Problem 1 is to apportion the blame. And I say, it can’t reasonably be done, unless you want to outlaw the profit motive.
It is true, that a massive effort could root out the worst of the worst mortgage brokers, but the fact is, these guys produced loans that the lenders wanted. I worked as a loan originator in 2006. If the loan scenarios (eg; how much income rel to how much debt, the whole “picture”) didn’t conform to lenders’ specs, we had 85 different lenders we could go to. SOMEONE would approve ANYTHING, it was just a matter of how much Xerox and Fed Ex expense you wanted to go thru.
I really have 2 points: An effort to prosecute the bad boys of this industry has to go right to the top, the BSCs and the Lehmans, and we not only see they are being bailed out, but the details of their transaction are being deliberately hidden from view, because the mark-to-market valuations of the toxics on their balance sheets would create a financial firestorm.
IF you are going to prosecute the originating brokers on the grounds that THESE were the people at the center of encouraging lies, finding the corrupt appraisers and getting the docs signed FACE to FACE, that the crimes occurred OVER THEIR DESKS, then it’s very much akin to prosecuting the street drug dealers and not the big time smugglers. (I’m totally neutral on this, if the banks want to prosecute, so be it, it was flaming mortgage fraud, a felony, then, and it is mort fraud now.) But if you DO want to prosecute, then just get the obvious repetitive names off the originating documents, round those people up, and confiscate their homes and BMWs. It should be really easy. There needn’t be any great Sherlock Holmes effort. The names are right there in black and white and nobody needs to be claiming they are any kind of great crusading hero cleaning up the industry. But get the underwriters at IndyMac and Chase and Greentree and Aurora, too, not just the shlumps. And get the dudes at Lehman who put these securities together. Oh, while you’re at it, get the heads of the ratings agencies who graded all this crap “AAA”....AND STILL DO!!!! After all, there is NO provision for increased oversight in the proposed new regs for the banking industry. Just $6 billion in tax breaks for the homebuilders, who both overbuilt and originated plenty of these hallucinogenic mortgages. Oh yeah, then there’s the $29 billion no-recourse taxpayer loan for JPMorgan and who knows how many more billions of dollars loaded onto the taxpayer. It’s a strategy of enforced numbness.
I agree with what you wrote and that the justice effort “has to go right to the top.” But in some of the more local scenes, we also find bribery, theft, drugs, and the like—even in higher local places. ;-)