FBI and Numbers

Robert Mueller, Director of the FBI, recently testified before a Congressional committee that there are thousands of mortgage fraud criminal investigations open across the country. He intended to blunt criticism, such as mine, that there has been no accountability imposed on the financial industry for mortgage fraud crimes committed from at least 1999 through at least 2007. His numbers are fake and meaningless.

To be sure, Grand Jury proceeedings are secret. There is no way I or anyone not involved in actual prosecutions and investigations can say with absolute certainty that there are no major enforcement actions brewing. Having said that, the evidence suggests that the FBI numbers are a sham.

The leading perpetrator of fraudulent mortgages in the nation was Countrywide Financial. Both the company and its head, Angelo Mozilo, have been told they will be not be criminally prosecuted. Civil fines imposed by the SEC required no admission of wrongdoing, and the amounts involved amounted to cost of doing business parking tickets. Similarly, executives of other banks, including Washington Mutual and Indy Mac, large mortgage players, have been approached about civil penalties in relative pennies, but not have not been photographed and fingerprinted on their way to criminal trials. No Wall Street investment bank has been indicted, nor has any major executive of a Wall Street investment bank been charged with mortgage fraud, securities fraud, or any number of other possible mortgage related charges.

The likelihood of criminal charges fades with each passing day. Statutes of limitation, generally, range between two and six years for financial crimes, with the six year statute reserved for tax evasion. Conspiracy has a five year statute of limitations from the date of the last overt act. It is now twelve years from every crime commited in 1999. It is four years from crimes committed in 2007, the year the bubble burst. That means that the statute of limitations has expired on thousands upon thousands of false loan applications, bogus securitizations, and mail and wire fraud charges through March of 2006. That means that counts, penalties, and fines have been irretrievably lost. In addition, the chances are overwhelming that documentary evidence of these crimes has been lost or destroyed by perpetrators who have not been subject to subpoenas and required to preserve such evidence.

That is not a formula for successful prosecution. On the contrary, it is a way to whitewash the financial industry and set the stage for fraud in years to come. What is not deterred becomes incentive.

The worst, though, is that the FBI and some state attorneys general have crowed about prosecuting mortgage fraud as if they've actually done something effective, something special. The FBI brags about mortgage fraud task forces. States have received millions in federal grants to team with the Bureau in these "task forces." But these highly publicized investigations, and resulting convictions, are, in themselves, something of a fraud.

What the public needs to know is that the task forces are about numbers. As a result, these investigations start with prosecutions of buyers who lied on their applications. Is that likely to deter the Wall Street mogul who securitized that mortgage? Then the prosecutions escalate-to appraisers, and to real estate brokers, and to mortgage brokers, and, on rare occassions, to the minor mortgage banking company which underwrote the paper. In other words, the smallfry. Those are starting places, not ending places, for going up the ladder and getting those who are really responsible. I have been told, personally, by a high ranking state mortgage task force director, "We're after numbers. We don't want to go higher. It takes too much time and effort. Our funding is short term. The only thing we want is to pile up conviction numbers." That is, indeed, a quote.

There is no political will to prosecute the rich and powerful bankers who caused the greatest economic collapse in world history. The public needs to rise up and shout. But even if it does, I doubt the politicians will do anything. So much for the rule of law, don't you think?


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