There is probably also some opportunity to be found by looking for violations of fiduciary responsibility. I am not an expert on the concept, but selling a client a bunch of securities while simultaneously betting against those same securities (i.e. selling short) seems like it would be a violation of fiduciary responsibility
As the rules are currently written, if you're selling to other qualified investors, you're required to disclose interest, but that's the extent of it. There are a handful of solid cases of the seller failing to make that disclosure, but they're a drop in the bucket (small fractions of a percent of all transactions); those cases are getting SEC attention, and that sort of failure-to-disclose is obviously an act of fraud, no matter what the political stripes of the listener, so our odds of seeing some convictions are high. Of course, this is securities litigation, so we won't see those convictions for several years yet.
criminal prosecution of large chunks of the mortgage origination and securitization industries. The abuse of well-established real estate law (i.e. blowing it off completely) in the securitization and transfer of mortgages is well established and quite widespread, if you read past the MSM version of the situation (a few isolated incidents, my ass)
You bet - I think we can all agree that there are tens of thousands of line mortgage brokers who performed clearly fraudulent acts. The problem is that those people are all bottom-feeders - they're middle class people who were cutting corners because everybody else was doing it, who've now left the business because there's no money there anymore, many of them going bankrupt along the way. They're the garden variety fraud of writing up a totally bogus mortgage application. I think going after a bunch of them is a good idea, and state levels attorneys' general are doing so, but that doesn't sound like who you're thinking about.
If the (again, well established) laws are taken at all seriously, then quite a few individuals are guilty of selling things as mortgage-backed securities which were nothing of the sort: the transfer of the note was not done according to the law, and so it is invalid, and so the MBS is in fact just an empty piece of paper.
Well... that's a lot harder. Until the home-buyers stopped paying, there wasn't any question about the mortgages being valid - the borrowers were paying what they believed were their mortgages every month, the servicers were divvying those payments out to the MBS holders. Pretty much everyone involved seems to have thought those were valid mortgages until the borrower stopped being able to pay.
On a somewhat tangential note, the maker of Inside Job (http://www.imdb.com/title/tt1645089/) is speaking about all this on KQED right now.
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Date: 2011-03-02 06:36 pm (UTC)There is probably also some opportunity to be found by looking for violations of fiduciary responsibility. I am not an expert on the concept, but selling a client a bunch of securities while simultaneously betting against those same securities (i.e. selling short) seems like it would be a violation of fiduciary responsibility
As the rules are currently written, if you're selling to other qualified investors, you're required to disclose interest, but that's the extent of it. There are a handful of solid cases of the seller failing to make that disclosure, but they're a drop in the bucket (small fractions of a percent of all transactions); those cases are getting SEC attention, and that sort of failure-to-disclose is obviously an act of fraud, no matter what the political stripes of the listener, so our odds of seeing some convictions are high. Of course, this is securities litigation, so we won't see those convictions for several years yet.
criminal prosecution of large chunks of the mortgage origination and securitization industries. The abuse of well-established real estate law (i.e. blowing it off completely) in the securitization and transfer of mortgages is well established and quite widespread, if you read past the MSM version of the situation (a few isolated incidents, my ass)
You bet - I think we can all agree that there are tens of thousands of line mortgage brokers who performed clearly fraudulent acts. The problem is that those people are all bottom-feeders - they're middle class people who were cutting corners because everybody else was doing it, who've now left the business because there's no money there anymore, many of them going bankrupt along the way. They're the garden variety fraud of writing up a totally bogus mortgage application. I think going after a bunch of them is a good idea, and state levels attorneys' general are doing so, but that doesn't sound like who you're thinking about.
If the (again, well established) laws are taken at all seriously, then quite a few individuals are guilty of selling things as mortgage-backed securities which were nothing of the sort: the transfer of the note was not done according to the law, and so it is invalid, and so the MBS is in fact just an empty piece of paper.
Well... that's a lot harder. Until the home-buyers stopped paying, there wasn't any question about the mortgages being valid - the borrowers were paying what they believed were their mortgages every month, the servicers were divvying those payments out to the MBS holders. Pretty much everyone involved seems to have thought those were valid mortgages until the borrower stopped being able to pay.
On a somewhat tangential note, the maker of Inside Job (http://www.imdb.com/title/tt1645089/) is speaking about all this on KQED right now.