Fraud about Fraud: Obama administration wildly overstated its mortgage fraud convictions
So here is a story of a fraud about a fraud about a fraud: Even the feds lied about how much enforcement they were doing.
As the Columbia Journalism Review notes, Bloomberg News actually uncovered last week that the Obama administration had overstated its mortgage fraud convictions. I’m just getting to it now in part because I wanted to check into a couple of particular cases. But this is worth noting, even now, for what it says about continuing operations in the mortgage and financial markets.
Fraud was the animating feature of the housing bubble and bust, and the many observers of it on many levels hoped that, once the dust settled (and the bailouts were dispensed), law enforcement would move in and collar the mountebanks.
Obligingly, we had the perfectly-named Operation Broken Trust, in which federal prosecutors were instructed to round up all active and recent cases having anything to do with mortgage fraud so they could be presented to the public in a high-profile way. I wrote about that, and I was pleased to see I was not the only one to recognize the fundamental bogusnessat its core.
So now The Justice Department admits it further inflated its numbers (by a factor of five!), and has issued its corrections. Bloomberg:
The FBI restated the number of people criminally charged to 107 from 530. Agencies were asked to correct victims’ total losses to $95 million from an estimated $1 billion, and the number of victims found to 17,185 from more than 73,000.
Just for shits and giggles I pulled the file on a case I stumbled upon in 2009 while researching the city’s civil suit against Wells Fargo. The photo above is where I started, 2520 Shirley Ave., a vacant house that had made national news as an exemplar of the problem.
As longtime readers may recall, a quick look at a few records made it clear that mortgage fraud was central to many of the individual properties the city cited as examples of “reverse red-lining” by the evil old bank—and that two of the 10 detailed examples the city offered the court (including the Shirley Avenue house) were part of an obvious fraud scheme operated by a New York-based Sikh family with political ties to Hillary Clinton.
I could say “obvious fraud scheme” because three of the principles were already under indictment in the Southern District of New York for mortgage frauds committed in other states. The patriarch, P. Singh Sabharwal, had moved back to India at the time—apparently to manage his multi-level marketing business.
So, did the mighty Justice Department collar those mountebanks? Not so much. The sons each got two year’s probation and a $100 “special assessment,” federal court records show. (One of them also got fined $1,000). The father’s case has still not been adjudicated.
There are as yet no cases charging any of them in connection with the five very profitable (yet totally senseless, if not fraudulent) real estate deals they did in Baltimore City.
This is all illustrative enough, but wait! There’s less! As of now, the number of actual bankers charged criminally for frauds they committed in creating the housing bubble remains at the non-multiple number (that’s zero , math-heads). And it’s not as if there is no evidence that workers up and down the chain knew they were committing crimes. Three years ago Michael Hudson published a whole book detailing this, and last week this obscure economic paper added more fuel to that fire.
CJR’s Dean Starkman parses it for a general audience here.
This boils down to the misrepresentation of the loans that the lenders sell to investors—the “liar loans” wherein some immigrant ditch-digger magically gets a $650,000 mortgage. From the beginning it has been clear that much—not all, much—of the fraud committed on those loans was by the mortgage brokers, as instructed by the Ameriquests and New Centurys of the mortgage world. The higher-ups at those companies knew they were lending to people with no way to repay, but they also knew they could sell the right to collect those non-existent payments for big money right away—just by lying about how bad the loans were.
And this they did with—so far—no criminal penalty.
How do we know they knew? Because the information was in their files. Starkman:
The authors found for instance that of 1,279 loans found to have misrepresented the presence of another lien, 93 percent actually had the correct information in New Century’s own database.
Ok, so as the statute of limitations ticks down its final minutes, it’s clear enough that we’re not going to see wholesale—or even boutique retail—prosecutions of the million-dollar-a-day douchepuddles who actually orchestrated the crash of the world economy in 2008.
We’re just not. Get used to it.
And that means, of course, that all of these
greedy bastards brilliant businessmen (and their heirs) shall live to entrepreneur another day.
We understand that
MLM real estate is the coming thing.