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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsIf We Don't Punish Past Financial Crimes, Future Ones Are Inevitable
by David Callahan
Did you hear that one of the biggest banks in America just agreed to one of the biggest penalties ever for committing one of the biggest financial frauds in U.S. history? It happened just the other day and, no, chances are you didn't hear because the story was buried in the business section.
The bank is Bank of America. The penalty is $6.3 billion. And the crime is that BofA knowingly sold loads of bum mortgage securities to Freddie Mac and Fannie Mae -- securities packed with subprime mortgages taken out by lenders that couldn't really afford the loans and that later lost value when the housing market imploded. Bank of America and its former CEO, Kenneth Lewis, also settled a suit with New York State that it misled its shareholders when it acquired Merrill Lynch n 2008, leaving out the inconvenient truth that Merrill was saddled with huge liabilities.
These are brazen crimes. Remember, securities law is relatively simple when it comes to defining fraud: If I'm selling you stock shares or a bond, I need to tell you the truth about the underlying value of that offering. If I tell an investor that my company has a thousand clients, and that's why he should give me cash for an equity stake, but I know full well that my company only has a hundred clients, I have just committed a federal offense that can result in prison time. Likewise, if I have a bundle of mortgages that I know include a bunch of really shaky loans -- where due diligence was never done, and poor credit prospects were given loans -- than I have an obligation to tell you that, so my bundle can be priced fairly. I need to say: hey, these loans are really a mixed bag. If I don't say that, and I know the truth to be otherwise, I can be sent to prison. And for good reason: I've just cheated you out of a bunch of money. I've sold you something for top dollar that should have been heavily discounted, or not sold at all, based on information that I withheld from you.
Clear enough?
Okay, so now consider how Bank of America (and, even more so, its affiliated entity Countrywide) handled themselves in the housing boom. They made loans to nearly anyone with pulse during the go-go years, due diligence be damned, and passed that junk along to buyers of mortgage-backed securities. Executives knew that these securities were filled with dubious loans, but they withheld that information in peddling this stuff to investors. And it's not like the evidence of this deception is incredibly arcane and hard to fathom: In many cases, smoking guns have been found: like clear-cut emails of bank and mortgage people on the front lines of lending raising red flags about the quality of underwriting, warning the execs upstairs that bad loans were being made. And investigators and plaintiff lawyers have taken depositions revealing what executives at places like BofA knew and when they knew it.
more
http://www.demos.org/blog/3/28/14/if-we-dont-punish-past-financial-crimes-future-ones-are-inevitable
L0oniX
(31,493 posts)...and go after that mafia asshole that ran Countrywide too!
I've seen the Feds shut down phone scam companies ....but they won't shut these thieves down? Who's working for who?
Divernan
(15,480 posts)rock
(13,218 posts)you substitute any genre of crimes for "financial".
gratuitous
(82,849 posts)Then it's a pretty safe bet that they made far more than that in the mortgage market scam. They'll chalk it up as a cost of doing business, declare the fine as a business loss, and get a nice credit on their taxes. Win, win, win.
If I stole a million dollars and had to pay back $10,000 without serving any jail time or even having a criminal conviction on my record, I believe I'd go out tomorrow and steal another million dollars. That is, if I was the sort of amoral fuckwad who thinks nothing of stealing a million dollars. How much moreso these corporate concerns stealing thousands of times that much? Maybe it's part of their "religious" beliefs, like Hobby Lobby not wanting to pay its employees the due compensation it promised them.
Zorra
(27,670 posts)randomelement
(128 posts)6.3 Billion is one of the biggest?!? What an f'ing joke!