Nearly 300 arrested in mortgage probe

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Nearly 300 arrested in mortgage probe
Thu Jun 19, 11:59 AM ET

WASHINGTON (Reuters) - Nearly 300 people have been arrested in a 3-1/2 month national coordinated mortgage-fraud probe to be disclosed on Thursday, a U.S. Justice Department official said. The official said 60 suspects were arrested in a sweep on Wednesday and more arrests were being made on Thursday. The Justice Department is set to discuss the probe at a news conference at 1:15 p.m. EDT.

http://news.yahoo.com/s/nm/20080619/...SOtOF4Vg. 3QA

Housing crisis brings Wall St. arrests, veto threat
By Kevin Drawbaugh and Randall Mikkelsen
Thu Jun 19, 8:13 PM ET

WASHINGTON (Reuters) - The U.S. housing crisis produced its first high-profile Wall Street arrests on Thursday, while the Bush administration called for broadening the Federal Reserve's powers over investment banks and said it has charged hundreds of people in a mortgage fraud probe. At the same time, the White House issued a surprise veto threat against a Senate bill aimed at preventing hundreds of thousands of foreclosures.

The threat signaled more partisan warfare on Capitol Hill as homeowners struggle. Two former managers for Bear Stearns Cos Inc., itself a recent victim of bad bets on mortgage securities, were arrested and indicted on securities fraud charges in New York in connection with the $1.4 billion collapse of two hedge funds. Ralph Cioffi, 52, and Matthew Tannin, 46, each pleaded not guilty. In a scene reminiscent of Enron-era scandals, the men surrendered to officials and were paraded in handcuffs in front of onlookers en route to their arraignment on Thursday. The two were charged with defrauding investors by concealing problems that led last year to the disintegration of the two hedge funds. That event raised fears about risky subprime mortgages and helped usher in a global credit crunch that governments around the world are still sorting out. With falling home prices and rising foreclosures, the U.S. Justice Department said it charged more than 400 people in a 3-1/2-month, national probe.

Dubbed "Operation Malicious Mortgage," it involved $1 billion in losses and 144 cases, mostly of lending fraud and foreclosure and bankruptcy scams. The department's get-tough display came amid rising fears the housing slump is pushing the economy into recession -- an issue playing a prominent role in the presidential race. Both contenders -- Illinois Democratic Sen. Barack Obama and Arizona Republican Sen. John McCain -- are making economic recovery central to their campaigns. "No one can predict when the fiscal chaos in housing will end, but it doesn't look like we will be done any time soon," said David Abromowitz, a senior fellow at the Center for American Progress, a think tank in Washington. "Trillions of dollars in lost family home equity ... has been wiped out for many families in just a short time. We would expect this to impact lives and put a drag on the economy well past the day when foreclosures slow and prices stop falling."

FED EXPANSION URGED U.S. Treasury

Secretary Henry Paulson on Thursday urged broad new powers for the Federal Reserve over investment banks, following actions taken by the U.S. central bank in March that changed its relationship with Wall Street. In March, the Fed helped broker a takeover of Bear Stearns by JPMorgan Chase & Co and guaranteed a $29 billion loan to facilitate the deal out of concern a Bear Stearns bankruptcy could trigger a financial panic. It was the first time since the Great Depression of the 1930s that the Fed, which regulates commercial banks, had stepped in to rescue a nondepository institution.

The Fed also set up a special credit line to make emergency loans to major investment banks in an effort to ease credit market strains. In an opinion piece in The Wall Street Journal on Thursday, Securities and Exchange Commission Chairman Christopher Cox said decisions must be made on whether and how long to maintain the emergency lending program, scheduled to expire this fall. Another SEC official told a congressional panel on Thursday that the investor protection agency and the Fed have nearly completed a formal agreement to oversee investment banks until Congress can set up a permanent system through legislation.

CONGRESS DEBATES

It looked unlikely that Congress would tackle such complex structural issues this year, given the difficulties it was having agreeing on legislation to help homeowners. The White House issued a surprise veto threat against a Senate bill that would, like a similar bill already passed by the House of Representatives, create a new fund to underwrite up to $300 billion of failing home loans. It would also offer billions of dollars in emergency housing relief. Proponents say the bill could save 400,000 homeowners from foreclosure. But the Bush administration House objected to a provision that would give state and local governments money to buy and fix foreclosed properties. Congressional leaders were trying to hammer out a final bill and send it to President George W. Bush before lawmakers leave town at the end of next week for the July 4 holiday.

Some House Republicans also threatened to stall a final version of the housing bill, demanding more information about preferential mortgage terms given to two Democratic senators by Countrywide Financial Corp. "Given the questions around Countrywide, preferential loans need to be investigated," House Republican leader John Boehner told reporters. "To think that we're going to move a housing bill with these questions looming I think is irresponsible."

(Writing by Kevin Drawbaugh and Randall Mikkelsen. Additional reporting by Patrick Rucker, Rachelle Younglai, Karey Wutkowski, Glenn Somerville, Chelsea Emery, Diane Bartz, Ellen Wulfhorst, Joseph A. Giannone, Chip East and Emily Chasan; Editing by Andre Grenon)

http://news.yahoo.com/s/nm/20080620/...dK43FvP8Ng.3QA

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White House threatens veto of foreclosure rescue
By JULIE HIRSCHFELD DAVIS, Associated Press Writer
2 hours, 20 minutes ago

WASHINGTON - A broad bipartisan coalition supporting a massive foreclosure rescue beat back GOP efforts to gut it Thursday, defying a White House veto threat and quashing a bid to make it victim to revelations about two senators' VIP mortgages.

Administration officials said they oppose the inclusion of $4 billion in the measure to help states buy and rehabilitate foreclosed properties, and a plan to have government-sponsored mortgage giants Fannie Mae and Freddie Mac pay for the rescue. They announced those and other objections as two GOP senators said they would try to block the package until a committee can investigate how much Countrywide Financial Corp. and other lenders stand to gain from it. House and Senate Republicans are voicing reservations about the bill in light of allegations that Senate Banking Committee Chairman Christopher J. Dodd, D-Conn., one of its architects, and Senate Budget Committee Chairman Kent Conrad, D-N.D., got cut-rate home loans through a VIP program at Countrywide, a leading subprime lender at the center of the mortgage meltdown. Both said they neither sought nor knew about the special treatment. "This bill has come together in such a way as to raise questions all over this country that we need to answer before we move ahead," said Sen. Jim DeMint, R-S.C. The Senate rejected, 70-11, the move by DeMint and Sen. Jim Bunning, R-Ky., to send the housing package back to Dodd's panel, which would have essentially killed the measure. The election-year bill, which could help hundreds of thousands of struggling homeowners, appeared to be drawing wide bipartisan backing. The Senate overwhelmingly defeated two amendments by Sen. Kit Bond, R-Mo., that would have derailed the measure. Both failed on margins large enough to override a promised veto, suggesting the plan could survive a showdown with President Bush. Dodd and Sen. Richard C. Shelby of Alabama, the senior Banking Republican, said the veto threat was "disappointing," given that their compromise plan includes several elements Bush has demanded, and said they hoped the White House would reconsider. Michael Ortiz, a spokesman for Democratic presidential candidate Barack Obama, said, "It's baffling why the White House would oppose a bill that would help so many American families at risk of losing their homes on the same day hundreds of mortgage fraud arrests were announced." One of Bond's proposals, which failed on a 69-21 vote, would have killed the foreclosure rescue. The other, defeated 77-11, would have essentially doomed an affordable housing fund financed by Fannie and Freddie, leaving it — and the mortgage aid plan — without a source of money. Democrats and many Republicans consider the measure a political imperative amid rising foreclosures and growing public anxiety about the sagging economy. Its centerpiece is a foreclosure rescue program in which the Federal Housing Administration would provide $300 billion in new, cheaper mortgages for distressed homeowners who otherwise would be considered too financially risky to qualify for government-insured, fixed-rate loans. Borrowers would be eligible if their mortgage holders were willing to take a substantial loss and allow them to refinance, and would ultimately have to share with the government a portion of any profits they made from selling or refinancing their properties. The measure is designed to help hundreds of thousands of borrowers in danger of losing their homes, but it also would benefit mortgage holders by allowing them to avoid costly foreclosures and reclaim some of what they're owed by people facing financial ruin. The bill would tighten controls on Fannie Mae and Freddie Mac — which provide huge amounts of cash flow to the mortgage market by buying home loans from banks — creating a new regulator for the firms. It also would provide a $14.5 billion array of housing and other tax breaks, including a credit of up to $8,000 for first-time homebuyers who buy a home in the next year, and boosts in low-income tax credits and mortgage revenue bonds. A group of 28 House Republicans wrote to Speaker Nancy Pelosi, D-Calif., on Thursday demanding an investigation — with open hearings — on the Countrywide allegations. "At a time when millions of Americans are struggling to repay their mortgage debts while coping with $4/per gallon gasoline and soaring foods prices, they will be outraged to learn that some members of Congress may have personally profited from their official positions through secret sweetheart deals on their mortgages," said the letter, signed by House leaders. They called the revelations "extremely troubling" in light of upcoming votes on the housing package. Rep. Barney Frank, D-Mass., the House Financial Services chairman, said his panel won't look into the Countrywide case, given the panel's already full schedule and a pending Senate Ethics Committee probe of the matter. He defended Dodd in a statement, saying, "At no point in any of our joint efforts has Senator Dodd shown even the slightest indication that he was in any way influenced by considerations other than what was best for the economy and the American people." Still, Frank and other Democrats have serious concerns about the Senate housing measure that could frustrate leaders' desire to send it to Bush before Congress breaks for a weeklong July 4 vacation.

http://news.yahoo.com/s/ap/20080620/...vmEXxqMwxg.3QA

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Laissez les bon temps rouler! Going to church doesn't make you a Christian any more than standing in a garage makes you a car.** a 4 day work week & sex slaves ~ I say Tyt for PRESIDENT! Not to be taken internally, literally or seriously ....Suki ebaynni IS THAT BETTER ?

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US mortgage fraud probe nets 406, plus Bear Stearns two
by Rob Lever
1 hour, 47 minutes ago

WASHINGTON (AFP) - Two ex-Bear Stearns executives were indicted Thursday as officials unveiled charges against 406 people in a huge probe into fraud, which helped fuel the housing crisis and infect the global economy.

The announcement was the biggest indication yet of criminal charges in response to what some say was rampant fraud aimed at cashing in on a sizzling market before last year's meltdown.

In an indictment unsealed in New York, former Bear Stearns hedge fund managers Ralph Cioffi and Mathew Tannin were charged with conspiracy, securities fraud and wire fraud. Cioffi was also charged with insider trading.

The pair told investors that their two funds were designed "to provide a modest, safe and steady source of returns," the indictment said.

But they failed to inform investors that the funds were "in grave condition" and at risk of collapse in March 2007.

The funds collapsed in the summer of 2007 resulting in some 1.4 billion dollars in losses to investors and triggering widespread panic in financial markets about the global financial system.

According to the indictment, the two had "marketed the two funds as a low-risk strategy, backed by a pool of debt securities such as mortgages" and "made misrepresentations to stave off investor withdrawal" even as the funds neared collapse.

But Edward Little, a lawyer for Cioffi, said the two men were being blamed in a crisis that was not their fault.

"The subprime crisis took everyone by surprise, including the Fed and Treasury, and dozens of the largest financial institutions have lost over 300 billion dollars to date on the same investments," the lawyer said in a statement.

"We are shocked and disappointed that the government has seen fit to fix blame on these two decent men. The good news though is that there will be a trial, and we look forward to the day they will be vindicated."

Tannin's attorney Susan Brune said: "Matt Tannin is innocent. He is being made a scapegoat for a widespread market crisis. He looks forward to his acquittal."

Meanwhile the Department of Justice and the Federal Bureau of Investigation (FBI) said they had charged 406 people from March 1 to June 18 in a national probe called "Operation Malicious Mortgage" in a variety of schemes related to housing fraud.

Some 60 arrests were made in mortgage fraud-related cases on Wednesday, in 144 separate cases. The FBI estimates that the cases resulted in one billion dollars in losses.

"Operation Malicious Mortgage and the Bear Stearns case demonstrate that the Department of Justice is determined to detect and to punish mortgage fraud and to help restore stability and confidence in our housing and credit markets," said Deputy Attorney General Mark Filip.

"The cases announced today represent the ongoing enforcement work of federal investors and prosecutors from across the country who are working with more than 40 task forces, that they, along with our state and local counterparts, have formed to combat this sort of fraud and related abuses."

The collapse of the hedge funds at Bear Stearns played a role in a global credit crunch as banks and investment funds scrambled to identify investments tied to risky mortgage bets.

Bear Stearns, a prestigious 85-year-old Wall Street investment firm, went into a downward spiral after that news and was on the brink of collapse itself when a rescue engineered by the Federal Reserve in March 2008 resulted in its sale to JPMorgan Chase.

The Operation Malicious Mortgage task force is probing a variety of tactics including lending fraud, foreclosure rescue scams and mortgage-related bankruptcy schemes.

Some cases involve fraudulent misrepresentations about the borrower's financial status, the use of false or fictitious employment records or the inflation of property values, according to officials.

Foreclosure schemes involve criminals who target legitimate homeowners in dire circumstances and collect fees for supposed foreclosure prevention services.

http://news.yahoo.com/s/afp/20080620...gmBytE.UmMwfIE

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Laissez les bon temps rouler! Going to church doesn't make you a Christian any more than standing in a garage makes you a car.** a 4 day work week & sex slaves ~ I say Tyt for PRESIDENT! Not to be taken internally, literally or seriously ....Suki ebaynni IS THAT BETTER ?

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More info : Hillary’s socialist housing bailout plan

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The Mother Of All Financial Scandals, The Fannie Mae and Freddie Mac racket

Foreclosures lead to abandoned animals

Countrywide gave special treatment to US lawmakers

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Laissez les bon temps rouler! Going to church doesn't make you a Christian any more than standing in a garage makes you a car.** a 4 day work week & sex slaves ~ I say Tyt for PRESIDENT! Not to be taken internally, literally or seriously ....Suki ebaynni IS THAT BETTER ?

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FBI mortgage probe expands to 21 firms from 19
Wed Jul 16, 2:09 PM ET

WASHINGTON (Reuters) - The FBI's investigation into potential corporate fraud in the U.S. home mortgage industry now encompasses 21 companies, up from 19 reported in April, a bureau spokesman said on Wednesday. "It's up to 21 now," FBI spokesman Jason Pack said. He had no further details on the expansion. Bureau officials have regularly said they expect the number of corporate and individual mortgage fraud cases to grow amid a crisis in the U.S. home-lending industry.

The bureau has publicly acknowledged only one company -- Doral Financial Corp, as involved. The largest U.S. mortgage lender, Countrywide, also is under FBI investigation, authorities have said, although the FBI has declined to comment and Countrywide said it was unaware of any investigation.

When the FBI disclosed its industry investigation, major investment banks Goldman Sachs, Morgan Stanley and Bear Stearns Cos each said the government had asked them for information, but there was no confirmation of any FBI role. Beazer Homes said last year it had received a federal grand jury subpoena related to its mortgage business.

Pack also said he was unaware of any new FBI initiative to investigate potential stock manipulation in major financial firms, including housing finance giants Fannie Mae and Freddie Mac .

U.S. securities regulators issued an emergency rule on Tuesday to limit certain types of short selling in such firms.

http://news.yahoo.com/s/nm/20080716/...ZG_qMJRH2 ocA



FBI probing IndyMac for possible fraud: report
1 hour, 4 minutes ago

WASHINGTON (Reuters) - IndyMac (IDMC.PK) is under investigation by the FBI for possible fraud involving home loans made to risky borrowers, The Associated Press reported on Wednesday, citing an unnamed law enforcement official.

The report said it was not immediately clear how long the FBI's probe of the bank has been ongoing but the probe is focused on the company and not individuals who ran the thrift institution.

U.S. banking regulators seized mortgage lender IndyMac on Friday after withdrawals by panicked depositors led to the third largest banking failure in U.S. history.

The FBI declined to comment on IndyMac, but a spokesman earlier on Wednesday said the FBI's probe of corporate fraud in the subprime lending industry had risen to 21, from 19 in April. He provided no details.

"The FBI currently has 21 investigations related to the subprime market industry. We receive information from a variety of sources on a daily basis, and we have an obligation to review each allegation on its merits," spokesman Jason Pack said when asked about IndyMac.

"Given the volatility of today's subprime market, we have seen an increase in subprime related complaints. To protect the integrity of our cases, we do not confirm or comment about specific companies that may or may not be a part of our investigations," he said.

Bureau spokesman Richard Kolko, asked whether IndyMac was under investigation, noted the expansion of the industry probe but said he had no names.

The bureau has publicly acknowledged only one company -- Doral Financial Corp -- as involved in its corporate probe of the mortgage industry. The largest U.S. mortgage lender, Countrywide, also is under FBI investigation, authorities have said, although the FBI has declined to comment and Countrywide said it was unaware of any investigation.

When the FBI disclosed its industry investigation, major investment banks Goldman Sachs (GS.N), Morgan Stanley (MS.N) and Bear Stearns Cos each said the government had asked them for information, but there was no confirmation of any FBI role. Beazer Homes (BZH.N) said last year it had received a federal grand jury subpoena related to its mortgage business.

Pack also said he was unaware of any new FBI initiative to investigate potential stock manipulation in major financial firms, including housing finance giants Fannie Mae (FNM.N) and Freddie Mac (FRE.N).

U.S. securities regulators issued an emergency rule on Tuesday to limit certain types of short selling in such firms.

http://news.yahoo.com/s/nm/20080716/...pSLnbF60QXIr0F

__________________
Laissez les bon temps rouler! Going to church doesn't make you a Christian any more than standing in a garage makes you a car.** a 4 day work week & sex slaves ~ I say Tyt for PRESIDENT! Not to be taken internally, literally or seriously ....Suki ebaynni IS THAT BETTER ?