I'm not entirely familiar with the testimony to which you are referring but, just from reading the summary you provided, I don't necessarily think that regulatory action -- much less jail time -- would be appropriate. A bank selling assets that violate its own internal quality guidelines isn't a crime as the bank is not bound by law to follow such guidelines.
It is when they do not state that the loans do not meet their own underwriting standards.
"During the foreclosure trial, an operational team leader for Bank of America, Linda DiMartini, said it was “customary for Countrywide to maintain possession of the original note and related documents.”
So the purchaser doesn't even have the ability to verify the quality of the loan nor do they legally (in most states) own the note. Those loans were packaged into MBS, which again are fraudulent because they do not contain the actual notes, and rated AAA.
Furthermore, since the vast majority of the loans made were eventually securitized and those securities received AAA ratings, largely due to claims made by the banks, it is very difficult to argue that massive fraud has not taken place.
It is exactly the same thing as taking a dog turd and dipping it in chocolate then boxing it up and selling it as pure Godiva. On the surface it looks and smells like chocolate until you dig in and take a bite. We call that fraud and it is in fact a crime.
Whether selling assets that actually differed from the bank's published claims vis-a-vis those assets is a crime depends on the nature of the misstatements -- in effect, whether they were material to an average investor. Although reasonable people can disagree as to what constitutes materiality in this context, if Citi provided full and accurate disclosure of the loans and didn't alter terms or hide 'bad' loans from potential investors then I'm chary to say that there was a crime committed. The investors were sophisticated counter-parties that had the ability -- provided Citi gave them an accurate accounting of the loans they were selling -- to independently evaluate the quality and risk associated with their investment.
" "In carrying out its review of the approximately 19,000 Countrywide loan files, MBIA found that 91% of the defaulted or delinquent loans in those securitizations contained material deviations from Countrywide’s underwriting guidelines. MBIA’s report showed that the loan applications frequently “(i) lack key documentation, such as verification of borrower assets or income; (ii) include an invalid or incomplete appraisal; (iii) demonstrate fraud by the borrower on the face of the application; or (iv) reflect that any of borrower income, FICO score, debt, DTI [debt-to-income,] or CLTV [combined loan-to-value] ratios, fails to meet stated Countrywide guidelines (without any permissible exception)." The plaintiff counsel is Bernstein Litowitz, which was made famous from the WorldCom litigation. We doubt they will settle for a few measily pennies on the dollar. As for the list of litigants, it is a veritable who's who of the insurance industry: Dexia Holdings, FSA Asset Management, New York Life iInsurance Company, The Mainstay Funds, Teachers Insurance & Annuity, TIAA-CREF Life Insurance, and College Retirement Equities Fund."
Hmm, what would you call that?
As such, why should the resources of the federal government be invoked because one set of investors made a series of bad bets?
Because black letter law was violated and people/entities have been cheated out of enormous sums of money and law enforcement is supposed to, I dunno, enforce the law?
Also, your analogies are all off the mark because it is not a crime -- in most cases, and especially those involving two sophisticated parties -- to sell low quality assets or securities. The only crime is in misrepresenting the quality of the assets.
It IS a crime to sell low quality assets or securities and claim that they are very high quality assets of securities. The sophistication of the other party is irrelevant, fraud is fraud.
Just because liabilities that were off-balance sheet jump onto a bank's balance sheet a few weeks or months later does not necessarily suggest that there was any accounting impropriety committed by either the company, its accountants or its auditors. Some of the activity would certainly seem to be fraudulent -- such as Repo 105 -- but other methods of moving assets of balance-sheet such as using SIVs or SPVs are not illegal and were recognized as entirely valid at the time the CEO and CFO signed the audit and accounting reports under Sarbox. The problem, of course, with SIVs is that the obligations housed in those vehicles are only 'quasi' off the balance and can jump back on at the least inopportune of times (as many of the banks experienced). This does not mean, however, there was a crime as the banks did comply with generally accepted accouting practices and guidelines -- which, this case, permitted holding less (or no) capital for SIVs and SPVs. The problem was not with the conduct of the banks but the accounting rules governing the banks.
Really? Why don't you try to make an "accounting error" for your company to the tune of 40 freaking percent (which the taxpayer has to then eat) and see what happens to you. I can understand a few percent or maybe even 10% but damn near HALF??? Are you kidding?
Oh, and on the topic of robo-signing, they did break the law but I can emphasize with them mainly because the American real property regime still has yet to evolve from the 16th century. It is hopelessly outdated and impractical. Moreover, there is no evidence yet produced that any individual was wrongfully foreclosed upon by a bank or loan-servicing company.
Wait, you said they did break the law but even though the foreclosure was not legal per black letter law no individual was wrongfully foreclosed upon by a bank or loan servicing company? Furthermore I can post literally dozens of cases of wrongful foreclosures, entities foreclosing that had no right to do so, foreclosures on properties that the bank did not and NEVER owned the loan. Breaking and entering into some poor womans house while she was home by foreclosure agents working for a bank when the woman OWNED the house outright. But wait, they did it again to the SAME WOMAN! Frankly they are lucky in the last case because in the state that happened the woman could have legally shot and killed the intruders.
I do invite you to go to your local courthouse and perjure yourself under oath and see what happens. Why do you think that the banksters should be held to a different set of laws than you or I?
How about bribery? Politicians admitted in court that they received a bribe from a large bank and said politicians are currently in JAIL. Last I checked at least two parties are guilty in a bribery case, the party accepting the bribe AND the party offering the bribe. Why is it that the party offering (and paying) the bribe gets off scott free?
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