Crimes suspected in 20 bailout cases -- for starters

LATimes ^ | April 21, 2009 | Ralph Vartabedian and Tom Hamburger

[CutePuppy]

Washington and Los Angeles -- In the first major disclosure of corruption in the $750-billion financial bailout program, federal investigators said Monday they have opened 20 criminal probes into possible securities fraud, tax violations, insider trading and other crimes.

The cases represent only the first wave of investigations, and the total fraud could ultimately reach into the tens of billions of dollars, according to Neil Barofsky, the special inspector general overseeing the bailout program.

.....

The report said little about who is under investigation and how the fraudulent schemes work, but investigators are already on alert for a long list of potential scams. Such schemes could include obtaining bailout money under false pretenses, bilking the government with phony mortgage modifications, and cheating on taxes with fraudulent filings.

"You don't need an entirely corrupt institution to pull one of these schemes off," Barofsky said. "You only need a few corrupt managers whose compensation may be tied to the performance of these assets in order to effectively pull off a collusion or a kickback scheme."

The risk of fraud is only increasing as the bailout becomes "more complex and larger in scope," he said.

Indeed, much of the 247-page report released in Washington today by Barofsky's office focuses on a segment of the bailout that is only now being put into motion -- an effort to buy toxic securities from banks and other investment groups in which the federal government would provide up to 92.5% of the money. That effort could be the most vulnerable to fraud, Barofsky said, because investors would have so little at risk.

Among the toughest recommendations in the report is for the Treasury to abandon its planned structure for buying the toxic securities, which include intricate bundles of bad mortgages and loans, before it gets rolling.

.....

[CutePuppy]

When there is a huge pot of money provided by government, now directed ostensibly for the purpose of "stimulating" the economy, there will be all kinds of temptations that "stimulate" the wrong people. The "bad bank" concept is unworkable, which is why Henry Paulson (in consultation with Bernanke and then-President of NY Fed) didn't go through with it. Geithner as Treasury Secretary could not come up with anything better and, after fumbling several attempts at toxic paper "solution," gave in to Sheila Bair (FDIC Chairman) and came up with the idea of... "bad bank" naming it PPIP (Public-Private Investment Program). Obviously, Obama and Geithner had no plan or idea how to "fix" the problems when they promised to "hit the ground running" upon taking the office.

[FromLori]

Great article thanks for posting it!

[CutePuppy]

I thought so, too. Glad you liked it.

[CH3CN]

The next level of looting starts.

[Proud_USA_Republican]

This is going to make the Katrina grifting look like some minor scam.

[gakrak]

He should start with Senator Dianne Feinstein (D) of California.
Her appearance of conflict of interest in securing a sweet deal for her hubby really needs to be prosecuted. Amen.

[SkyPilot]

The report said little about who is under investigation

What a joke. For starters, they can go after these three criminals who had a direct hand in causing the financial, housing, and economic crisis with the Community Reinvestment Act (CRA):

Look at this map, and notice the red.

That red has been labeled Redlining and is where activists such as ACORN demanded (and got) millions upon millions in guaranteed loans in inner city neighborhoods all over the country (this map is just Camden NJ). This was done despite their ability to pay them. Anyone ever been to this neighborhood in Camden. I have seen war zones that look better. Where did those billions go?

Here we are, seven and one half years after the Government started the Enron investigation - and the Government "Enron Task Force" is still investigating. Investigating.....what?

Justice in this nation is a complete joke.

[CutePuppy]

For starters, they can go after these three criminals who had a direct hand in causing the financial, housing, and economic crisis with the Community Reinvestment Act (CRA)

CRA and previous "too big to fail" public-private enterprises - GSEs (Government Sponsored Enterprises) like Fannie and Freddie... But who is going to investigate themselves?

[Think free or die]

I’m surprised to see this in the LA Times. I’m not surprised the fraud continues and escalates.

[nathanbedford]

I posted this prediction in March:

Unknown Trillions of dollars handed out by unelected officials in secret to people we often do not know for purposes about which we are mostly ignorant. All ratified under one-party rule which expressly excludes the other political party, done with legislation that no one reads. Could anything be more opaque?

Under these circumstances fraud is inevitable. I therefore predict that these matters will soon be in the hands of a federal prosecutor, even against the wishes of the Obama administration, or in the hands of a special prosecutor, forced on a resistant Obama administration.

It could start with civil suits against corporate officers which might uncover evidence of actual fraud and collusion with government officials. There is too much interaction between administration economic advisers, treasury officials, and politicians and corporate executives. There is too much overlapping of political contributions and taxpayer largess for this chaotic misadventure to be free of corruption.

It is only a matter of time.

[blackdog]

Financial firm writes bad loans earning tripple rate going interest and fees. Firm has to write down values because of corrected assesment values. Government has to bail out financial firms to keep them solvent. Firms take money and embezzle, commit fraud, line pockets, and other happy horse hockey........which all came from the taxpayer.

Now, gubmint prosecutes the horse-hockey and the firms agree to settle out of court using stockholder money to pay the fines pounded out by the gubmint.

Nobody goes to jail. The taxpayers and stockholders just got fleeced over not one, not two, but three times.

What a country!

[blackdog]

They'll all settle out of court using our money again.

Elliot Spitzer mad a good living doing just that.

[CutePuppy]

Could anything be more opaque?

Not only it is deliberately opaque, but it's also done under the guise of "transparency".

There is too much interaction between administration economic advisers, treasury officials, and politicians and corporate executives. There is too much overlapping of political contributions and taxpayer largess for this chaotic misadventure to be free of corruption.

That is exactly why socialist regimes everywhere (be they fascist or communist, olygarchy or other mixes and variations) are the most corrupt political structures on Earth.

Even a fairly liberal economist Joseph Stiglitz Says Ties to Wall Street Doom Bank Rescue - April 17, 2009

“All the ingredients they have so far are weak, and there are several missing ingredients,” Stiglitz said in an interview yesterday. The people who designed the plans are “either in the pocket of the banks or they’re incompetent.”

..... Stiglitz said there are conflicts of interest at the White House because some of Obama’s advisers have close ties to Wall Street.

..... "The statement from Sheila Bair that there’s no risk is absurd," he said, because losses from the PPIP will be borne by the FDIC, which is funded by member banks.

[dools007]

To me, the really amazing aspect of the story is that it was published by the LA Slime. Epipheny anyone? Or is this just a ploy to make it look like a legitmate news organization?

[nyconse]

If the banksters were trustworthy, they would not have dealt in shady banking practices and crashed the economy. I hope they catch them all and put them in jail.

[nyconse]

There will be criminal charges filed...and you can’t settle those out of court...I have said before that people who committed illegal acts in the financial sector must be brought to justice in order to restore confidence in the system. They gave capitalism an undeserved black eye and for that alone, I despise them.

[Glenn]

Ask yourself this question:

If we can’t control it here, how in the hell do we control it in when we send money to places like Gaza?

[koraz]

I am interested in seeing the actual 250 page report and haven’t had any luck finding it. Do you have a link? Thanks!

[koraz]

Never mind. I found it. Here is the link if anyone else is interested.

http://sigtarp.gov/reports/congress/2009/April2009_Quarterly_Report_to_Congress.pdf