Tuesday, September 23, 2008
What is taking so long?
There's really only one reaction to word that the FBI has opened investigations into possible fraud at some of the largest subprime mortgage lenders in the United States -- what took you so long? Nobody watching the unfolding breakdown of the U.S. financial system doubted that some kind of massive fraud was taking place -- except, maybe, the government regulators whose very job was to keep watch and guard against it. Fannie Mae, Freddie Mac, Lehman Brothers and AIG -- names everyone is familiar with now because they were some of the worst offenders in the financial crisis -- are among the 26 targets of the FBI investigation, according to CNN. FBI Director Robert Mueller told Congress earlier this month that 1,400 individual real estate lenders, brokers and appraisers were under investigation in addition to the 26 firms. "The FBI currently has 26 pending corporate fraud investigations involving subprime lenders," FBI Special Agent Richard Kelko told CNN. "As we have seen, this number can fluctuate over time, however we do not discuss which companies may or may not be the subject of an investigation." CNN said it previously learned Countrywide was being investigated. The financial crisis was triggered by a decline in home prices, which had been rising for 10 years, that undermined millions of mortgage loans extended using relaxed lending standards. The resulting rise in defaults has placed new strains on the U.S. economy and has begun to felt worldwide. Of course, the mere creation of an investigation does not mean crimes were committed, even though more than 400 brokers, lenders, appraisers and others were arrested in June by the FBI's Mortgage Task Force on suspicion of causing more than $1 billion in losses, according to CNN. Still, it is gratifying to see the government begin to take alleged fraud in the economic system seriously. Next, maybe the FBI is going to investigate how the U.S. automobile industry was driven into the ground.