7 of the Nastiest Scams, Rip-Offs and Tricks From Wall Street Crooks
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This fraudulent process caught up with the banks, and once again the government offered “settlements” that, instead of prosecuting the fraud, offered immunity from prosecution before the states even had a chance to fully investigate charges. California’s Attorney General Kamela Harris backed away from this deal. Several other state Attorneys General, including New York’s Eric Schneiderman and Delaware’s Beau Biden are independently investigating foreclosure fraud, along with those in Nevada, Minnesota, Massachusetts and Kentucky.
We’ll see if the “settlement” comes through, blocking a more comprehensive investigation and possible prosecutions. Recently Massachusetts filed the first foreclosure-fraud lawsuit , followed by Nevada .
- Pushing Subprime Loans
The initial wave of mortgages to go bad were the “subprime” mortgages that were given to people barely able or even unable to make their payments. Why were there so many of these mortgages in the system? These mortgages were pushed on people by “predatory lenders” who would make a quick buck on upfront fees and commissions and then sell the loans to Wall Street to be repackaged into “CDOs” – the “toxic assets” that took down much of the financial system.
You may have come across the recent story in the news about the Sheriff and movers refusing to evict a 103-year-old woman and her 83-year-old daughter from the home they have lived in for 53 years. So here is a question: Why does a 103-year-old woman who has been in her house for 53 years even have a mortgage? Because many banks were pushing minority borrowers into expensive subprime loans, even if they qualified for standard mortgages.
Predatory lending isn’t just about steering borrowers into very expensive loans, it is also about hard-selling people into borrowing money in the first place. According to The Leadership Conference , “Predatory lending occurs when a lender uses unfair, deceptive, or fraudulent practices when selling a loan to a consumer. Borrowers are steered toward unaffordable loans, or charged higher fees or interest rates than those they qualify for. “
Predatory and subprime lending has died down, thanks to some degree of a restoration of sanity and new lending standards. But no one stepped in and stopped it when the practice was at its … prime.
Meanwhile yet another “settlement” with no criminal charges is occurring. On Wednesday the government announced a $335 million settlement with Bank of America’s Countrywide Financial unit for overcharging minorities and pushing them into subprime loans.
- Betting Against Designed-to-Fail Bonds
Even in collapsing markets there is money to be made by placing bets against assets that are overvalued, and then when their price drops the bets pay off. And if you know where the toxic assets are, in advance, you can make a ton of money. The best way to know where toxic assets are is if you put them there, on purpose, in order for them to collapse. A ProPublica story, Did Citi Get a Sweet Deal? Bank Claims SEC Settlement on One CDO Clears It on All Others , says CitiBank created toxic assets on purpose in order to make bets that they would fail,
In the run-up to the global financial collapse, Citigroup’s bankers worked feverishly to create complex securities. In just one year, 2007, Citi marketed more than $20 billion worth of deals backed by home mortgages to investors around the world, most of which failed spectacularly. Subsequent lawsuits and investigations turned up evidence that the bank knew that some of the products were low quality and, in some instances, had even bet they would fail.