America's Debt Complex: FBI Finally Cracks Down on Mortgage Crime Wave

By Danny Schechter, AlterNet. Posted June 24, 2008.

Stephen Colbert has a popular feature in his Comedy Channel rants of the day. He calls it "The Word" (rappers used to just say "word"), and he explains how language can have different meanings. Consider the word "predator."

My online dictionary offers two meanings, one for the animal world and one for ours.

predator: noun -- an animal that naturally preys on others. Wolves are major predators of rodents. figurative -- a rapacious, exploitative person or group. Her wealth made her vulnerable to predators. (Note: poverty also can make one vulnerable.)

In popular usage there are two others. One references companies and scammers who engage in predatory lending. They are behind the subprime loans that took advantage of so many people resulting in the collapse of our markets and a threat to the global economy. Despite its pervasive presence, this type of predatory behavior does not find its way into the news much because of its connotation of criminality.

The other use is associated with men who use the internet to lure young people into sex. No one really knows how pervasive the practice is -- most of the figures have been hyped and exaggerated. Yet, because of its salaciousness, it has been the subject of a popular prime time TV segment, NBC's "To Catch a Predator," which has made parents fearful that legions of perverts are lurking online to solicit their kids. Yet, when the Columbia Journalism Review analyzed the show, it found it to be exploitative, factually inaccurate and a disservice. CJR showed how the show inflated a problem for the sake of entertainment, as opposed to reporting one as news.

This is an example of how TV news organizations sensationalize to generate ratings while ignoring a far more pervasive reality by the same name confronting many more people who are losing their homes and their hope.

Now that the Justice Department and the FBI are indicting and rounding up this type of predator, the criminal nature of this problem has finally been validated. Last week, two former hedge fund managers at Bear Stearns were busted for defrauding investors to the tune of a billion dollars. Another 400 scammers were arrested in "Operation Malicious Mortgage," an FBI-run investigation staffed by 180 agents serving 40 task forces working more than 1,200 cases.

So far, no TV network has announced a special series on these corporate predators, but the New York Times business section has become a subcrime scene with pictures of the perps. There have been reports about an executive for a Swiss bank that encouraged Americans to violate the law by moving money illicitly into offshore accounts, as well as a profile of another hedge fund crook, now on the run, chased by U.S. marshals as he tries to escape a jail sentence. The Times even published a Wanted poster.

The investigation of this white-collar crime wave is a bit late since trillions have already been lost. Legal experts say the top dogs may walk because of the difficulties of proving that what they did was a crime.

Historian Carolyn Baker, who follows the economic crisis for her Speaking Truth to Power website, states: "History will prove that the number of people busted for this is only a drop in the bucket compared to the number involved in nationwide blatant fraud and theft which created the largest mortgage meltdown in the history of the world. A few bad apples? Get a clue! The scam was rampant and epidemic."

Aaron Krowne, who edits the indispensable insider Ml-implode.com mortgage site, agrees: "It's not like the current execs would have done anything different; this is all just plausible deniability and saving face, so that angry investors (the general public -- including Aunt Millie's pension fund) who are being diluted to oblivion won't be able to say 'nothing is being done.'"

What's worse, while these arrests capture the headlines, the industry is busy lobbying Congress to back off on regulations of its latest bubble-blowing exercise. Reported the Washington Post: "Wall Street banks and other large financial institutions have begun putting intense pressure on Congress to hold off on legislation that would curtail their highly profitable trading in oil contracts -- an activity increasingly blamed by lawmakers for driving up prices to record levels."

Yes, there are criminal practices under way, but they are far more insidious than most people realize. For example, Treasury Secretary Henry Paulson is using the crisis as a cover to call for more power to the Federal Reserve Bank, which is actually an entity run by private banks in their own interest. (The bank itself was created in response to a manufactured banking crisis in 1907.) Committee chairmen in Congress are not rushing to discuss his proposals reportedly, in part, because Paulson has done so little about the worsening foreclosure problem.

Read some history, like lawyer Ellen Hodgson Brown's well-documented book "Web of Debt," and you will see that a battle between financial capital and the public interest over who controls our money supply has been a constant over the decades. The book reminds us that former Fed Chairman Alan Greenspan, whom many now blame for allowing the housing bubble to burst, was on the board of JP Morgan before joining the Fed. It was the Fed, of course, that recently bailed out Bear Stearns by giving Morgan $30 billion to buy the company. Morgan boasted last week in an unseemly way about what a bargain it got.

Americans have been fighting for economic justice from before there was an America. The colonists opposed taxation without representation. They rose up against the kind of debt that is enslaving so many of us now and seems to be leading to a total economic breakdown.

If President Dwight David Eisenhower were alive today, he might have warned us of another complex, as well as the military-industrial behemoth, that is threatening our economic well-being as a nation. Imagine if his famous farewell address were updated to sound like this:

"In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the financialization of America and its CREDIT AND DEBT complex. The potential for the disastrous rise of misplaced power exists and will persist.

"We must never let the weight of this combination endanger our liberties or democratic processes. We should take nothing for granted. Only an alert and knowledgeable citizenry can compel the proper meshing of our FINANCIAL SYSTEM and ECONOMIC JUSTICE so that security and liberty may prosper together."

See more stories tagged with: debt, fbi, predatory lending, mortgage industry, credit and debt complex, white collar crime

Danny Schechter writes a blog for MediaChannel.org. He is the author of Plunder, a forthcoming book on our financial crisis.

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