Capital New York

PBCliberal commented on Bloomberg: 'Plain and simple,' Congress caused the mortgage crisis, not the banks

The FHFA (Fannie and Freddie's receiver) is now suing the major banks and several of their officers that sold the securitized mortgages and represented that they were AAA investments under a definition that the mortgage holder have at least 20% of the equity and be owner-occupied. When the banks' research discovered this was not true they simply did less research so that their culpability was reduced. Congress did not require the bankers to lie about the quality of their investments. If they had merely told the truth the folks who lost money would have themselves to blame, and AIG would never have underwritten them for the rates they charged. Public relations operatives at the banks have basically said that Fannie and Freddie are sophisticated investors and should have known the banks were lying. Misrepresentation of the worthiness of a mortgageholder is a criminal offense when the mortgageholder does it, and is at the very least perjury when the bank official does it. Yet the only criminal prosecutions to date do not include the vice-presidents who are all named in the FHFA suits. Instead of spinning perjury that it is somehow Congress' fault, perhaps his administration should seek to prosecute the perjurers and let them make their own argument that they were somehow induced by congress to lie.

Posted on November 1st, 2011 5:34pm