BernieHund: The Political Watchdog

To hear some talk, the consumers should have been wary of the easy mortgage lending practices of the banks and mortgage companies for the past few years.  I suppose some of us have been wary.  Anyone could have questioned the easy money.  But, as consumers most of us have the idea that when we want something it should be made available.  And, as the Joneses moved to a new larger home, many of us felt as if we were being left behind if we didn’t pack our households onto moving vans and make a similar move. 

Before we get to the indictments I feel the need to say that consumers are partially to blame.  We want.  We get.  Credit has been all but forced upon us.  Even BernieHund received a “pre-approved” credit card application or two.  In case anyone is wondering, Bernie is a dog.  See the picture in the logo.

But, some of us felt our egos grow and that translated into self-worth and self-esteem as our mailboxes were flooded with offers of credit.  The weakness of the human condition allowed many of us to accept credit we knew we shouldn’t have.  We became collectors of things because it was easy.

Secondly, our education system is partially to blame for our acceptance.  Schools have long neglected the practical side of arithmetic.  No one seemed to be teaching how to balance a checkbook or how to use credit properly.  And, as we all know that if children are graduating from high school without the ability to read, we cannot expect them to be able to understand math or science.  For those who made it to college, often during the first weeks of September they found tables set up all around the campus encouraging them to sign up for a credit card.  Many have.  And, today many find themselves in debt they didn’t figure on by graduation.

That’s a failure of parental guidance and an indication of educational deficiencies.  Now, to the indictments.  Much as been written and spoken about how consumers “took advantage” of the easy credit.  And, yes, that’s true.  But, for the most part these consumers were told that it was okay.  Mortgages were handed out like the playbill at a high school football game.  Everyone who stuck out a hand got one.

That’s where government regulation comes in.  Apparently, there was none.  And, much like the Enron scandal, we are about to see that those institutions and corporations we have been taught to trust have betrayed that trust for a fast buck.  Need we wonder how the gap between the rich and the poor widened so quickly?

To recite the phrase that has riddled the airwaves and press of late, “the chickens are coming home to roost.”

Federal authorities announced Thursday that more than 400 real estate industry players have been indicted since March — including dozens over the past two days — in nationwide crackdown on mortgage fraud that has contributed to the country’s housing crisis.

The FBI put the losses to homeowners and other borrowers who were victims in the schemes at over $1 billion.

The Deputy Attorney General spoke to the issue.

“Mortgage fraud and related securities fraud pose a significant threat to our economy, to the stability of our nation’s housing market and to the peace of mind to millions of Americans,” Deputy Attorney General Mark Filip said in a statement.

That doesn’t necessarily excuse all consumers from any responsibility for accepting mortgages that seemed too good to be true, but it does tell us that we, as consumers, were baited into accepting mortgages that we didn’t deserve and over time couldn’t afford.

How widespread is the fraud? 

Since March 1, 406 people have been arrested in the sting dubbed “Operation Malicious Mortgage” that saw 144 cases across the country. Sixty people were arrested on Wednesday alone, including in Chicago, Miami, Houston and a dozen other regions policed by the FBI.

The name of the sting “Operation Malicious Mortgage” pretty well describes it.  Because of these malicious mortgages many people are moving out of their homes and into apartments.  There is nothing wrong with apartment living, but that isn’t the point.  People were led to believe that they could have the American dream of owning a home when it really wasn’t affordable.  These people who are losing their homes aren’t just enduring the inconvenience of moving.  They are facing years and years of “bad credit.”  The move to the apartment will be the easy part.  The suffering will come in the years following that move, when these people will be charged higher interest because they have a low credit score.  They will pay higher car insurance because they have a low credit score.  And, the list goes on. 

Additionally, two folded hedgefund executives from Bear Stearns have been indicted.

In a separate sweep, two former Bear Stearns managers in New York were indicted and taken into custody Thursday on criminal charges related to the collapse of the subprime mortgage market. Matthew Tannin was taken into custody outside his New Jersey home and Ralph Cioffi was arrested at his New York City home, the FBI said.

An indictment unsealed in federal court charged both men with securities and wire fraud, and Cioffi with insider trading.

In a separate complaint filed Thursday, the Securities and Exchange Commission alleges that in the first five months of 2007, Tannin and Cioffi “deceived their own investors, as well as the fund’s institutional counterparts, by fraudulently concealing from them the full extent of the fund’s deepening troubles.”

The complaint says that in March 2007, Cioffi withdrew $2 million of his own money from a hedge fund without revealing to investors that he was substantially reducing his exposure to the toxic loans.

And, this is the same Bear Stearns that the Fed rushed in on a Friday night after closing hours to bail out.  Don’t get me wrong.  I understand the idea that no one wants to see a bank fail.  But, I don’t think many of us want to move out of our homes either.  Quite honestly, that $600 check didn’t help too many people stay in their houses.  It seems that those who created the problem and benefited most from the easy credit deals got the bail out and the rest of us are eating from the Marie Antoinette cake before they pass out the kool-aid. 

Thousands of Americans are losing their homes.  Regardless of what has been reported, I find it hard to believe that we have reached the crest of the crisis.  Yet, only 400 of the implementers have been indicted.  Perhaps, there are more to come.  For the consumers, the crisis will last far longer and have longer lasting devestating effects.

Once again, under the present administration, we have seen another scandal that picks up a few of the top dogs and makes homeless strays of too many American citizens. 

And, please…. don’t say anything about “reading the fine print.”  If the legal authorities are still litigating the “language” of the fine print, how can an untrained consumer be expected to understand it?  As consumers we are forced to rely on so-called experts to guide us.  No one can know everything about everything.  That much we do know.  But, it has now come down to who can we trust?  Isn’t that something the government should be overseeing and regulating… before it’s too late?  Unfortunately, once again, it’s too late.