Investigating Possible Fraud (Fannie, Freddie, Lehman, etc.)

[KSig RC]

Should the FBI find fraud, what would happen? What would change?

It's not like the government can recoup enough money to make a difference . . .

[texas*princess]

^^ i was wondering the same thing.

[AKA_Monet]

If they find a RICO statue violation, folks will go to jail... Kind of like Keating in the S&L crisis. The other issue is how high this lunacy goes, which means that the FBI is just now telling the public about this investigation... But the investigation has been going on for awhile...

Call it payback to the Valerie Plaine outting...

Some of this should not be so political. But if it is, wow... We all fell for the gank move, for real...

And maybe not "recoup" money back, but since the VALUE of money is neither created or destroyed, it just changes from one form into another... So those areas that took the money from these unsavory people, then certain "deals" will be cut, based on that--i.e. how the US will attack one country but not another that has done some shady stuff--like genocide or rather a pillaging of these countries resources by us, wrapped up into another opportunity...

[texas*princess]

I'm not even going to pretend I know anything about that lending industry... but let's hypothetically say that possible fraud is found... can they take back the multi-million dollar severace (sp) packages that the top execs received?

The thing that rifles my feathers the most is that people are losing their jobs in this industry, people are losing their homes and this is causing some serious economic turmoil for other industries... and in the midst of it all, some losers who ran the company into the ground make a clean break with several million $$.

[Benzgirl]

Originally Posted by texas*princess

I'm not even going to pretend I know anything about that lending industry... but let's hypothetically say that possible fraud is found... can they take back the multi-million dollar severace (sp) packages that the top execs received?

The thing that rifles my feathers the most is that people are losing their jobs in this industry, people are losing their homes and this is causing some serious economic turmoil for other industries... and in the midst of it all, some losers who ran the company into the ground make a clean break with several million $$.

Well, I do know about the Mortgage Industry and let me tell you, it's
1. Not easy to prove culpability, due to the numerous parties involved.
2. Not easy to determine the egregiousness of a case
3. Not easy to challenge "professional opinion"
4. And if you can prove the above, its nearly impossible to get your money back.

When I ran a fraud department and we were able to go after someone (people), you weigh out "do I want my money back" or "do I send them to jail". FBI always sends the fraudsters to jail, so lenders are stuck with an REO.

IF Fannie/Freddie finds fraud themselves, they throw a repurchase back on the Wholesaler (my company), who tries to recoup funds from a broker who rarely has the funds to purchase a loan back from us. We have found that indemnifications aren't worth the paper that it's signed on. Often, the broker has often gone out of business (or is in jail) before we come after them. Bottom line is that the GSEs are not always taking the hit on the loan -- the wholesalers do.

Sure, I think you could try to go after restitution from the former heads of Fannie and Freddie. Will you receive reimbursement? Did you Enron shareholders get any money back? Answer...doubtful.

Sorry for the rambling. This hits very close to home (and my paycheck)

[Kevin]

Originally Posted by KSig RC

Should the FBI find fraud, what would happen? What would change?

It's not like the government can recoup enough money to make a difference . . .

Any officers who were complicit in any sort of fraud scheme would have violated their fiduciary duties to the corporation and would be civilly accountable and probably criminally accountable. Right?

Other than that, I doubt that Congress second guesses bailing any company out. The issue is not the wrongful or stupid conduct of the decision-makers (at least half of that seems to be conceded), the issue Congress should be interested is what happens if the bailout doesn't happen.

On another note, I think this will all shut the people up (or it damn well should) who were in favor of deregulation of the securities industry due to the belief that the "free market regulates itself" (I believe that's a direct quote from Ron Paul).

[nittanyalum]

Originally Posted by Kevin

On another note, I think this will all shut the people up (or it damn well should) who were in favor of deregulation of the securities industry due to the belief that the "free market regulates itself" (I believe that's a direct quote from Ron Paul).

Thank you.

[KSig RC]

Originally Posted by Kevin

Any officers who were complicit in any sort of fraud scheme would have violated their fiduciary duties to the corporation and would be civilly accountable and probably criminally accountable. Right?

Oh, of course - that's the only reasonable end-game, but that doesn't really change anything in the big picture, other than a perceived deterrent effect and maybe a misplaced sense of 'justice' or whatever, and neither of these are tangible or show real utility in my mind.

[Kevin]

Originally Posted by KSig RC

Oh, of course - that's the only reasonable end-game, but that doesn't really change anything in the big picture, other than a perceived deterrent effect and maybe a misplaced sense of 'justice' or whatever, and neither of these are tangible or show real utility in my mind.

Does it make a huge difference as to the big picture? I agree. No. Absolutely not.

Does it make a bailout a lot more digestible to the general public when officers and maybe directors who are guilty of wrongful malfeasance are walking away with 8-figure bonuses? I think so.

I think that some sort of action involving negative consequences has some political value insofar as making a market bailout more palatable for the voters if you can call that "utility."

[KSig RC]

Originally Posted by Kevin

I think that some sort of action involving negative consequences has some political value insofar as making a market bailout more palatable for the voters if you can call that "utility."

Yeah, I don't really - I can see where others could reasonably consider that a benefit, though. This may be related to my distaste with the bailout as endgame, though - if the solution needs to be made more palatable in a political sense, perhaps it should have been handled differently?

[CrackerBarrel]

Originally Posted by Kevin

On another note, I think this will all shut the people up (or it damn well should) who were in favor of deregulation of the securities industry due to the belief that the "free market regulates itself" (I believe that's a direct quote from Ron Paul).

That's just it, from an economic standpoint THIS IS THE SECURITIES MARKET REGULATING ITSELF. The ones who were dumb enough to invest in securities backed by mortgages to people who had no hope of paying them back are (or should be) out of business. But if the government is willing to bail you out for those bad investments, there is no real incentive not to invest in idiotic securities where a return was improbable to say the least again in the future.

I realize it was meant as a joke, but a friend sent me a facebook bumper sticker that laid it out pretty well: "Let's start making worse business decisions so we can go bankrupt and earn free taxpayer money."

[Kevin]

Originally Posted by CrackerBarrel

That's just it, from an economic standpoint THIS IS THE SECURITIES MARKET REGULATING ITSELF. The ones who were dumb enough to invest in securities backed by mortgages to people who had no hope of paying them back are (or should be) out of business. But if the government is willing to bail you out for those bad investments, there is no real incentive not to invest in idiotic securities where a return was improbable to say the least again in the future.

I realize it was meant as a joke, but a friend sent me a facebook bumper sticker that laid it out pretty well: "Let's start making worse business decisions so we can go bankrupt and earn free taxpayer money."

Either it's too big to fail or it's not.

If we're going to buy into deregulation, then the free market has to be allowed to work. It now appears that even those who were behind (and still may be) deregulation are not in favor of the negative consequences which can stem from a free market.

Now that we're talking 'bailout,' and acknowledging that things are too big to fail, it's clear we've made a choice. We need more regulation, not less, if these things are really too big to fail.

If the public is going to be held accountable for the actions of these private companies, then the public should have the ability to hold these companies accountable.

Unfortunately, I think these companies have us out manned with respect to lobbying power.

[KSig RC]

Originally Posted by Kevin

If we're going to buy into deregulation, then the free market has to be allowed to work. It now appears that even those who were behind (and still may be) deregulation are not in favor of the negative consequences which can stem from a free market.

Now that we're talking 'bailout,' and acknowledging that things are too big to fail, it's clear we've made a choice. We need more regulation, not less, if these things are really too big to fail.

This is really my main problem - deregulation is the ideal situation, but may prove impossible given the current state of affairs. If this is true, then it's not hard to see that a negative feedback cycle is forming, and the results of that cycle are likely something that most people would find distasteful - namely, state ownership of nearly every similar institution.