes fraudulent programs as if they had created them and had the power to do so.

From the very beginning, I have said that the creators were Merrill Lynch, Bear Stearns and Lehman Brothers. They were sub prime. They did, in fact, create the entire sub prime products and markets along with creative financing, limited documentation or no documentation programs. It was their underwriting guidelines and rules that everyone followed.

To allow these Wall Street to securitize loans, thereby creating money out of thin air, they had to show that these investments were secure. The rating agencies, Standard and Poors, Fitch, Moody’s all readily and willingly rubber stamped every issue AAA.

To further this effort the risk was spread even further by insurers reinsuring most of this debt putting another layer of “false” guarantee on risky paper. This debt was leveraged up to 60 times. In other words, for ever dollar of debt obligated 60 additional dollars were created. So if you got a mortgage for $100,000 the banking industry got back $600,000 and all the risk was spread so far and wide that no one can ever put it all together. Instead, we pay to keep it going.

Then it was said that if only all loans followed Fannie Mae and Freddie Mac guidelines that none of this would have ever occurred. Wrong again, as I stated a year ago, Fannie and Freddie were doing the same and I predicted that they would follow the demise of the Wall Street banks mentioned above.

Not even close friends and associates believed me. Sheltered by their own false sense of investment security, no one believed any of these large companies could fail.

Well, here we are. More then a year later and all that I said would come to pass has done so. I am not trying to say, “I told you so” nor am I trying to rub salt into anyone’s wounds. What I am attempting to do is to get people to open their eyes, look at more then just the headline gathering news, sound bites and distorted, cover up stories primarily from main stream media. Perhaps they voluntarily report what the government wants them to.

Bottom line is that we, as a nation are in deep trouble, deeper then we are still being told. But there are those who are beginning to surface publicly attempting to expose the truth and the dangers of our current situation.

Regardless of your political leanings and views, regardless of party lines and regardless of what candidates you may vote for, the fact remains that there are those speaking out the things we as Americans need to know.

John McCain is doing that. In fact in his speeches in Tampa and Ohio he almost reaffirmed all that I have written and said over the past year.

Ron Paul sees and talks the truth. He along with the not so recognized official other party candidates for President see and expose the truth.

Glenn Beck of CNN reports on the realities and true situations of what is occurring not only in our financial markets but in our political system as well.

There are cadres of others who stand with the above and behind them as well. People knowledgeable and experienced in politics, government and economics. People much more credible then I attempting to get the story out so that we, the people, can take back control of the government and right all the wrongs.

We are seeing some very dangerous times. Nationalization of private companies – AIG, Fannie Mae and Freddie Mac – funding of private companies by the government – $65 billion to J. P. Morgan/Chase for the purchase (really a free acquisition) of Bear Stearns – and the creation of debt by a private company – The Federal Reserve.

Dangerous indeed. If the government can nationalize private firms under the guise of a bail out, then they can nationalize everything. Is that not how the Soviet Union functioned? This is the beginning of the elimination of Capitalism.

Allowing some companies to survive by public funds (really debt) is another serious situation. What we are saying is that if you are large enough we will allow you to continue and prosper as long as you listen to our (the government) guidance and desires. As in the Soviet Union, some were allowed to prosper and enjoy a lifestyle not available to the masses.

The Federal Reserve has taken liberties to loan money that will not be available to repayment for years, perhaps centuries. This just secures the financial futures of the owners of the Fed, their families and heirs for ever. Oh yes, I say owners. The Federal Reserve is a private company owned by people not know to anyone publicly. For every dollar they give out or create, we owe them back $1.20. For every dollar that is already issued and in circulation, we pay them $1.20. Don’t kid yourselves, these payments are and will continue to be made until We the People do something about it.

No one says it better then Paul Muolo, a reporter for SourceMedia as reported in National Mortgage News. Follow this link in his latest column What We’re Hearing.

You Decide.

Also go to: http://www.TheForeclosureDetonator.org

Foreclosures Increase 55%… Unemployment at 6.1%

A real economic epidemic.

There is so much hype about the government’s effort to stem the tide of foreclosures through various rescue bills, plans and laws, yet they DO NOT seem to be working.

The latest effort, the takeover of Fannie Mae and Freddie Mac by the Government will also do little to stem the tide. This solution may be good for China’s interests as about 40% of their investments are in those two institutions. Yes, this move will guarantee them their money but at the expense of the stockholders. I also read recently that China will pull back its investments meaning that Fannie/Freddie will have less money to lend – another negative impact on our economy. While it does have some positive international ramifications, I see little benefit domestically. If we think those two companies were run badly before, just wait and see how they will operate under government rule.

It is no surprise to me, as I continually report, that these “feel good” efforts are meant only to comfort the public. We tend to get our news in snippets and on the run retaining only the main sound bites. When the headlines read, “Foreclosure Rescue……” we listen quickly and think, hey, things are getting better. They just said so. Then we tell our co workers, neighbors and friends that we just heard reports that help is on the way and an overall improvement of our economy is near. The comfort train is in motion.

CNBC.com in a report on line last month had the following to say about the state of the housing industry. It is a very good insight as to the state of the economy and the people of our country.

You can view the video at http://www.cnbc.com/id/15840232?video=823836941

The foreclosure rate went up 55% in July compared to a year ago.

• That relates to 1 in every 464 homes.
• There were 272,000 filings in July up 8% from June.
• Bank Repossessions are up 184% over a year ago July.
• Default notices are up 54% over a year ago July.
• Auction sales are up 11%.
• 750,000 foreclosed properties are for sale nationwide as reported by RealtyTrac.
• 17% of all existing home sales in June were foreclosures as reported by the National Association of Realtors (NAR).
• 40% of all sales are bank owned.
  

These figures are staggering. It indicates a rapid decline of our economy, escalating each and every month. Yet, Recession is not yet admitted.

Just do the math. If there were 272,000 foreclosure filings in July, 8% more then in June then June filings had to be around 254,000. Adding June and July together, we have a total of 526,000 homes in foreclosure in just two months.

Averaging June and July foreclosures we get an average of 263,000 homes per month. On an annual basis that is (263,000 X 12) a total of 3,156,000 homes per year. Yes, over THREE MILLION homes for the year.

If that figure is not staggering enough let’s see how that relates to people and not so much to brick and mortar and the economy. If the average household in America contains 4 people then we now have (3,156,000 X 4) 12,624,000 people affected. People of all ages, sizes and shapes – older folks, middle age folks and children who are too young to do anything – traumatized, displaced and broken.

If we take the averages above and project them 4 years into the future and add in the same numbers for last year the foreclosure crisis will affect around 63,120,000 people. As I see it, almost 20% of our entire population.

Add to this the ever increasing unemployment rates, high food and fuel prices and we have an economic epidemic of unprecedented proportions.

Government has appropriated billions of dollars for various rescue plans and corporate bailouts. One needs to ask, who does all this money really benefit? Obviously not the people.

We have allowed our large corporations to rape and pillage and they continue to do so. Not only did they make billions of dollars making loans, they made more billions securitizing these loans to sophisticated investors world wide. Now, through foreclosure they will once again profit through fees and charges for their services – all at the unconscionable expense of the American people.

There is a fraud occurring here beyond any we have seen to date. The victims are not just those that suffered at the hands of fraudsters and scammers – the victims are our entire nation of people – a real economic epidemic.

The latest unemployment figures released said there were 9.4 million people unemployed with over 562,000 new unemployment filings in July. What we need to remember about the total figure reported is that it only includes those still receiving unemployment benefits and does not include commission workers, many domestic workers, self employed and others not eligible for unemployment benefits. So it could well be argued that those figures could potentially be twice as large at the very least.

But using the published figures let’s see how this really impacts us as a nation.

If the new filings average 562,000 (figures increase each month so this figure would be conservative) and we annualize this, then we can expect another 6,744,000. If we add that to the existing 9.4 million we have a total of 16,144,000 – an even greater economic epidemic.

If each of these unemployed spends an average of $3,000 per month and now is limited to $1,000 that would mean that there is over $32 Trillion ($32,000,000,000) not circulating in our economy.

With no real improvements in sight for the economy, with no real plan for improving the economy and the lack of available capital and credit, we as a nation are suffering.

Our leaders still fail to call this a Recession when in fact, it may be the “Greater, Great Depression”.

We as a people need to come together, not only to help each other, but to come together as a group, with a strong voice that says, “We’re mad as hell and we’re not going to take it anymore”.

Those of us who grew up in the 60’s and 70’s did it then. Where are we now when the same voice we used then is needed even more now.

Also go to: http://www.TheForeclosureDetonator.org

Fannie Mae and Freddie Mac Takeover Reactions

A false sense of security may have overcome everyone when the Treasury came riding in a “painted” white horse to save the day. Perhaps the horse they were riding was a black stallion adorned with armor as was its rider. They are prepared for battle, not for the good of the people but for some other causes.

Initial reactions by the mortgage market was an increase in rates, yesterday and another increase in rates today while the stock markets had a positive upswing. You will see a potential reason for this below.

Below are excerpts and my commentary from an article posted in one of the most honest publications on the web, Mortgage News Daily. Titled, “Experts Moderate Initial Enthusiasm for GSE Takeover”. As you will see, the quotes were taken by MND from sources such as Forbes, The Wall Street Journal and The New York Times.

“Reading through it all one gets a strong feeling that Freddie and Fannie aren’t necessarily dead, a huge battle is looming, and the Bush administration may pay a price for their actions.”

Larry: I believe we will all pay a price for this.

“…by the end of the day Monday, concerns about bank solvency and the weak economy returned.”

“Former Presidential candidate Steve Forbes, writing in his magazine suggests that the Treasury Department’s actions were taken months too late but that now the two companies (who Forbes has renamed Fonie and Fraudie) should be broken up into 12 new companies, recapitalized to the tune of $300 billion and both common and preferred stockholders in the old companies allowed to trade their shares for common stock in the new companies.”

Larry: Fonie and Fraudie, very appropriate Mr. Forbes. I also agree that stockholder should be protected and not wiped out.

“The New York Times is reporting that “policy makers and Congress began [on Monday] what promises to be an epic political fight over how to revamp the companies once the current crises ends.” These same factions, The Times reported, have also begun the ritual of assigning blame for events leading to that crisis.”

Larry: The blame game again. Why don’t they just accept the blame as they should?

“The Times states that some senior Treasury Department officials want to shrink the companies and turn them into public utilities. This would result in tightly regulated entities with smaller investment portfolios. Another version would turn the GSEs into pure government agencies with management vested in government officials and profits returned to the Treasury. However, the paper also reports that many Democratic lawmakers still see Fannie and Freddie as instrumental in providing more affordable housing.”

Larry: As I warned, watch out. Shrinking the companies reduces money availability. Having given Treasury too much power they can now do what ever they want. They are not for the people.

“In the meantime, Congress and the White House exchanged angry words over how the mortgage debacle played out. Presidential press secretary Dana Perino said that Congress had failed to act on administration recommendations for avoiding the crisis while Senator Dodd accused Treasury Secretary Henry Paulson of misleading lawmakers into giving him authority to spend huge amounts of money the rescue the GSEs while “assuring them at the time that he had no intention of using that authority.” Dodd said that he had taken the administration at their word and said it found it hard to believe that the takeover was going to happen.”

Larry: Treasury lied to Sen. Dodd. No, our government doesn’t lie to us, do they?

“Both Schwartz and the three reporters who wrote the WSJ article referenced above (Deborah Solomon, Michael Corkery, and Liz Rappaport) suggested that the takeover was pushed to a great extent by concern expressed by Asian investors who apparently regarded the close association of Freddie and Fannie with the U.S. government as a guarantee of their investments in the two companies.”

Larry: As President Reagan used to say, “here we go again”. I agree this move was meant for Asian investors. We need China, how else would Wal Mart stock their shelves. So, let’s protect Asian Investors by screwing American and other investors. Truly a government working for our common good.

I rest my case!

Also go to: http://www.TheForeclosureDetonator.org

Flippingfrenzy Post on FBI and Mortgage Fraud

FBI Responds to LA Times Article on Mortgage Fraud as published in Flippingfrenzy September 3, 2008.

This is an article published today which I felt was important enough to reprint here along with the response comment I made.

There is much more to this so called “mortgage meltdown” that has not even begun to surface. As you will see in my comment, this is no longer, and probably never was, a mortgage meltdown, it was and is, in fact, a Main Street – Wall Street banking debacle. A Banking Crisis.

Here is the article:

In a recent Los Angeles Times article about the FBI’s role in the run-up to the current housing crisis, staff writer Richard Schmitt wrote:

Today, the damage from the global mortgage meltdown has more than matched that of the savings-and-loan bailouts of the 1980s and early 1990s. By some estimates, it has made that costly debacle look like chump change. But it’s also clear that the FBI failed to avert a problem it had accurately forecast.

The FBI and its parent agency, the Justice Department, are supposed to act as the cops on the beat for potentially illegal activities by bankers and others. But they were focused on national security and other priorities, and paid scant attention to white-collar crimes that may have contributed to the lending and securities debacle.

As you can see from their response, the FBI didn’t take too kindly to Schmitt’s assessment:

Letter to the Editor Regarding the Mortgage Crisis

Your 8/25 story on the mortgage crisis (”FBI saw threat of mortgage crisis,” L.A. Times, August 25, 2008) implied that if the FBI had made more arrests for mortgage fraud, the crisis could have been averted. To even suggest that is a cry for a lesson in both civics and basic economics.

The story’s premise was built around a 2004 quote from an FBI official who said he was confident the FBI could prevent fraud from becoming a massive problem. In context, Assistant Director Chris Swecker meant he believed the FBI could stay focused on mortgage fraud to prevent fraud from becoming the major driver that would cause a collapse of credit in the housing market. We believe by a good measure, the Bureau did that.

The FBI’s Criminal Division has arrested 1000 suspects and targeted 180 criminal enterprises since 2004. 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.

In the end, most economists have attributed the crisis to very aggressive lending practices and too little risk management throughout the financial services industry. As far as mortgage fraud was concerned, the FBI had the right intelligence and provided the right warnings to the industry, but fraud alone does not appear to be the straw that broke the mortgage camel’s back.

In the boom and bust of the mortgage business, to suggest that making more arrests would have averted the mortgage crisis is to confuse the root cause with the side-effects. It is not a fair or realistic assessment.

Kenneth Kaiser, Assistant Director
Criminal Investigative Division
Federal Bureau of Investigation

If you missed the Los Angeles Times article that Assistant Director Kaiser refers to above, here it is in its entirety:

FBI saw threat of mortgage crisisA top official warned of widening loan fraud in 2004, but the agency focused its resources elsewhere.

By Richard B. Schmitt, Los Angeles Times Staff WriterAugust 25, 2008.

Long before the mortgage crisis began rocking Main Street and Wall Street, a top FBI official made a chilling, if little-noticed, prediction: The booming mortgage business, fueled by low interest rates and soaring home values, was starting to attract shady operators and billions in losses were possible.

“It has the potential to be an epidemic,” Chris Swecker, the FBI official in charge of criminal investigations, told reporters in September 2004. But, he added reassuringly, the FBI was on the case. “We think we can prevent a problem that could have as much impact as the S&L crisis,” he said.

Today, the damage from the global mortgage meltdown has more than matched that of the savings-and-loan bailouts of the 1980s and early 1990s. By some estimates, it has made that costly debacle look like chump change. But it’s also clear that the FBI failed to avert a problem it had accurately forecast.

Banks and brokerages have written down more than $300 billion of mortgage-backed securities and other risky investments in the last year or so as homeowner defaults leaped and weakness in the real estate market spread.

In California alone, lenders have foreclosed on $100 billion worth of homes over the last two years and are foreclosing at a rate of 1,300 houses every business day, according to a recent report from ForeclosureRadar.com.

Most observers have declared the mess a gross failure of regulation. To be sure, in the run-up to the crisis, market-oriented federal regulators bragged about their hands-off treatment of banks and other savings institutions and their executives. But it wasn’t just regulators who were looking the other way. The FBI and its parent agency, the Justice Department, are supposed to act as the cops on the beat for potentially illegal activities by bankers and others. But they were focused on national security and other priorities, and paid scant attention to white-collar crimes that may have contributed to the lending and securities debacle.

Now that the problems are out in the open, the government’s response strikes some veteran regulators as too little, too late.

Swecker, who retired from the FBI in 2006, declined to comment for this article.

But sources familiar with the FBI budget process, who were not authorized to speak publicly about the growing fraud problem, say that he and other FBI criminal investigators sought additional assistance to take on the mortgage scoundrels.

They ended up with fewer resources, rather than more.

In 2007, the number of agents pursuing mortgage fraud shrank to around 100. By comparison, the FBI had about 1,000 agents deployed on banking fraud during the S&L bust of the 1980s and ’90s, said Anthony Adamski, who oversaw financial crime investigations for the FBI at the time.

The FBI says it now has about 200 agents working on mortgage fraud, but critics say the agency might have averted much of the problem had it heeded its own warning.

“The FBI correctly diagnosed that mortgage fraud was epidemic, but it did not come close to meeting its announced goal,” said William K. Black, who was a federal regulator during the S&L crisis and now teaches economics and law at the University of Missouri-Kansas City.

“It used everyday procedures and woefully inadequate resources to deal with an epidemic,” he said. “The approach was certain to bring symbolic prosecutions and strategic defeat.”

The mortgage debacle has laid bare a system marked by dubious practices at every stage of the process. Lenders often made loans to borrowers who had limited ability to repay them but little desire to pass up the dream of homeownership. Many loans lacked basic documentation, such as information about borrowers’ incomes.

Still, mortgage companies could hardly sell them fast enough, packaging the loans as investment securities and peddling them to eager buyers on Wall Street.

The FBI defends its handling of the crisis, with officials contending that as home prices were rising several years ago, the trouble brewing in the mortgage market — and the potential crimes behind it — was not immediately apparent.

Officials said they began approaching mortgage companies and others in an attempt to raise awareness about the growing fraud problem. But the lenders had little incentive to cooperate because they were continuing to make money. Black says that in many cases, they were part of the fraud.

“Nobody wanted to listen,” Sharon Ormsby, the chief of the FBI’s financial crimes section, said in an interview. “We were dealing with the issue as best we could back then.”

Over the last three years, the FBI and other agencies have brought dozens of mortgage-fraud cases. The bureau has rooted out foreclosure rescue schemes in which homeowners are tricked into signing over the deeds to their homes to operators who buried the properties even deeper in debt. Agents have disrupted cases of identity theft in which criminals open — and exhaust — home equity lines of credit and leave homeowners stuck with the bill.

Many of the cases have been relatively small, however, with about half the investigations involving losses of less than $1 million — the size of two or three loans.

But the tepid response also reflects a broad realignment of law-enforcement priorities at the Justice Department in which mortgage fraud and other white-collar crimes have been subordinated to other Bush administration priorities.

That has reflected, in part, the ramp-up in national security and terrorism investigations after the Sept. 11 attacks. But the administration has also put more support behind efforts against illegal immigration and child pornography.

In a way, the mortgage debacle could not have come onto the FBI radar screen at a worse time. Just as Swecker was making his doomsday forecast, the FBI, under pressure from Congress and the White House, was creating a crime-fighting brain drain, transferring hundreds of agents from its criminal investigations unit into its anti-terrorism program. About 2,500 agents doing criminal work — 20% or so of the entire force — were affected.

Even as the number of new white-collar cases started declining, the Justice Department did pursue some high-profile corporate prosecutions, such as those arising from the collapse of Enron Corp. But some former prosecutors question the administration’s current commitment to pursuing complex, high-stakes cases.

“I think most sitting U.S. attorneys now staring at the subprime crisis find scant resources available to pursue sophisticated financial crimes,” said John C. Hueston, a Los Angeles lawyer who was a lead federal prosecutor in the trials of Enron executives Kenneth L. Lay and Jeffrey K. Skilling.

Absent a major shift in priorities and resources, he said, it is likely that the Justice Department and the FBI will continue on their current path of focusing on simple cases “that don’t go to the heart of the problem.”

The FBI says it has 21 open investigations into possible large-scale fraud related to the subprime meltdown. The Times reported last month that a federal grand jury in Los Angeles had subpoenaed records from three large California lenders: Countrywide Financial Corp. (now part of Bank of America Corp.), New Century Financial Corp. and IndyMac Federal Bank.

Among other possible targets, the FBI has said, are investment firms that sold billions in securities backed by shaky subprime mortgages and credit rating agencies that gave high marks to the now-worthless securities and failed to protect investors.

But it may be hard to jump-start such probes. Trying to prove that a major mortgage company intended to defraud buyers of its securities, for example, could take years of digging into records and testimony.

Moreover, some of those involved may have special legal protection: Credit rating firms have in other cases successfully asserted that their opinions about the values of securities are protected by the 1st Amendment.

“I am happy to have investigations going on, but these investigations should have taken place years ago,” said Blair A. Nicholas, a San Diego lawyer representing investors who lost money in the collapse of several subprime mortgage lenders. “They seem to always get involved after the horse has left the barn. It is always cleaning up the mess rather than being proactive.”

Could the crisis have been averted, or at least mitigated, if the FBI had intervened more forcefully?

“Until there is a catastrophic loss, there is no incentive to investigate criminal conduct,” said Cynthia Monaco, a former federal prosecutor in New York. “Nor are there people coming forward with evidence” such as angry investors or whistle-blowing corporate employees, she said.

Even now, Monaco added, it is far from clear whether the damage — suffered by investors and homeowners alike — was the product of clear-cut fraud.

Ormsby says the FBI is more actively working with other federal investigative agencies in the hope they will pick up the slack. The Secret Service, for example, in a departure from its traditional missions of protecting presidents and heads of state and investigating counterfeiting, has assigned more than 100 agents to examine mortgage fraud, said spokesman Edwin Donovan.

The Justice Department is also starting to mobilize. The department offered what it described as a “basic seminar” on mortgage fraud cases to about 100 prosecutors last week at its national training academy in South Carolina.

Posted By: Ralph Roberts @ 10:49 am Filed under: Mortgage Fraud, FBI

MY RESPONSE/COMMENT as posted on Flippingfrenzy.

Crime and criminal prosecution today is a very selective process. The laws apply to some, usually the small fry, but not to all, typically Main Street and Wall Street.

Richard Schmitt said in his article:

“Among other possible targets, the FBI has said, are investment firms that sold billions in securities backed by shaky subprime mortgages and credit rating agencies that gave high marks to the now-worthless securities and failed to protect investors”.

Kenneth Kaiser of the FBI in his letter to the editor said the following:

“In the end, most economists have attributed the crisis to very aggressive lending practices and too little risk management throughout the financial services industry”.

These two comments begin to sum up the real cause of this meltdown. During the S&L crisis, the focus for fraud was aimed at the S&L’s and their management. If you remember, it was their shoddy lending practices that caused the problem and nurtured the fraud by those they lent money to.

Today, this banking crisis – not a mortgage meltdown – is similar to the S&L debacle. It was the shoddy lending practices of the banks and Wall Street that nurtured the fraud.

It was the extreme high demand for mortgage notes to satisfy the demand for mortgage backed securities that fostered an era of no doc or limited doc loans, APPROVED BY AND FUNDED BY the banks and ultimately Wall Street.

Everyone must keep in mind that the banks after funding a loan for a mortgage broker or even their own loan officers then SOLD the loan to Wall Street. In other words, THEY GOT THEIR MONEY BACK with a profit. The banks had no risk, no exposure, no losses and certainly no reason not to loan anyone at all money.

Wall Street also had no risk, no exposure and no losses. THEY GOT THEIR MONEY BACK plus a profit from the world wide investors who purchased their securities induced to do so by FRAUDULENT ratings by the rating agencies.

Further more, what is little known is that both Wall Street and the banks were selling these mortgage notes “forward” meaning that the notes were sold even before the deal closed and the borrower signed on the bottom line.

In addition, I recently read, from a credible source, that banks such as Wells Fargo actually sold mortgage notes into the security packages that DID NOT EXIST. They actually forged a borrower’s signature on the mortgage and note knowing full well that the borrower never closed on that loan. And to add insult to injury they then initiated foreclosure proceedings against the person whose name they forged but never closed. This action now created a cloud on the title for the buyer who did close on the loan and created a problem for the lender who actually did finance that home for the buyer who closed. In other words, these forged notes defrauded the actual buyer, the actual lender and the investor who purchased shares in a security where the security -mortgage note and property-did NOT EXIST.

Do we hear or see investigations of this type. NO! Why? Because the BIG GUYS are immune from investigation and prosecution unlike the S&L days.

I have said this before, where was the SEC when it came to regulating these security sales? Maybe if the securities were monitored properly, fraud would have been limited and the FBI would not have even had to participate in so many cases.

By continuing to investigate the bottom of the pyramid, the actual perpetrators will never be brought to justice. Every crime has a crime boss who makes the crime possible. Who are the bosses in this banking crime?

Don’t blame the FBI, put some blame on the SEC and perhaps on “higher ups” in our national government. Somebody up there knew what was happening and what the results would be. Profit and greed at its’ highest levels and will go unpunished while an entire industry is wiped out with hundreds of thousands of innocent victims and a shattered national economy that may take years to recover. All for the benefit of a few.

Also go to: http://www.TheForeclosureDetonator.org

Welcome to TheForeclosureDetonator

This blog and the related site, www.TheForeclosureDetonator.org are meant to help the millions of Americans who have fallen victim to mortgage foreclosures.  Very few know that a foreclosure CAN be fought legally in court.  Very few know that most foreclosures are illegal and are basically “fraud”.  The lenders that are foreclosing are committing fraud not only on the many homeowners but on the courts themselves.  They prey on the masses, knowing full well that most people don’t know their legal rights and the laws governng the foreclosures.  The lenders along with the attorneys representing them are profiteering once again furthering the fraud against the invetors who purchased the mortgages in the form of securities.

Lenders have not only been paid for the mortgages they made but are now illegally taking back properties, selling them and profiting twice.

THIS MUST STOP!  We need to maintain the integrity of our neighborhoods, the justice system and most of all the citizens of this country who are being scammed by an economy working in favor of banks and Wall Street. 

This blog along with www.TheForeclosureDetonator.org will begin to provide the knowledge needed to FIGHT FORECLOSURES and win, stopping the banks and Wall Street from profiting through illegal actions.

Anyone involved in foreclosure or anyone who has been through foreclosure can be helped.  More and more judges around the nation are recognizing the fraud and denying the foreclosures.  Some are even reversing final judgments and unwinding the foreclosure.

Your comments and questions are welcome here.  Toghether we can fight this crime against the population and begin to put an end to rogue corporations whose greed is sanctioned by the government allowing them to fleece its citizens.

Here is a quote as was published in the National Law Journal:

National Law Journal as reported by Julie Kay, staff reporter on July 14, 2008

 

“I deny more foreclosures than I approve,” said Justice Arthur Schack of Kings County, N.Y., Supreme Court, in Brooklyn. “I want to see the servicing agent’s power of attorney, I want to see all the paperwork before I approve it. If the paperwork is garbage, I deny it. If you’re going to take away someone’s home, it should be done properly.”