Ed Harrison had a nice post the other day concerning mortgage fraud. He started off his piece this way:
Rampant fraud in the mortgage industry has increased so sharply that the FBI warned Friday of an “epidemic” of financial crimes which, if not curtailed, could become “the next S&L crisis.”
Assistant FBI Director Chris Swecker said the booming mortgage market, fueled by low interest rates and soaring home values, has attracted unscrupulous professionals and criminal groups whose fraudulent activities could cause multibillion-dollar losses to financial institutions.
“It has the potential to be an epidemic,” said Swecker, who heads the Criminal Division at FBI headquarters in Washington. “We think we can prevent a problem that could have as much impact as the S&L crisis,” he said.
In the 1980s, many Savings and Loans failed because of poor management, risky loans and investments, and in some cases, fraud. Taxpayers were left with a $132 billion tab to cover federal guarantees to S&L customers.
This is the headline and first four paragraphs of a CNN article from 17 September 2004.
Where are the investigations, perp walks, convictions? So what happened to all that fraud?
It’s still ongoing.
Today, Calculated Risk featured a Jim the Realtor segment in which Jim talks about short sales and frankly opines that fraud and deceit is rampant and frankly embarrassing. Here’s the clip:
So, how many years are we into this mess with nothing in the way of reform to show for it? And, what is the response from Washington? Well, it’s to pass thousands of more pages of regulations that will, trust them, ensure that we never suffer this sort of debacle again.
If there are no consequences for breaking the law and significant financial gains to be had by doing so then a lot of people will do just that. More regulation is pointless if it just sits on a shelf and gathers dust along with the current laws. If you want to make the country a safer place economically, just bring the hammer down on the bad guys.