This
guy’s a crook and he’s going away for a very long time. His sentence
will be announced tomorrow. He’s looking at 50 years. This is Lee Farkas.
He was the boss at Taylor Bean & Whitaker (“TBW”). Farkas and some
of his pals at TBW have been convicted of $3b in mortgage fraud.
This is a very nutty story. For me, the Farkas conviction is a sideshow.
What I want to know/understand is how some of the biggest players in
D.C. were involved in this mess.
Bloomberg has a detailed recap of the story. (Link). My take and some of their cuts:
This all started way back in 2002. TBW was doing big mortgage business with Fannie Mae. And guess what? Fannie determined that TBW was selling phony loans. Fannie accused TBW of fraud. They looked at specific mortgages and concluded:
A
public records check revealed that the named borrowers didn’t hold title
to the real estate and that the mortgages sold to Fannie Mae had never
been recorded, according to the Fannie Mae document.
In 2008 a Fannie Exec said this about the events of 2002:
“Our conclusion was that fraud, if I can use that word, had been perpetrated on Fannie Mae, and we considered that to be a very, very serious matter.”
As a result of the fraud Fannie stopped doing business with TBW. But they had a side deal to keep that quiet. Why? Because the disclosure would hurt the mortgage pool. Unbelievable!! From a court document:
Fannie
Mae wanted to preserve the value of the servicing portfolio, which would
plummet if it reported that Taylor Bean was selling bogus loans.
So after Fannie sneaks out of this dirty deal, who steps into the trap? None other than those idiots at Freddie Mac: (from the Bloomberg story)
At Freddie Mac, the decision to boost purchases from Taylor Bean was made by David H. Stevens, then a senior vice president of mortgage sourcing.
This insanity led to the $3b ultimate fraud. How could this have happened? Fannie knew that TBW were crooks. They must have been laughing in the halls when their archenemies at Freddie picked up where they left off. Who was in charge of Fannie at the time? Who was it that failed to notify ANYBODY of mortgage fraud? None other than Franklin Raines.
So what does are boy Frank have to say about the events that took place in 2002? Unbelievable!
“I have no memory” of the Taylor Bean matter.”
This just might be one of those cases where water boarding might be justified. He has no memory of such a significant event? Not possible.
Fannie
and Freddie were regulated by OFHEO in 2002. Armando Falcone was
running the place at the time. He was a Clinton holdover. I’m not sure
what role he played in this. I find it impossible to believe that the
“Top Cop” of the GSEs was not aware of the history of TBW. I think he
tried to force the issue and got fired for his efforts.
On 2/25/05 this notice of a new requirement for the GSEs to disclose any
evidence of fraud was published in the Federal Register. Falcone was behind this disclosure effort. He had to have something in mind.
Six weeks later Falcone was forced to resign. He wrote a letter to Bush.
I wonder if this sentence was a hint of what he was thinking:
I expect Fannie Mae and Freddie Mac will ultimately emerge as more effective and responsible government-sponsored enterprises.
I take this to mean that he did not consider Fannie and Freddie to be either effective or responsible. He knew they were rotten.
So who takes up OFHEO in 2005? Does it surprise you that it is George Bush’s lifelong friend (and school mate) James B. Lockhart?
Consider the circumstances. Lockhart comes in over the fraud disclosure issue. He must know that this is the hot button. It’s the reason he has the job! Does
he do anything about it? Is he not aware of what happened with TBW and
Fannie? Is he not aware that Freddie is buying billions in loans from
TBW?
Lockhart does nothing and the opportunity for massive fraud on the people has been assured.
Now consider the role of a central player in all of this. David Stevens.
He was the SVP at Freddie that made all of this happen. He left Freddie
in 2005. Right at the time that Falcone was pushing for fraud
disclosure. David had a fine career at Wells and Long and Foster where
he continued to be a big shot in the mortgage industry. His chance to
really shine came in 2009 when he was appointed head of FHA:
So what does our boy David do less than two months after taking on this big job? He blows up TBW:
David had to know all along that TBW was dirty. Give the guy some credit. Back in 2002 he gets a call from TBW where 100% of the new business is being offered to him. He knows that TBW is a big customer of Fannie, but he never asks why the switch? Not in a million years.
Mr. Stevens just got another big job. He’s out of government, but he hasn’t left D.C. Today he is running the Mortgage Bankers Association.
Quite frankly, this whole story makes me want to puke.
One of your best ever posts BK.
Is he related to Sid Farkas? "Hey Frank, would you mind if I asked Estelle out on a date?"
Bruce, I honestly doubt Lockhart or the guys at Freddie knew anything. Relationships used to switch all the time between the GSEs back then. It was not uncommon. The fact that Fannie allowed them to switch servicing would have made Freddie believe all was kosher.
The fault clearly lies with Fannie. They helped conceal a crime, and their justification seems to be "we were the only victims, and we settled out of court". Of course we know that wasn't the truth, there were many other victims. What about the borrowers who used TBW - if they were willing to rip off their investors, does Fannie really think they weren't also ripping of their borrowers?
Of course in American, commit a crime, get promoted.
You say:
"I honestly doubt Lockhart or the guys at Freddie knew anything."
That is a possibility. It would imply that both Lockhart and Stevens are idiots. That Lockhart completely ignored the responsibilities of his job.
I don't think that for a second. These are very sharp guys. Lockhart knew D.C. inside out. The first day on the job at OFHEO he told someone:
"Get me every file on fraud".
Of course he knew.
bk
They need to claw back all the money Franklin Raines made at FNMA, but this Administration won't--for a variety of reasons.
Were I the prosecutor in this case I would be making Mr. Farkas offers of: a country-club prison, conjugal visits, and plastic surgery if he would disclose information that could put Franklin Raines, Lockhardt, or Stevens in the slam. If he goes into the general population, he wouldn't last a week.
nice BK.
Welcome to the good ole UCA (United Crooks of America.)
All public officials should be hooked up to lie detector when speaking.
What a cast of scumbags.......many of which are currently working in the current administration, and/or the hallowed halls of congress, are they not? I hate that everyone tends to blame those 'evil corporations' for all the problems in this country but fail to realize it's the real scumbags in congress/Senate/Aministrations that enable all of this fraud in the first place, then campaign against it. Unfuckingbelievable.
If there is any justice left in this world then
Franklin Raines and Barney Frank will both be fed to the Nile crocs at the Washington Zoo.
+666
Lee Farkas...you know his brother Scott has yellow eyes...so help me God, yellow eyes.
Good job (as always) Bruce!
Bruce - this is a very sad story. The Rome is burning, and these crooks just changing chairs. It proves, that it doesn't matter who is Dem or Rep. United we Steal!
We are looking at the unincorporation of America...
There is possibility Armando had to leave OFHEO because he kept nagging congressman and senators about things like housing markets and systemic risk:
http://www.fhfa.gov/webfiles/1145/sysrisk.pdf
The word at the time in the 'tin foil' hat community was that GS told bush to can Falcon ... exposing the massive crime in progress of derivatives, housing and what not was not good for reelection possibilities.
That was my belief at the time - remember he was the one that exposed the accounting issues at the GSEs via that massive audit that showed revenue shifting deals and the like.
I seriously doubt he knew anything about the TBW deal.
Side deal to keep quiet...
"
So, "never been recorded" is thus acknowledged as sign of fraud...and all the while was enabled precisely by FannieMae officers agreeing to keep quiet?! Some "side-deal".
"Side-deals" are the real deals in business...always have been.
Bruce, doesn't this make you hope that Obama manages to raise taxes on the "rich" so that you and others who have made their living on wall street can finally pay your "fair share" to better support the federal government and all its good deeds? Or even better, maybe the Democrats could tack some law onto a bill to finally make expats pay their fair share, perhaps the Democrats could throw any banker in jail anywhere on the planet who unknowlingly opens an account for a US citizen:
http://www.reuters.com/article/2011/06/28/us-usa-taxes-swiss-idUSTRE75R6...Bruce -
whatever your real name is, you need to use as a byline to a long magazine length article on this and get it out. It is the prime example of the bipartisan corruption that seldom gets reported in MSM newspapers but easy enough to document. Whether is defense contracts, housing agencies, private prison contracts so on, it is a revolving door of elite DC arseholes in and out of various administrations corrupt to the core...
That is my real name.
Every day I wait for that offer.......
Not surprising, but still a good article. One could equate mortgages as the tip of the iceberg and world economies as the Titanic.
With stories like these and added dots connected, it will soon be apparent to everyone with even a simian brain that this was all an orchestrated phenomenon and that none of it happened by accident.
We're starting to put it all together now, boys and girls. This part will be the fun part...
The fun part will be when I get to see any/all the'boyz' get their just due. Hanging is too good for them. Giv'em some shitty LSD laced with acetone etc and see what happens when we throw them onto the 'court' at MSG.
Great stuff Bruce. This story will only get better. One wonders if Rolling Stone has anything to report on this matter?
What a charade our "government" has become--or always was? Makes one wonder just how dirty Obama is that he has sold the country to Wall Street without a hint of a fight.
Go long crooks!
The US has not changed a bit since its inception. Same guy behind different masks.
I believe it is because the USA is a completely fraud-based society.
I'm kinda of surprised you haven't figured that out yet, Brucie??
I wonder if Armando Falcone is related to Philip A. Falcone????
Really curious about that?
But, but, but .. I have my Ivy League MBA Degree.
Ives don't go to jail.
None save Jeff Skilling has made that trip.
Almost everything in Amerikan Goberment makes me want to puke. Welcome to the club Bruce.
The fleecing of Amerika, to be continued.
The sad part is that I am not even remotely surprised...nor do I think anyone else will be.
This will be swept under the carpet and all those involved, with the exception of the obvious fall guys, will be richly rewarded.
The rule for advancement in a corrupt system is: You gotta fuck up to move up. This makes you blackmailable and thus easier to control and predict.
Well, if you understand the gangs, you understand the US.
Gangs often require that their members take their share of a crime in order to prove their loyalty and dedication to the gang.
If you give me in, I give you in.
It is gang, you know.
"The rule for advancement in a corrupt system is: You gotta fuck up to move up. This makes you blackmailable and thus easier to control and predict."
this may be the key component to the whole machine.
Excellent job Bruce.
+1
And also Tyler's comments. Amazing that the Obam news media does not do this work. What a joke.
it was maybe the darkest day of 2008, and my son calls and he tells me he and his wife just bought a house, a HUD backed loan through their CU. The two of them have average credit, (maybe) they are lower to middle class, both of them work. I knew then that this the socalled financial crisis was political theatre.
excuse me Mr Krasting ..i cant read English text, so
could you just point who'S BAD GUY ? is it first one or last one, or all of them ?
to me , they all look alike..
thank you for help
alx
ps
:))))))))
If Shakespeare was alive today and wrote Obama I I believe his famous remark re lawyers would instead reference bankers.
Farkas's biggest problem is that he was not at B of A. He'd still be sittin pretty if he was.
And it gets better: "A confidential agreement between Fannie Mae and Taylor Bean’s Farkas unwinding their relationship was negotiated by lawyers from the general counsel’s office, overseen at the time by Thomas Donilon, now Obama’s national security adviser, according to the documents. Donilon’s spokesman, Tommy Vietor, declined to comment."
Welcome to an official policy judicial exclusion.
Prosecuting government officials risks a “cycle” of criminalizing public service, [Sunstein] argued, and Democrats should avoid replicating retributive efforts like the impeachment of President Clinton — or even the “slight appearance” of it.
http://jonathanturley.org/2008/07/21/obama-adviser-cass-sunstein-rejects...
The rule of law no longer exists in the US
The list is getting lengthy.
The other evening I made reference to a Bloomie article of the Greek practice of giving lawmakers immunity from prosecution for, well, for merely being a "lawmaker".
I noted the odd habit of the law not remaining constant enough to allow for that much comfort/protection to current or past lawmakers...but they do love their binky's so ;-)
this is the truth - and it's time to stop with the doublespeak of "public service" and start telling the truth about the criminals in "corporate service" - the District of Columbia is full of parasites in need of a cleanse.
had to chuckle last night listening to talk radio about the whole Massey coal mine thing when one of the interviewees said that the State & the Law is there to protect the public.
I suspect that when all is known (5,10,25 years from now, depending on citizen demands?) there will be names attached to all these frauds that are literally a current who's who of American, European and Asian sophistication.
'nuff said.
For now...
Tks TD.
bk
and Thomas Donilon replaced a Marine Corp General to become NSA. I found it striking at the time given the ever expanding war committments. Not that housing hasn't been in the national interest for some time. What part of housing however? That people have it?
Crooks, crooks, crooks everywhere at the top. I guess that explains why:
NONE of our financial problems have been solved.
NO ONE of significance has gone to jail.
"...And I guess that was your accomplice in the wood chipper. And those three people in Brainerd. And for what? For a little bit of money. There's more to life than a little money, you know. Don't you know that? And here ya are, and it's a beautiful day. Well, I just don't understand it"
Awesome reference. The ending to that movie kind of reminds me of the end of Chinatown or The Long Goodbye.