<snip>
During the trial, the prosecutors argued that Townsend had defrauded the mortgage lenders -- including Countrywide Bank, Fremont Investment & Loan and Washington Mutual Bank -- by failing to disclose his arrangements with the nominee buyers. Executives from these lenders testified about their strict underwriting policies on mortgage loans.
On cross-examination, I tried to point out that the lenders, banking on short-term profits, had encouraged people such as Townsend to bring them more and more loans, regardless of the borrowers’ ability to repay, and then sold their bad loans to Wall Street. These very lenders had been advertising “liar loans” with “no income verification required.” In a rare unscripted moment, one nominee buyer (who was a cooperating government witness), said the lending banks “just feel your pulse and see if your heart is beating and give you a loan.”I tried to convince the judge that the jury needed to know the truth about the lenders in order to determine whether Townsend had had any intent to defraud and whether he had made any material misrepresentations.
But the judge accepted the federal prosecutors’ argument that the sins of the lenders were “irrelevant,” and that if such evidence were introduced at trial, there would be a risk of “jury nullification” -- that is, the jury might be tempted to acquit the defendants because others not on trial were more culpable. No evidence or argument about the corrupt practices of the lenders was allowed.<And...>
Three days after the verdict, I received a letter from a distraught juror, who said she had held out for Townsend longer than the others, indicating that she knew the lenders’ loan practices had been predatory. “It is small consolation, I know, but I will tell you that my conscience is not clear.”<snip>
More:
http://www.bloomberg.com/news/2011-08-10/a-speculator-takes-blame-for-mortgage-mess-commentary-by-leonard-goodman.html:mad:
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