Reputable Bank Mortgage Fraud Documented in New Study

The Big Picture summarizes a new study confirming pervasive fraud by our most “reputable banks” prior to the Great Recession.

“The definitive evidence of control fraud that PSW2013 identifies is by mortgage lenders who made, or purchased, mortgages and then resold them to “private label” (non-Fannie and Freddie) financial firms who were creating mortgage backed securities (MBS).  The deceit they documented by the firms selling the mortgage loans consisted of claiming that the loans did not have second liens.  The lenders knowingly sold mortgages they knew had second liens under the false representations (reps) and warranties that they did not have second liens.  (The authors confirm the point many of us have been making for years – the banks that fraudulently sold fraudulent mortgages did have “skin in the game” because of their reps and warranties.  The key is that the officers who control the banks do not have skin in the game – they can loot the banks they can control and walk away wealthy.)  The PSW 2013 study documents that the officers controlling the home lenders knew the representations they made to the purchasers as to the lack of a second lien were often false (pp. 2, 5 n. 6), that such deceit was common (p. 3), that the deceit harmed the purchasers by causing them to suffer much higher default rates on loans with undisclosed second liens (pp. 20-21), and that each of the financial institutions they studied – the Nation’s “most reputable” – committed substantial amounts of this form of fraud (Figure 4, p. 59)…

The greatest importance of the PSW 2013 study is that even the fraud deniers have to admit that our most prestigious banks were the world’s largest and most destructive financial control frauds.  Given this confirmation that the banks engaged in one form of control fraud in the sale of fraudulent mortgages (false representations about second liens), there is no reason to believe that their senior officers had moral qualms that prevented them from becoming even wealthier through the endemic frauds of liar’s loans and inflated appraisals.  Appraisal fraud is almost invariably induced by lenders and their agents.  Given the “pervasive” willingness of the officers controlling our most prestigious banks to enrich themselves personally by lying about the presence of second liens, they certainly cannot have any moral restraints that would have prevented them from creating the perverse incentives that caused loan officers and brokers to put the lies in liar’s loans and to induce appraisers to inflate appraisals – two other control fraud schemes that were far more “pervasive” (and even likelier to produce severe losses) than the two forms of fraud studied by the PSW 2013 authors.”

Related posts

Bloomberg Editors: Too Big to Fail Banks Would Break Even in the Absence of Corporate Welfare

Bloomberg editors warn us about corporate welfare for the “too big to fail banks.” In addition, the fact that the ”too big to fail banks” would break even in the absence of corporate welfare is an incredible indictment against the leadership … Continue reading→

If the Big Banks Were Too Big to Fail in 2008, Where are They Today?

Oh, much bigger! Source: Jon Ogden at Switch Your Bank

Is 2013 the Year for Substantive Financial Reform?

Simon Johnson believes that “2013 will be a watershed for financial reform.” “News reports indicate that the Fed has already started saying no to some bank mergers. At the same time, the US Federal Deposit Insurance Corporation has become a bastion …Continue reading →

Troubling Data Points

Via Paul Bucheit: “1. Only THREE PERCENT of the very rich are entrepreneurs. According to both Marketwatch and economist Edward Wolff, over 90 percent of the assets owned by millionaires are held in a combination of low-risk investments (bonds and … Continue reading →

Resources on “Too Big to Fail” Banks

Banks are an important asset for our capitalist economy. In fact it can be argued that a healthy  and thriving banking system is at the core of a robust, growing economy. On the other hand, the Great Recession has taught … Continue reading →

Powerful Fed Board Member Calls for Capping Bank Size

A high profile and powerful member of the Federal Reserve’s Board of Governors, Daniel Tarullo, calls on Congress to cap the size of the nation’s financial firms. According o the Wall Street Journal this marks “one of the most high-profile challenges to the way Wall … Continue reading →

The Relationship between Regulations, Failed or Assisted Banks and S&Ls

The relationship between regulations, failed or assisted banks and S&Ls Also, credit to Marilynn Baker.

Speaking about Who Doesn’t Pay Taxes

Speaking about people not paying taxes…. $21 to $32 Trillion in Off-Shore Jurisdictions “A significant fraction of global private financial wealth — by our estimates, at least $21 to $32 trillion as of 2010 — has been invested virtually tax-free … Continue reading →

The Big Banks Fail Us Again: 800,000 Homeowners were Pushed toward Foreclosure Unnecessarily

An important question: How many people have been pushed toward foreclosure unnecessarily? Based on an a study from the Federal Reserve Bank of Chicago, the government’s Office of the Comptroller of the Currency (OCC), Ohio State University, Columbia Business School, and … Continue reading →

Bank Loans Grow to Post-Recession Peak: U.S. GDP Growth Expected

Good news. Lending by U.S. banks has grown to a post-recession peak, supporting  an expected growth in GDP, according to an article in Bloomberg. “Borrowing is the best indicator out there for future growth. If you see the demand to … Continue reading →

Misplacing the Blame for Budget Problems: The False Narrative

The Economist View explains the false narrative of budget problems: “Bankers, with the help of their purse string controlled puppets in government, have been able to successfully blame our budget problems on social insurance and other government spending they oppose. … Continue reading →

Yardeni: Banks are the Achilles’ Heel of Capitalism

Noted economist, Edward Yardeni, President and Chief Investment Strategist of Yardeni Research, is not supportive of the ‘too big to fail’ banks. As he explains in Barron’s, “banks are the Achilles’ heel of capitalism.” “The problem with banks is that … Continue reading→

Titans of Banking, Economics and Finance Call for Breakup of ‘Too Big to Fail’ Banks

The Big Picture compiled an impressive list of noted titans in banking, economics and finance calling for the break up of ‘Too Big to Fail’ banks. “The following bankers are calling for the big banks to be broken up: -Former … Continue reading →

‘Too Big to Fail Banks’ are Much Bigger

Neil M. Barofsky, the special inspector general of the Troubled Asset Relief Program (TARP), observes, “The top banks are 23 percent larger than they were before the crisis. They now hold more than $8.5 trillion in assets, the equivalent of … Continue reading →

Former Citigroup Chairman: Separate Investment Banking from Banking

Guess who’s added his name to the growing list of notable people suggesting that investment banking needs to be separated from banking? No less than former Citigroup Chairman and CEO Sanford Weill this morning on CNBC’s “The Squawk Box.” “What …Continue reading →

Study: Global Most Wealthy Have at Least $21 Trillion Hidden in Secret Offshore Tax Havens

I’ve been sitting on the following study for a few days to see if it came under severe criticism. So far I haven’t seen any debunking of the study. The findings of this study are incredible. The study contends that … Continue reading →

A Must Read: “Failing to Break Up the Big Banks is Destroying America”

Barry Ritholtz has written a very compelling and scary article on the “Too Big to Fail” banks. I highly recommend it. I place the article in the “must read” category. His article has six major, well-documented, sections: The Size of … Continue reading →

The Financial Crisis Was Foreseeable … Thousands of Years Ago

The Financial Crisis Was Foreseeable … Thousands of Years Ago – http://pulse.me/s/bsACC

Canada’s Banking System Helped Canada Surpass the U.S. in Wealth

I forgot to mention in the blog dealing with Canada and 16 other countries surpassing the U.S. in wealth that one of the reasons for Canada’s positive economic growth is Canada escaped in relative terms the great U.S. banking crisis. … Continue reading →

Top GOP Appontee Worried about Banks

I’ll tell you about Sheila Bair in a minute but, most importantly, this is what she has to say about the alleged corruption in the banking system: “I worry that the public is getting cynical. One of the reasons I … Continue reading →

Are Banks Banksters?

Can you name your banker? I can’t. Yes, I know the name of my drive-up teller, but it’s been years since I knew the name of any key decision-makers in my bank. I recall when my wife and I bought … Continue reading →

Consumer Financial Protection Bureau Puts $140M Back in Consumers Pockets

The newly formed Consumer Financial Protection Bureau (CFPB) bagged its first major win against Capital One Bank. Here’s the release from the CFPB site: WASHINGTON, D.C. – Today, the Consumer Financial Protection Bureau (CFPB) announced its first public enforcement action … Continue reading →

A Must Read Article on Mega Banks

Dr. Peter T Treadway, Chief Economist, CTRISKS Rating, LTD, Hong Kong, writes a long but very worthwhile article on banking and  banks (i.e., regulation, Basel III, Dodd-Frank, LIBOR,  too big to fail, risk). His article is very informative. I highly … Continue reading →

Bipartisan “Financial Crisis Inquiry Commission” Report Examines Causes of Great Recession

The bipartisan ‘Financial Crisis Inquiry Commission’ was established by Congress “to examine the financial and economic crisis that has gripped our country and explain its causes to the American people.” Their final report is a very comprehensive analysis of the … Continue reading →

Contemporary Republican Thinking is Just Wrong!

David Brooks writes a very interesting article on “What Republicans Think.” I recommend it. However, I think Brooks misses the point. The more important question is: “Is what contemporary Republicans believe good for the American economy?”  Let’s examine some contemporary … Continue reading →

The Euro Crisis and You

Find out why David Frum, a former economic speechwriter for President George W. Bush,, ends his column with this quote. “And then understand why all this talk of “We could be like Greece” so radically misses the point. We’re in … Continue reading →

Best Article on Status of Financial Regulatory Reform

The best article I’ve read, albeit long, on the status of financial regulatory reform is linked below. Regulatory Reform since the Financial Crisis Governor Daniel K. Tarullo Member, Federal Board of Governors Federal Reserve System This article was originally presented … Continue reading →

Banks and Corporations are Sitting on Huge Reserves

Banks Stockpile Huge Excess Reserves The most recent Federal Reserve Statistical Release H.3 ( March 8, 2012 ), dealing with bank reserves, shows the quantity of excess reserves, above and beyond required reserves, has grown substantially following the collapse of … Continue reading →

Despite Dodd-Frank Criticism, Banks on a Roll

Banks Full-Year Net Income Highest Since 2006 Banks insured by the FDIC experienced full-year net income of $119.5 billion, the highest since 2006, according to the latest press release from the FDIC. This outcome appears to be in direct conflict … Continue reading→

The Cause of the Financial Crisis: Fraudulent Creation of 3,000 Times Leverage On House Prices by the Big Banks

Ritholtz has a great article on the cause of the great Recession. It’s captured below. Insane Levels of Leverage by the Too Big to Fail Banks – Not Deadbeat Borrowers – Caused the Financial Crisis The Cause of the Financial … Continue reading →

FBI: Banks Responsible for Mortgage Fraud

Sometime in the past I learned that mortgage fraud involved U.S. major banks. Yet last night I listened to a banker explain on John Stossel’s show on Fox Business the banks were basically not culpable for the mortgage crisis. The … Continue reading →

U.S. Bank Failures, Regulations and Federal Prosecutions

David Cay Johnston, a Pulitzer prize winning journalist, has posted two interesting graphs on TaxProf Blog.  The first figure depicts a historical review of bank failures, regulations and inequality. The correlation of these factors is striking, but as Johnston correctly …Continue reading →

Banks – Too Big to Fail or Too Big for Our Own Good?

There is little question that banks are an important and vital component of a robust, capitalist system. Since 2008 however the role of banks in creating the the crisis which led to the Great Recession has caused a re-examination of … Continue reading →

Break Up the Giant, Insolvent Banks?

Are the giant banks too big to fail? Should they be broken up? Are they the “only way to save the economy”? Frankly I don’t know the answers to these complex and important questions. However, I will give leverage to … Continue reading →

Holy Cow! Derivatives Exceed Global GDP by a Factor of 10!

Holy Cow! The total value of derivatives in the world exceeds total global gross domestic product by a factor of 10, according to Mark Mobius, executive chairman of Templeton Asset Management’s emerging markets group. As reported by Bloomberg, Mobius goes …Continue reading →

This entry was posted in Economy, Government and tagged , , , , , , , . Bookmark the permalink.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>