The Cowardly Failure to Prosecute Bank Felons

One of the great “mysteries” of the post financial crisis era is why obvious criminality has not been prosecuted. We have been told it is more complex than it appears; that the securitization process has made determining exactly who was harmed complicated; that this complexity makes convincing a jury a crapshoot.

All of these arguments fail to withstand even cursory scrutiny when it comes to foreclosure fraud. The Robo-signing, document fabrication and mass perjury were fish in a barrel for even a newbie prosecutor. Why did the government fail to go after the perpetrators of mass fraud?

An Inspector General’s report released this week by the Justice Department raises that exact question.

A quick reminder: The high speed assembly line production of subprime mortgages led to a series of errors in the securitization of these mortgages. This was facilitated by an extra-legal entity names MERS (they facilitated the securitization process with very sketchy behavior worthy of a column itself). The pressure to push these mortgages rapidly along led to lots of avoidable errors: Missing mortgage notes, bad or outdated information, error-riddled underwriting. Who actually owned the underlying note often was unknown.

As these poorly assembled sub-prime mortgage began to collapse, banks were faced with an expensive legal issue: How to process a massive number of foreclosures. Rather than perform this in a prudent and legal manner, some banks made the decision to take inexpensive – and illegal – shortcuts. They hired firms like the now defunct DOX to fabricate documents for court. DOX even published a list of docs they were for willing to artificially manufacture for trial. This “DOX perjury price list” was one of many factors that eventually led to its demise.  continues here

 

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