Later On

A blog written for those whose interests more or less match mine.

More on the Obama DoJ and its priorities

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Dean Baker writes in TruthOut:

Many people have been asking about the Justice Department’s priorities in the wake of the suicide of computer whiz and political activist Aaron Swartz. As has been widely reported, the Justice Department was pressing charges that carried several decades of prison time against Swartz. He was caught hacking M.I.T.’s computer system in an apparent effort to make large amounts of academic research freely available to the public.

The Justice Department’s determination to commit substantial time and resources to prosecuting Swartz presents a striking contrast to its see no evil attitude when it comes to financial fraud by the Wall Street banks. People should recognize that this is not just a rhetorical point. It is clear that the Justice Department opted to not pursue the sort of investigations that could have landed many high level people at places like Goldman Sachs and Citigroup behind bars.

First, it is important to acknowledge that stupidity, not fraud, was probably the largest factor driving the housing bubble. In the years when the bubble was peaking, 2002-2006, I met many people with no obvious stake in lying who would tell me stories of how housing was always a great investment. The same was true when the stock market was selling at twice its historic valuations in the late 1990s.

Unfortunately, many of the people who control large amounts of money at banks, pension funds, mutual funds and elsewhere can be pretty clueless when it comes to understanding the economy. This mismatch of jobs and skills imposes large costs on the economy, but does not involve criminality.

However there clearly was a substantial component of criminality in the housing bubble, which the Justice Department has chosen not to pursue. Specifically, we know that large numbers of fraudulent mortgages were issued. The FBI publicly warned about an “epidemic of mortgage fraud” as early as 2004.

This was not an issue of people lying to qualify for mortgages; it was overwhelmingly a case of issuers putting down false information to give people mortgages for which they were not qualified. This could mean, for example, that a couple applying for a $400,000 mortgage accurately reports their income at $60,000. Since this income would be grossly inadequate, the bank issuing the mortgage changes the income number to $120,000.

I received numerous e-mails during these years from people telling me about friends or relatives working at major subprime lenders who were being told to change numbers so that people would be able to get mortgages for which they were not qualified. Unless there was a conspiracy to fool Dean Baker, this sort of practice must have been commonplace.

The way the Justice Department would prosecute this fraud would be to find some of the worst branches and put together a case against the worst loan officers. They would then offer them the option of substantial prison time or explaining why their supervisors were unconcerned about them writing in phony numbers on loan forms. When they have two or three loan officers to make a case against a supervisor, they then offer the supervisor the option or jail time or explaining how he/she decided that it was clever to have their branch office engage in mortgage fraud. It is impossible to say whether this sort of investigation would have nailed an Angelo Mozilo (the CEO at Countrywide), but there is no evidence the Justice Department even started down this path.

In the case of the investment banks, . . .

Continue reading. The fact is, Obama’s DoJ seems much more interested in prosecuting the powerless (like Matt Davies, facing 10 years of prison for conducting a medical marijuana operation that was in complete conformity with state law—the very sort of operation that Obama and Holder promised not to prosecute) than in challenging the powerful and wealthy. The DoJ has been corrupted by Obama.

Written by LeisureGuy

24 January 2013 at 1:57 pm

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