It's been a lengthy hiatus from the blog for me. I've actually been doing so much music writing and recording of late that I haven't had much free time, but I wanted to get a brief post out here.
From Reuters: "Prosecutors ... are stepping up their scrutiny of players in the subprime-mortgage crisis ... A task force of federal, state and local agencies will look into potential crimes ..."
I was glad to read this. Let's go after the people who promulgated this mess. But as I read further, my hopes were dashed.
The range of crimes being looked into? Mortgage fraud by brokers, securities fraud, insider trading and accounting fraud. The targets? Wall Street firms like UBS and Bear Stearns, lenders like Countrywide, builders like Beazer Homes, and major insiders.
How about going after the ratings agencies for totally missing the boat on assessing risk, which is their one and only job? How about going after the bond insurers for taking on excessive risk? (Sure, in a free market you should be able to take on as much risk as you want. But some of the monolines still carry AAA ratings, even after losing 95% of their value and having to borrow at rates up to 14% to raise the capital they have to raise to stay alive. So maybe it comes back to the ratings agencies.)
Finally - can we prosecute the people who lied about their incomes, assets and ability to make the payments on their loans? Who knew they wouldn't be able to make the payments on a low-teaser rate ARM once it reset, but didn't care because they just knew their new McMansion's value would go up by double digits every year until the end of time? Or the people who just stop paying their mortgage because their house is now worth less than the loan balance, even though they can make the payment?
Barney Frank doesn't think so. Ol' Barn wants to bail those people out, to the tune of $2.7 billion of taxpayers' money, including taxpayers who also happen to be responsible homeowners and renters. (For more details, read my article "Kill (This) Bill" in our company's newsletter for May - go to www.cnbsnet.com, and click on the story in the MarketCast box.)
Well, I think Barney should be prosecuted with the rest of them for even proposing such a notion. I'll bet less than 1% of delinquent subprime borrowers were unwittingly duped by a rogue lender. The rest were as criminal as the lenders, Wall Street, the builders and the ratings agencies. Or at least criminally stupid, as Barney Frank appears to be.
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