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How the Government Botched Its Effort to Hold Wall Street Accountable After the Crisis
The Department of Justice (DOJ) fell down on many of its efforts to hold Wall Street accountable for mortgage fraud after the crisis, according to a new audit from the U.S. Department of Justice Office of the Inspector General (OIG).
The DOJ promised the public that it would place a priority on going after mortgage fraud. But the report finds that “DOJ did not uniformly ensure that mortgage fraud was prioritized at a level commensurate with its public statements.” One telling example is that the Federal Bureau of Investigation (FBI) ranked mortgage fraud as the lowest threat in its lowest crime category. The OIG also visited FBI field offices in Baltimore, Los Angeles, Miami, and New York and found that either it was a low priority or not even listed as a priority. Meanwhile, the FBI got $196 million in funding to investigate mortgage fraud between 2009 and 2011, yet the number of agents doing the investigation decreased in the same time, as did the pending investigations.
On top of these findings, the OIG reports that data was so poorly collected at the DOJ that it’s difficult for it to assess what was going on. And this bad data also led to the department misleading about its efforts to the public. In October of 2012, Attorney General Eric Holder announced a press conference that his department had filed 110 federal civil cases that involved more than 73,000 homeowner victims and total losses of more than $1 billion. When the OIG followed up about these numbers, it became clear that there were significant errors with them — the total losses, for example, were $95 million, 91 percent than originally claimed. Yet the department kept referencing these numbers even after it realized its mistakes.
The report does have some praise for the DOJ. It offers two examples of where the department prioritized going after mortgage fraud: “the Criminal Division’s leadership of its mortgage fraud working group and the FBI and USAOs’ participation on more than 90 local task forces and working groups,” it notes. And more financial reports here.
A spokeswoman for the DOJ also pointed to the fact that the number of mortgage fraud indictments almost doubled between 2009 and 2011 and that the number of convictions rose by more than 100 percent, saying, “As the report itself notes, even at a time of constrained budget resources, the department has dedicated significant manpower and funding to combating mortgage fraud.”
But the audit’s findings are disturbing given the scope of fraud and how little justice homeowners have seen since the crisis. Prosecutions for financial fraud hit a 20-year low in 2011, in the wake of a crisis created by risk-taking on Wall Street. Lawmakers continually prodded the DOJ over what they felt was an attitude that banks were “too big to jail,” “too big for trial,” or that they had a “get out of jail free” card.
Meanwhile, the national mortgage settlement struck in 2012 over servicing abuses has brought very little relief for homeowners. Two years later, most banks are flouting the terms, as only two were fully in compliance, and servicers are still rampantly abusing homeowners. Meanwhile, little of the money set aside to help homeowners dealing with foreclosure has actually reached them, and some of the checks were so small homeowners refused to cash them.
Other efforts to hold Wall Street accountable after a crisis that took as much as $14 trillion — or perhaps even more — out of the economy haven’t produced many results. Just one financial executive has been held accountable, while most banks have walked away with settlements that aren’t nearly as large as they at first may appear. The Securities and Exchange Commission has won back just $2.7 billion in fines, penalties, and disgorged profits, and while it started demanding that banks admit to wrongdoing in settlements, there is evidence it may be throwing the towel in on prosecutions related to the financial crisis.
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The above article is a repost from ThinkProgress.