We Are the Government and We Are Here to Help
Not many of you will remember the S&L crisis a few decades ago. Back then, there were 200 FBI agents assigned to mortgage fraud cases. During this last real estate boom, there were 100 agents on the trail of fraudsters. In fact, the FBI asked for a bigger budget for such things and they got even less than they originally had.
This points out one — of MANY — opportunity costs that fighting three wars presents (Iraq, Afghanistan, the War on Terror).
We simply chose to provide funds to fight wars rather than regulate our markets. This is not a judgment; it’s a fact.
Much of the initial “sub prime” issue arose because of wanton fraud by both borrowers and lenders. Mortgage banks duped investors who bought the “securitized” mortgages, but investors should have known better.
Officials said they began approaching mortgage companies and others in an attempt to raise awareness about the growing fraud problem. But the lenders had little incentive to cooperate because they were continuing to make money. Black says that in many cases, they were part of the fraud.
At the end of the day, it was all about greed: Borrower, lender, and investor greed. Greed is not one of the seven deadly sins for nothing!