Why the noisy public relations campaign for the mortgage fraud task force? Thankfully, main street has not stopped demanding accountability. As Politico reports, Members of the liberal activist group CREDO Action have made more than 3,000 calls since March to the White House and Obama’s Chicago campaign headquarters urging the administration to assign more investigators to the mortgage fraud task force. About 50 struggling homeowners also protested this month outside an Obama fundraiser at George Clooney’s house in Los Angeles.
“We’re not talking about putting people in jail by executive order,” said Becky Bond, political director at CREDO Action. “We’re just talking about putting a couple thousand investigators on the case. We believe if there’s a full investigation, that’ll result in criminal charges.” Unbelievably, the citizens actually have to rise up and demand that the law enforcement agencies perform their duties. This is quite a state of affairs.
An astonishing explanation was provided by Robert Khuzami, director of enforcement for the Securities and Exchange Commission and one of five co-chairs on the mortgage fraud task force, “The fact they may look around and not see a particular [case] being filed is not the appropriate metric at this early stage of the effort of the working group, but that shouldn’t be mistaken for a lack of progress.” No, Mr. Khuzami, the SEC defines lack of progress with its announcement that no charges will be filed against Lehman Brothers. Since he doesn’t view that as a failure of law enforcement, I can only imagine what his aspiration of justice is in regards to mortgage fraud.
The root of this indefinite “delay” is quoted in Politico by an anonymous source:
A government source working on housing issues said the unit is struggling in part because of a lack of commitment from the White House since its roll out in the State of the Union, citing a leadership vacuum since DOJ Associate Attorney General Thomas Perrelli left the Obama administration in February.
“It’s not happening at the level that it should be happening,” the source said. “There’s no person with juice at the federal level that is banging heads and making sure things are happening the way they should.”
If the priority was to actually hold anyone accountable, we know that an investigation would have started years ago with the first whistleblowers. As early as 2004, the FBI was warning of a mortgage fraud epidemic. Investigators should have went to the businesses where higher volumes of bad mortgages were issued and questioned the agents on up until reaching the top levels of the banks. This same strategy should have been implemented with securitization firms and credit ratings agencies. Instead, years have passed and we find ourselves in another election year. In an attempt to placate the public, a public relations campaign is kicked off with a dramatic uptick in “shuffling the shit”. This new task force was created, people and paper have been shuffled around, subpoenas issued, a website was launched and frequent grandiose public announcements are being made. This is eerily similar to failing corporations that undergo massive organizational restructuring efforts back-to-back until finally being bought out.
This task force isn’t even pursuing criminal investigations. All evidence is starting to point to a repeat of the hush money settlement we witnessed this year because bank attorneys are gearing up for monetary penalties. How is this going to change future behavior? It should not be acceptable for people in the industry to commit fraud and there should be serious consequences for those who do. At the moment, fraud for profit looks like a bet that only has an upside.