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Former Regulator: Clear Fraud in Financial Crisis -- Why Isn't Anyone in Jail?
Old 11-23-2008, 09:06 AM   #1
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Former Regulator: Clear Fraud in Financial Crisis -- Why Isn't Anyone in Jail?

Mortgage fraud in the institutions. I thought this was interesting. Apparently the FBI and Feds are slow to move.


Former Regulator Clear Fraud in Financial Crisis Why Isn't Anyone in Jail: Tech Ticker, Yahoo! Finance
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Old 11-23-2008, 09:33 AM   #2
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Originally Posted by chinaco View Post
Mortgage fraud in the institutions. I thought this was interesting. Apparently the FBI and Feds are slow to move.


Former Regulator Clear Fraud in Financial Crisis Why Isn't Anyone in Jail: Tech Ticker, Yahoo! Finance



The article is upside down and backwards. They're calling for executive's heads presumably to "restore" confidence (not out of retribution or envy, of course). But the sources they site as "evidence" of rampant corporate fraud is actually about the financial institutions being defrauded by borrowers . . .

Quote:
. . . In one operation, six individuals were arrested Thursday in Charlotte, charged with bank fraud for their roles in a multimillion-dollar mortgage fraud, officials said. The two-year investigation found fraudulent loans that exposed financial institutions and mortgage companies to $130 million in potential losses, they said.


Also Thursday, federal agents in Jacksonville arrested two people and executed seven search warrants in connection with an alleged scheme designed to defraud banks of $22 million, officials said. . .
I'm pretty sure that when the author said . . .

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In the aftermath of the corporate scandals earlier this decade, investor confidence was (partially) restored by a parade of "perp walks" of fallen chieftains like Ken Lay, Bernie Ebbers, and Dennis Kozlowski.
he wasn't hoping to see more people "perp walked" out of trailer parks on an episode of Cops.
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Old 11-23-2008, 09:40 AM   #3
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I keep waiting for the first "naked short" arrest. It has always been illegal except for certain broker-dealers. Now it is fully criminal instead of civil.

I can't believe all of the massive selling in Citi doesn't involve naked shorting.
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Old 11-23-2008, 10:08 AM   #4
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i've seen stocks in big companies drop big before. there is a good chance the stock is going to be worthless and i bet almost every managed fund is dumping the last of their citi stock and the only people buying are the bondholders
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Old 11-23-2008, 10:10 AM   #5
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...But the sources they site as "evidence" of rampant corporate fraud is actually about the financial institutions being defrauded by borrowers . . .

I think he outlined a sequence of events... Making loans knowing that the information is incorrect (liar loans) and then selling off the mortgages to be securitized and sold as MBS. Basically making the loans to get the fee and send it along to investors.

He said that several laws were broken when that occurred.


Time will tell. Hopefully someone is looking into it.
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Old 11-23-2008, 02:48 PM   #6
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Chinaco

I have found that there are certain classes of people who are pretty much above the law.

Laws only apply pretty much to poor guys.

If you or I would file a false insurance claim we would be looking at prison time but someone can rip people off for millions or billions and never see a day in jail. What am I talking about they can rip people off and get a huge bonus for it.

I have a lady that lives near me that is an identity thief and has probably ripped people off for more than most bank robbers......she has never seen one day in jail.

But if I would do the slightest little thing I would be doing time.

Jim
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Old 11-23-2008, 04:39 PM   #7
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i've seen stocks in big companies drop big before. there is a good chance the stock is going to be worthless and i bet almost every managed fund is dumping the last of their citi stock and the only people buying are the bondholders
Why would the bondholders buy the stock? When a company goes into bankruptcy the common shares are wiped out. Am I missing something?
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Old 11-25-2008, 07:58 AM   #8
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Why would the bondholders buy the stock? When a company goes into bankruptcy the common shares are wiped out. Am I missing something?
I think he investors would not buy their stock but bond investors might be buying CitiGroup bonds...
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Old 11-26-2008, 11:29 AM   #9
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with Bear the bondholders bought it to make sure the merger was approved. same here, if Citi were to be forced into a merger with another bank that would take on the debts than the bondholders have the most to lose if the merger doesn't go through
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Old 11-26-2008, 02:28 PM   #10
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with Bear the bondholders bought it to make sure the merger was approved. same here, if Citi were to be forced into a merger with another bank that would take on the debts than the bondholders have the most to lose if the merger doesn't go through
But when the Bear bondholders bought the Bear Stearns stock JPMorgan Chase had announced that it wanted to merge with Bear. Here with Citi there is no merger on the horizon. The only bank with enough capital to merge with Citi is the fed...

Isn't this the second major crisis Citi has had? I read somewhere that they had some serious problems in the 90's.
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Old 11-26-2008, 04:52 PM   #11
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Isn't this the second major crisis Citi has had? I read somewhere that they had some serious problems in the 90's.
Citi was down to about $2 per share during the South American bond defaults. If mark to market existed back then, they would have failed along with 50+% of the big banks in the US. The FED lowered interest rates and time allowed them to reflate their balance sheets.
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Old 11-26-2008, 06:03 PM   #12
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ex AIG CEO Joseph Cassano under investigation:
Bloomberg.com: U.S.

DD
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Hopefully someone is looking into it.
Old 11-27-2008, 05:12 AM   #13
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Hopefully someone is looking into it.

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Hopefully someone is looking into it.
Politicians hoping to finance their next campaign will be "looking into it" to see if these super-wealthy scammers will be donating again next year.
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Old 11-27-2008, 07:09 AM   #14
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Chinaco

I have found that there are certain classes of people who are pretty much above the law.

Laws only apply pretty much to poor guys.

If you or I would file a false insurance claim we would be looking at prison time but someone can rip people off for millions or billions and never see a day in jail. What am I talking about they can rip people off and get a huge bonus for it.

I have a lady that lives near me that is an identity thief and has probably ripped people off for more than most bank robbers......she has never seen one day in jail.

But if I would do the slightest little thing I would be doing time.

Jim
Many times scams are set up so well that it is very difficult to prosecute, especially when the scammer is "rich". Often the scammers become rich because they are so good at the scam. Other times they might be doing something that is shady, but not illegal. A good example is the Nigerian money change scam. It has made headlines and the news is out there for people to read, but people still fall for it. It is almost impossible to discover who is doing the scam, let alone make an arrest if the perpetrators are discovered.

Shaky cases often are sent to the prosecutor's office to determine if they want to go forward with the prosecution. When the prosecutor receives the case they can investigate further, file, or decline filing.

With the banks, I think, it would be a difficult sell to gain a meaningful successful prosecution of the powers. If it were obvious that the loan involved fraud the bank would normally decline the loan, at least they were at regional banks where the DW worked. The more involved the case is the less likely it will be prosecuted. The main reason is the prosecutor has to be able to clearly explain to the jury how a financial transaction is illegal. Try talking about finances with the typical American and their eyes glaze over in about two seconds. When public opinion gets so bad against the banks, then the prosecutor could get a conviction of the ham sandwich in the lunch room, but I don't think we are there yet. A few more "AIG parties" by the banks after the bailout and we will be there, quickly.
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