Abacus Indicted for Criminal Mortgage Fraud
While the name Abacus is famous as Goldman's fraudulent CDO scheme - the poster child for the rampant fraud on Wall Street - another Abacus (a small bank) has just made news by being criminally indicted for mortgage fraud.
Bloomberg’s Anthony Lee Pacchia interviewed Bill Black on the meaning and ramifications, and sent me the following summary and clip:
Manhattan DA Cy Vance given us a rarity in filing *criminal* charges against Abacus Bank and 19 former employees for mortgage fraud. The papers say the bank originated liar loans, a common practice for most banks. But according to guest Professor William K. Black, don’t expect this case to lead to more prosecutions of large banks despite overwhelming evidence of rampant fraud amongst the big banks in mortgage origination. A couple of his points:
-state and federal authorities don’t have anywhere near the manpower or resources to actually prosecute big banks for fraud.
-Treasury Sec. Tim Geithner has actively discouraged prosecutors from going after big banks.
-the very idea of prosecuting Abacus for a crime while allowing it to remain open is completely nonsensical and is likely to provoke a run on the bank.
Of course, fraud caused the 1930s Depression and the current financial crisis, and there’s no recovery because the government made it official policy not to prosecute fraud (and see this, this, this, and this).But government regulators have said that they'll take on the small fish ... and let the big-time criminals go.
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