FBI Missed Mortgage-Fraud Schemes, Former Agents Say


The FBI was aware for years of “pervasive and growing” fraud in the mortgage industry that eventually contributed to the U.S. financial meltdown, but did not take definitive action to stop it, says trhe Seattle Post-Intelligencer. “It is clear that we had good intelligence on the mortgage-fraud schemes, the corrupt attorneys, the corrupt appraisers, the insider schemes,” said a recently retired, high FBI official. Another retired top FBI official confirmed that such intelligence went back to 2002. The problem, according to the two FBI retirees and several other current and former bureau colleagues, is that the bureau was stretched so thin that no one noticed when those lenders began packaging bad mortgages into bad securities. One retired FBI official said “the agents with the expertise had been diverted to counterterrorism.”

“These are very resource-intense cases that take a lot of work by very skilled people,” said John Falvey Jr., a former federal prosecutor who currently does white-collar criminal defense work in Boston. After the terrorist attacks of 2001, about 2,400 agents were reassigned to counterterrorism duties. This mass reassignment was first chronicled by the Post-Intelligencer in 2007 and 2008. That administration policy resulted in a dramatic plunge in FBI criminal investigations and referrals for prosecution. FBI Assistant Director Ken Kaiser took issue with any implication “that if the FBI had made more arrests for mortgage fraud, the crisis could have been averted. To even suggest that is a cry for a lesson in both civics and basic economics. It is not a fair or realistic assessment.”

Link: http://seattlepi.nwsource.com/national/397690_fbiweb28.html

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