The Housing Bubble Was Based On Fraud

by Ian Welsh:

Once again:

Recent filings by two Federal Home Loan Banks — in San Francisco and Seattle — offer an intriguing way to clear this high hurdle. Lawyers representing the banks, which bought mortgage securities, combed through the loan pools looking for discrepancies between actual loan characteristics and how they were pitched to investors.

You may not be shocked to learn that the analysis found significant differences between what the Home Loan Banks were told about these securities and what they were sold.

The rate of discrepancies in these pools is surprising. The lawsuits contend that half the loans were inaccurately described in disclosure materials filed with the Securities and Exchange Commission.

Half of them were fraudulent.

Half

There would have been no housing bubble without widespread fraud. None.

Virtually every major bank executive in the US should be indicted for fraud. The fact that there aren’t even serious investigations, let alone indictments, tells you everything you need to know. Everyone in the system knows it was all fraud, they knew it at the time, and that is exactly why there are no real investigations.