FBI Failed to Stop Fraud in Mortgage Industry
According to the Seattle-PI, the FBI was aware of fraud in the mortgage industry as far back as 2002. They could not tackle the problem because resources were diverted to fight terrorism.
The FBI was aware for years of “pervasive and growing” fraud in the mortgage industry that eventually contributed to America’s financial meltdown, but did not take definitive action to stop it.
“It is clear that we had good intelligence on the mortgage-fraud schemes, the corrupt attorneys, the corrupt appraisers, the insider schemes,” said a recently retired, high FBI official. Another retired top FBI official confirmed that such intelligence went back to 2002.
The problem, according to the two FBI retirees and several other current and former bureau colleagues, is that the bureau was stretched so thin that no one noticed when those lenders began packaging bad mortgages into bad securities.
“We knew that the mortgage-brokerage industry was corrupt,” the first of the retired FBI officials told the Seattle P-I. “Where we would have gotten a sense of what was really going on was the point where the mortgage was sold knowing that it was a piece of dung and it would be turned into a security. But the agents with the expertise had been diverted to counterterrorism.”
The FBI not only lacked the resources, but also never got the tips it needed from the banking regulatory agencies. The Securities and Exchange Commission, the Office of Thrift Supervision and the Office of the Comptroller of the Currency also failed to detect the securities issue, said the first retired FBI official.
This is ironic because the bad mortgages were the foundation for securities and derivatives that Warren Buffett called “financial weapons of mass destruction” in 2003.
But Mr Buffett argues that such highly complex financial instruments are time bombs and “financial weapons of mass destruction” that could harm not only their buyers and sellers, but the whole economic system. This FBI failure echoes revelations that as early as 1999, the SEC had been made aware of Bernie Madoff’s Ponzi scheme, yet they did nothing to stop it.
The federal Securities and Exchange Commission said Tuesday that allegations against Bernard Madoff and his securities firm had “repeatedly” been brought to the attention of SEC staff as early as 1999 but were not recommended to the commission for action.
My own personal view is that government is so dependent upon taxes that they turn a blind eye to how corporations and individuals are making their profits. When the government profits from fraud, they are unlikely to put an end to it.
According a report yesterday, some government workers are also too busy watching pornography to do their jobs.
When you look at the global financial chaos that has been facilitated by these examples of government incompetence and corruption and the pain and suffering that will follow, it’s amazing that so many people think the solution to all our problems is more government.
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