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Maybe Someone Should Investigate the Investigators?

May 13th, 2010
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May 13, 2010 original publish date
Oct. 24, 2014 updating broken links, general update, new format edit.

New York Attorney General, Andrew Cuomo

Maybe Someone Should Investigate the Investigators?

original article written by Net Advisor

New York. The New York Attorney General’s Office served subpoenas on eight U.S. and foreign banks today. The banks include Citigroup, Credit Agricole, Credit Suisse, Deutsche Bank, Goldman Sachs Group Inc, Merrill Lynch (now owned by Bank of America), Morgan Stanley, and UBS. The investigation is probing whether said banks ‘misled investors’ over mortgage securities.

Keep in mind that the so called “investors” we are talking about are not the mom and pop mutual fund investors, there are major banks, including foreign banks that are known experts in trading this market.

Try not to get mislead that by the term “investors.” The argument here should not be talking about “investors” but rather be referred to as “Institutional Investors.” An Institutional Investor (includes but is not limited to): A State or National bank, trust company, savings bank, or savings and loan association” as defined under 13 CFR 108.50 (1)(i). By the way, investopedia.com has an incorrect definition of Institutional Investors.

A headline discussing how Institutional Investors, such as the above named major banks lost money, just does not get much press attention. The average person is not likely to care if a major bank loses money on an investment, just so long as they don’t have to bail them out. But don’t let a bank’s bad investment stop a political drive to squeeze more money from them.

The NY Attorney General’s Office claims that Citigroup, Deutsche Bank, JP Morgan Chase, and UBS are under review to determine whether a criminal allegation is warranted or not.

The NY Attorney General’s Office is headed by Andrew Cuomo (D-NY), who under President Clinton, Cuomo was head of the Housing and Urban Development (HUD). HUD has been full of controversy, and scandal including during the time Cuomo served as HUD Secretary.

According to a 2008 article in The Village Voice, Wayne Barrett argued that Andrew Cuomo that helped facilitated the current mortgage mess when he served as HUD director from 1997-2001.

“He (Andrew Cuomo) took actions that—in combination with many other factors—helped plunge Fannie and Freddie into the subprime markets without putting in place the means to monitor their increasingly risky investments.

He turned the Federal Housing Administration mortgage program into a sweetheart lender with sky-high loan ceilings and no money down, and he legalized what a federal judge has branded “kickbacks” to brokers that have fueled the sale of overpriced and unsupportable loans. Three to four million families are now facing foreclosure, and Cuomo is one of the reasons why.”

The Village Voice (PDF)

Thus, Cuomo is now effectively investigating an industry (mortgages) that we was in charge of.

The Village Voice has also led other accusations against HUD in 2006 calling it, “New York City’s worst landlord” and “the #1 worst in the United States.” The criticism is based upon alleged decrepit conditions of buildings and questionable eviction practices. The Village Voice is locally published in New York.

HUD created what effectively are a host of tax payer funded social welfare programs including in 1992 under the Housing and Community Development Act of 1992 [Source: HUD (PDF)].

In 2007, HUD initiated a program that would allow buyers of HUD homes to make a down payment of just $100.00

HUD employs over 10,000 people and has a 2010 annual budget of $43.7 billion.

On a side note, do we really need 10,000 people to offer high risk real estate to people who can’t afford it, and who are likely to default anyway, and then rack up an additional $43 billion a year in operating costs to tax payers?

Political Motive?
The government (Congress, the SEC, now NY Attorney General’s Office), all under Democratic control, has been hammering through the media by pressing accusations against banks and Wall Street firms for any roles they played in the mortgage crisis.

Note, all this is occurring not in 2006 when real estate mortgage loans began to deteriorate, nor in 2007, nor in 2008 when the market nearly collapsed, nor in 2009, but in 2010 coincidentally, when mid-term elections occur in Congress and many democrats are facing the risk of losing their seat in Congress, and the Obama Administration is pushing “financial reform.”

What is not being done is to uncover the role government played in the crisis. We also seem to have forgotten that millions of people took out loans that never should have got them.

The only way unqualified borrowers could get those loans was that government had to create laws to lower credit standards and allow government agencies such as GNMA, HUD, FHA, Fannie Mae, Freddie Mac to take on risks that banks and other lending intuitions would not normally accept such risky loans. Are we going to investigate the government roles in the mortgage crisis? Probably not. Why not? Because that would be investigating the investigators, and who would be in charge of that?


Originally published, Copyright © 2010 Net Advisor™

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