Mass Mortgage Fraud Indictments

By Jeralyn, Section Crime in the News
Posted on Thu Jun 19, 2008 at 01:05:49 PM EST
Tags: mortgage fraud (all tags)

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The Justice Department has been busy.

Former Bear Stearns Cos. hedge fund managers Ralph Cioffi and Matthew Tannin, arrested this morning at their homes in New Jersey and Manhattan, were indicted for mail fraud and conspiracy in the first prosecution stemming from a federal investigation of last year's mortgage-market collapse.

The two men were charged with misleading investors about the health of two Bear Stearns hedge funds whose implosion ignited the subprime mortgage crisis. Cioffi was also charged with insider trading in the indictment, which cites a series of e-mails between the two men. They face as much as 20 years in prison if convicted of the most serious charges.

It's part of the Justice Department's Operation Malicious Mortgage. In Chicago, there were 70 arrests. More than 400 have been indicted since March, with many more arrested:

Since March 1,406 people have been arrested in the sting dubbed "Operation Malicious Mortgage" that saw 144 cases across the country. Sixty people were arrested on Wednesday alone, including in Chicago, Miami, Houston and a dozen other regions policed by the FBI.

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Mass Mortgage Fraud Indictments | 13 comments (13 topical)

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Heh (5.00 / 2) (#2)
by Steve M on Thu Jun 19, 2008 at 01:16:21 PM EST

Let's leave everything unregulated, trusting in the benevolent workings of the marketplace, and then when the inevitable occurs we'll find some scapegoats to indict. That's how it always works.

But Steve the magic of the market place (none / 0) (#3)
by Molly Bloom on Thu Jun 19, 2008 at 01:27:32 PM EST

always works.

Markets = Freedom. Freedom = Democracy.

Ergo Markets = Democracy.

QED.


Sometimes I wonder.... (none / 0) (#4)
by kdog on Thu Jun 19, 2008 at 01:28:45 PM EST

if a totally unregulated wild west type marketplace would be preferable to our current system of regulated and rigged markets.

Sometimes all regulations do is regularize corruption, pollution, and unfairness.


: The lack of regulation (5.00 / 1) (#8)
by Molly Bloom on Thu Jun 19, 2008 at 02:36:35 PM EST

is what caused this particular problem. You got your wish here and this is what you got.
In general a wild west market place is what Milton Freidman acolytes demanded in Argentina, Chile, Iraq.
Think Enron and the California rolling black outs. Aunt Millie got the shaft, cause Friedmanists got their wish.

In this case, I'd like to see some little people.. (5.00 / 1) (#5)
by dianem on Thu Jun 19, 2008 at 01:39:15 PM EST

...get punished. A lot of mortgage lenders deceived borrowers about the terms of their loans and a lot of people suffered as a result. Buyer beware is a good philosphy - but the entire system was rigged against honest lenders and in favor of people who were little more than con artists pushing bad loans in exchange for higher commissions. My husband and I bought a new home 3 years ago, and the initial mortgage broker we spoke with wanted us go go with a gimmicky ARM, even though our credit score qualified us for a fixed rate loan that was at the same rate as the ARM. We knew enough to not do it, but how many people simply trusted the "experts" and ended up with loans they couldn't pay? Not everybody has the ability to research and understand complex financing. Heck.. I barely get it and I'm blessed to disgustingly well-educated. We shouldn't just throw less educated buyers to the wolves.

: Little people get punished. (5.00 / 1) (#12)
by sarcastic unnamed one on Thu Jun 19, 2008 at 06:40:11 PM EST

Gotta say, the guy who had his biz next door to mine up to a year or so ago sold a whole lot of mortgages.
He was even able to get the deals done when the SS# on his applicant came back as, well, deceased.
He told me he made over $750K in 2006...

dianem: (5.00 / 1) (#6)
by cpinva on Thu Jun 19, 2008 at 01:58:14 PM EST

i agree with you, up to a point. i'm a cpa, pretty well versed in the complexities of the various types of debt available in the residential mortgage industry (heck, i even know what a "wrap-around" is!). however, it doesn't require a cpa to figure out that if you make $50,000 a year, you can't afford a $500,000 house, regardless of the type of financing used.

this just defies common sense. yet, people were doing it, having been "talked" into it by the professionals. as it turns out, not much talking was required, because those people just really, really wanted to buy those houses! then, when they couldn't keep up with the morgage payments, they blamed the broker for talking them into it.

the point is that there was collusion on all sides, not just the sharks having their way with the bait. in many cases, the bait willingly and knowingly jumped right into the shark's mouth.

: I agree to a point., but I read that really (none / 0) (#13)
by hairspray on Thu Jun 19, 2008 at 06:43:13 PM EST

poor loans were given to some people who didn't know better and could have qualified for better loans. My daughter who makes a lot took out a big loan, with a good downpayment, and is looking at a doubling of her rate in another year or two. That is the part I don't understand. How can a "teaser" rate be 5 1/2% and then turn over to 11% four years later? The people who invested in these risky funds are entitled to that kind of return on their investment? Is that the rationale?

Since when has this justice department (5.00 / 1) (#11)
by Militarytracy on Thu Jun 19, 2008 at 06:03:50 PM EST

wanted to dispense justice?

Do these probes (none / 0) (#1)
by Abdul Abulbul Amir on Thu Jun 19, 2008 at 01:13:17 PM EST

Do these probes include the sweetheart deals the likes of Dorgan and Dodd have gotten from Countrywide?

Dodd and Dorgan (none / 0) (#7)
by This from a broad on Thu Jun 19, 2008 at 02:23:30 PM EST

Don't be silly! Politicians are allowed to break the law. They take a Hypocritical Oath.


Frankly, Dodd was always (5.00 / 1) (#9)
by Stellaaa on Thu Jun 19, 2008 at 02:45:47 PM EST

cozy to the mortgage industry and not in a good way. I am surprised people are surprised. The Dems are just as bad.

I hope they nab some in the real estate and appraising industry as well and a bunch of the rating companies guys.


: "The Dems are just as bad." (5.00 / 1) (#10)
by FemB4dem on Thu Jun 19, 2008 at 04:54:41 PM EST

Yep. That kind of sums up my feelings about politics these days, and I think that feeling is shared by many across the political spectrum.
One wonders if stuff like this will help bring Bush's approval ratings up just a tick or two, brining disaffected repubs back to McCain? I smell Karl Rove. My guess is the rest of this year will be about the Bush administration going after corruption, showing how split government can work, and arguing that "victory" in Iraq is within sight (a meme the mainstream media is already pushing hard). IMO, the split government thing will be a big selling point for McCain in the fall, particularly if Bush can polish the image a bit by playing smart with vetos rather than looking petulant.