U.S. sues Bank of America over alleged mortgage fraud

[ImaLooser]

Uh, yeah, that's what the second sentence of your post said!
"People were beong told they could afford something they couldn't."

And people were told housing prices nnever decline?! By who? And what idiot would believe such nonsense?

I lived in California and heard it a lot. "The price can only go up." Those were the words. I heard them many times.

It worked for a very long time. When things went bad the price never went down, the market just locked up for a few years. Everybody lied on their loan applications (1980's). You had to, or you'd never be able to own a home.

So yeah, millions of idiots believed that nonsense, if that's the way you want to put it.

But it was all shading and judgement. The fraud came in when Salomon Brothers invented the securitized mortgage. There was a tsunami of money since the increases in wealth all went to the rich, and it had to go somewhere. Eventually they used up all the good investments, but the flood continued unabated and the dough had to go somewhere.

Was it the most widespread fraud in history? To be fair you'd have to do it on a percentage basis. I'm not sure, but I think so. I can't think of anything bigger. There was the huge John Law fraud in Louis XIV France (one of the craziest events in history) but there were so few people with money that the percentage involved was surely small.

Even Isaac Newton got caught in a bubble. Physics content!

 

[Oltz]

lets not get back into the: "It is all Jimmy Carters fault" garbage again. That has been disproved. It was greed plain old greed. Sub Primes sold for a higher price on Wall Street, because the interest rate was higher.



http://www.mcclatchydc.com/2008/10/12/53802/private-sector-loans-not-fannie.html

I actually never said anything abut Carter but here try this one if you honestly believe the government played no part in this.

Bold mine

FHA loans, a Federal Mortgage program, went to the white majority and reached few minorities. In a study done in Syracuse, between 1996 and 2000, of the 2,169 FHA loans issued only 29 or 1.3 percent went to predominantly minority neighborhoods compared with 1,694 or 78.1 percent that went to white neighborhoods.[7][8] Mortgage discrimination played a significant part in the real estate bubble that popped during the later part of 2008, it was found that minorities were disproportionately steered by lenders into subprime loans.[9]

In 1993 President Bill Clinton made changes to the Community Reinvestment Act to make mortgages more obtainable for lower and lower-middle class families. The changes ushered in during the Clinton Presidency encouraged banks to make mortgage loans to people who otherwise would not have qualified for them. In 1998 the Federal Bank of Boston issued a report entitled “Closing the Gap: A Guide to Equal Opportunity Lending." The 30 page document was intended to serve as a guide to loan officers to help curb discriminatory lending [10] "Closing the Gap," instructs banks to hire based upon diversity needs, sweeten the compensation structure for working with lower income applicants, encourages shifting high risk, low income applications to the sub prime market, by saying "the secondary market [Subprime Market] is willing to consider ratios above the standard 28/36," and "Lack of credit history should not be seen as a negative factor."

http://en.wikipedia.org/wiki/Mortgage_discrimination

 

[SixNein]

Um...doesn't the OP kinda contradict that?

Yes, I know: Not enough for your taste. Except that nothing you described in that long, detailed and accurate (as far as I can tell) previous post of yours was illegal. Near as I can tell, very little (fractionally) of what caused the meltdown was illegal. It was mostly just bad decisions.

That said, I do sympathize with the desire to see heads roll over bad decisions due to the damage caused. As an engineer, if a building that I design collapses due to an error I made (I'm a mechanical engineer, not a structural engineer, but just go with it), I'd probably end up in jail for manslaughter. Finance people don't have such responsibilities, even though the injuries they cause with their mistakes are still very real.

See that's the thing. Our heads would roll if we did even a fraction of the damage they caused.