It’s a basic failure to enforce the federal criminal law.

One huge factor in the savings and loan debacle of the late 1980s was fraudulent real estate loans. In these, financial institutions knowingly lent more than properties were worth, based on fraudulent appraisals. In order to dupe bank and S&L examiners, the financial institutions then traded these loans, as they became non-performing, for new but not-yet-bad loans from other institutions. It was known in Texas as trading a dead horse for a dead cow.

Congress attempted to forestall a repeat by hiking the penalty from 2 to 30 years in prison knowingly to make “any false statement or report, or willfully [to overvalue] any land, property or security, for the purpose of influencing in any way” any of a raft of federal financial institutions including “any institution the accounts of which are insured by the Federal Deposit Insurance Corporation” or any of a raft of other federal entities. Title 18, U.S. Code, Section 1014.

So, practically every knowingly false statement for the purpose of obtaining a mortgage in the U.S. could be prosecuted as a 30-year federal felony.

We’ve read that one factor in the current financial meltdown is that both mortgage applicants, and financial instutions eager to grant mortgages, have falsely stated applicants’ salaries, assets, etc. on a grand scale. (Sorry, I’ve still not learned to link. But there’s been a lot published recently about this.)

In other words, some unqualified mortgage applicants and some greedy financial institutions alike have been ripe for prosecution for violating Section 1014.

And just how many such prosecutions has the Bush Dep’t of Justice brought? None of which I’ve read.

It’s hard not to think that, despite the shredding of the regulatory safety net, vigorous enforcement of Section 1014 would have headed off much of our current disaster.

WE NEED CHANGE! WE NEED CHANGE now!

_./’._¢¬¢¬.•¢´**¢´•.¢¬.•¢´**¢´•..•¢´. .
*•. .•* *Obama/Biden o8!!
/.•*•. •¢´**¢´•.,.•¢´**¢´•.,.•¢´**¢´

ummm, I think he tried to add some ’HOPE’ to this situation! LOL

then there is every incentive for financial firms to make every possible loan, good, bad and indifferent, to capture the fees. Thus they don’t care if the loans will be repaid.

Very late to this thread, but that would be a “Bingo”!

Not good. Not good at all.

BC

Buffett may realize that the entire industry and economy will collapse if he doesn’t step in. He’s going to pay for the sins of AIG one way or the other.

The economy is just fab.