Do any of you remember an article I sent in about economic pundits
scoring accurately only 50% of the time?
Here's a clip about an accurate prediction around the sub-prime scandal,
upon which the FBI criminal investigator was unable to act due to staff
cut-backs and security diversions over the 9/11 scare. Oh, how the 9/11
thing just mushrooms!
Natalia
* FBI WARNED OF MORTGAGE FRAUD IN 2004 BUT FAILED TO ACT
<http://www.latimes.com/business/la-fi-mortgagefraud25-2008aug25,0,6946937.story>
LA Times -* Long before the mortgage crisis began rocking Main Street
and Wall Street, a top FBI official made a chilling, if little-noticed,
prediction: The booming mortgage business, fueled by low interest rates
and soaring home values, was starting to attract shady operators and
billions in losses were possible. "It has the potential to be an
epidemic," Chris Swecker, the FBI official in charge of criminal
investigations, told reporters in September 2004. But, he added
reassuringly, the FBI was on the case. "We think we can prevent a
problem that could have as much impact as the S&L crisis," he said.
Today, the damage from the global mortgage meltdown has more than
matched that of the savings-and-loan bailouts of the 1980s and early
1990s. By some estimates, it has made that costly debacle look like
chump change. But it's also clear that the FBI failed to avert a problem
it had accurately forecast.
Banks and brokerages have written down more than $300 billion of
mortgage-backed securities and other risky investments in the last year
or so as homeowner defaults leaped and weakness in the real estate
market spread. . .
Most observers have declared the mess a gross failure of regulation. To
be sure, in the run-up to the crisis, market-oriented federal regulators
bragged about their hands-off treatment of banks and other savings
institutions and their executives. But it wasn't just regulators who
were looking the other way. The FBI and its parent agency, the Justice
Department, are supposed to act as the cops on the beat for potentially
illegal activities by bankers and others. But they were focused on
national security and other priorities, and paid scant attention to
white-collar crimes that may have contributed to the lending and
securities debacle. . .
Sources familiar with the FBI budget process, who were not authorized to
speak publicly about the growing fraud problem, say that he and other
FBI criminal investigators sought additional assistance to take on the
mortgage scoundrels. They ended up with fewer resources, rather than more.
In 2007, the number of agents pursuing mortgage fraud shrank to around
100. By comparison, the FBI had about 1,000 agents deployed on banking
fraud during the S&L bust of the 1980s and '90s, said Anthony Adamski,
who oversaw financial crime investigations for the FBI at the time.
The FBI says it now has about 200 agents working on mortgage fraud, but
critics say the agency might have averted much of the problem had it
heeded its own warning.
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