|
FBI investigating financial companies |
|
|
|
|
Written by Dr. Garth A. Rose
|
|
Sunday, 28 September 2008 |
The financial crisis gripping the nation over the past few weeks took a dramatic step, when it was reported on Tuesday that the FBI has commenced investigation of the companies that received government bailout and those that went bankrupt.
Giant mortgage guarantee companies, Fannie Mae and Freddie Mac, recently taken over by the government; the bankrupted Lehman Brothers and AIG, which faced with a severe cash problem was also bailed out by government with a loan of $85 billion are now being investigated.
The FBI investigations, which also include the executive of these companies, is reported to being conducted as part of a broad look into possible mortgage fraud, sources with knowledge of the investigation told CNN Tuesday.
As the mortgage crisis worsens and has created an extremely negative impact on the economy across the country, including here in South Florida, there has been an increasing outcry from people who have lost their jobs and houses, for some people in the banking, mortgage and real estate industries to be arrested on fraud. In recent weeks the Miami Herald has run an investigative story highlighting fraudulent actions by mortgage brokers, and there have actually been arrests of fraudulent brokers in the region in recent months.
However, the investigations by the FBI into the activities of some of the leading financial institutions on Wall Street have given an entirely new perspective regarding the possibility of fraudulent activities leading to the current mortgage crisis.
According to reports the FBI is unable to give the media much details of the investigation since it is ongoing, however FBI spokesman Special Agent Richard Kolko told CNN that that 26 firms were currently under fraud investigations involving subprime lenders as part of the bureau's mortgage fraud inquiry. Kolko, however said that The FBI could not discuss which companies were being investigated.
Earlier this month, FBI director Robert Mueller told Congress that 1,400 individual real estate lenders, brokers and appraisers were now under investigation in addition to two dozen corporations.
Several states, including Florida, have filed lawsuits against one of the nation’s leading mortgage lenders, Countrywide Financial, for abusive and questionable lending practices. The suits claim thousands of homeowners were forced into foreclosures by Countrywide deceptively marketing risky adjustable-rate mortgages to borrowers who didn’t understand the implications of their monthly payments eventually rising beyond their ability to pay. Countrywide, which suffered significant losses, was bought by Bank of America in July.
Although the FBI has not detailed the nature of their investigation, analysts monitoring the investigations, are indicating that the FBI could be investigating the big Wall Street companies like Lehman Brothers, Fannie Mae and Freddie Mac to see if they overstated their assets giving investors a false impression of financial security. It is speculated that the outcome of the investigations could lead to arrests of some leading banking executives, and even some politicians.
The escalating economic crisis in the US is largely a result of the decision taken some seven years ago by mortgage lenders to relax restrictions on mortgage loans. These easier-to-get mortgages pushed a strong demand for houses, greatly inflating home prices, creating profit “bubble” in the housing industry. However, as the number of borrowers defaulted on their mortgages the bubble burst, thousands of homes were foreclosed, lenders all over country experienced significant losses, and the economic crisis set in.
As the losses within the mortgage industry worsened the FBI, along with the IRS, commenced investigation into mortgage fraud, creating the Mortgage Fraud Task Force. More than 400 mortgage brokers, lenders, appraisers and other industry insiders are reported to have been arrested by the task force. Also, last month in a study, the Mortgage Asset Research Institute (MARI) reported that the number of fraudulent loans issued during the first three months of 2008 increased some 42 percent compared with the same period in 2007.
The losses by the nation’s investment and commercial banks led the Bush administration's to propose spending $700 billion to save the country’s financial market and economy. The proposal is currently being debated by Congress.
|
News 
