Thursday, February 12, 2009

• FBI’ Shifts – Counter-terrorism To Anti-Fraud

As the economy’s meltdown confuses politicians and economists, and stresses businesses and wage earners, the FBI has suddenly discovered a new path to career advancement. It has announced open season on the financial community with 530 corporate fraud investigations.

The FBI also claimed that 38 of these new investigations involve some of the biggest names on Wall Street, and that it has a record 1,800 investigations digging into mortgage fraud. Mortgage industry professionals, including the CEOs of companies, brokers, and lawyers are apparently being scrutinized for their roles in the evaporation of hundred of millions of dollars.

Some of the disappearance is related to the $700 billion Troubled Asset Relief Program’s cash distribution already dispensed. No-one was watching. What can really be expected for the stimulus money Obama and Congress will shortly be disposing of? Neil Barofsky, the special inspector general of the TARP program put it rather aptly, “History teaches us that an outlay of such money in such a short period of time will inevitably draw those seeking to profit criminally.” This is evidently a behavior newly discovered amongst these so-called pages of history. We can assume that anyone of the millions of taxpayers who are being asked to go into massive debt, could easily have lent a more watchful eye over the apportionment of cash than the amateurish efforts which the Administration and Congress have provided.

All of this, of course, is intended to allay, even anesthetize the public fears that its precious cash is, and will be, judiciously dispensed throughout the attempt to stimulate the economy. Taxpayers must be convinced that the trillions that will be borrowed on their behalf to bailout failing or troubled businesses, are in good hands. Every tactic, including fear and panic, is being applied to convince America that this unprecedented borrowing is justified, and execution of the cash distribution will be diligently overseen by government agencies. Taxpayers must also be persuaded that government intrusion in corporate America will, in time, have positive affect. How else can the emergence of future Madoffs be prevented? Shifting public consciousness is a slow multi-level, multi-dimensional process.

We can rest assured that the FBI investigation, along with an allegedly revived SEC, will not delve too deeply into any affairs of financially healthy friends of the Administration or Congress. Future results will be consistent with past inaction on abuses perpetrated by former executives of organizations such Fannie Mae and Freddie Mac. Where was the SEC’s oversight during the past few months or the past year? Where is it now?

America can look forward to being entertained by in-depth coverage of occasional culprits assembled into the coral constructed specifically for scapegoats. Sure, they will be guilty, and mountains of evidence will be collected then disgorged on their heads with flamboyance in the public square, but they will be bit players in the game. The new FBI initiative is another tool in the arsenal prescribed for taking the taxpayer’s eye off the ball. Fraudsters should be punished. All fraudsters, including the ones at the top of any fraudulent food-chain, even those whose cosy relationships provide insulation from prosecution. Delivering otherwise is repeating tired myths, and is a prolonging of past disrespect of taxpayers.


  1. Are there any independent investigative bodies, not subject to influence by government, the financial industry, organized crime, special interest groups, etc., that currently look into financial crimes, malfeasance, excessive risk-taking, etc.? If there are, where were their pre-collapse warnings? It seems most of the pre-collapse warnings, from just about all sources, were delivered to institutions that were either supposed to investigate, but were known not to (SEC, etc.), or delivered via individual blogs, intermittent news articles, etc.--in other words, methods whose success is too hit-or-miss, or downright known to have little if any effect on things like, and as big as, the financial industry. I wonder what would have happened with the Madoff fraud if Markopolos, the guy who had been blowing the whistle on Madoff since 1999, had taken his story to the press, TV, etc. from the start, keeping it in the public eye daily until something was done about it? Staid reliance on old methods of getting certain things done, too often doesn't get things done. Put an issue before the public eye, daily, making use of populism, and more will probably get done.

  2. the saying that WHAT YOU DONT KNOW WONT HURT YOU
    was well designed to misrepresent the real meaning and translation of WHAT WE DONT KNOW, WILL DEFINETLY HURT THEM!!!
    all citizens and taxpayers have entered an extremely high danger zone, this is the begining
    of the end of days.

  3. "I conclude we need economic stimulus, however, it must start where the root problem started ..."

    I agree, and the place where the root problem started is at the banking level:

    Banks should NEVER have been given the go-ahead to package their mortgage loans into 'investments' ... so just change the law and stop them from doing it any more.

    My personal view is that banks should NEVER be able to repackage and resell my mortgage to anyone else -- EVER! I went to them for my loan because they are the ones I wanted to deal with, not some service company out of state or some unknown investor.

    If the President and other policy makers and the SEC would recognize that the source of this problem is because the banks were given the green light to collateralize mortgage loans -- and just STOP IT IMMEDIATELY AND FOREVER -- then maybe we will never again have to worry about this kind of crap.

    But I have yet to see anyone suggest that this is something they are considering, and personally I think it is not only the best solution but the only solution that will make these banks wake up and remember that they are supposed to be providing stable lending opportunities to real estate buyers, not specially packaged 'investments' to others just they can avoid responsibility for lending to people they knew full well would never be able to pay.

    It's a shame the regulators in this country are so lax and irresponsible that they would every let the banks get away with this loan packaging in the first place.