The Wall Street Journal fronts news that the feds are suing Wells Fargo for a decade of mortgage fraud that bilked the government out of hundreds of millions of dollars. The New York Times stuffs it on B3.
The WSJ:
The complaint alleges nearly a decade of misconduct dating back to May 2001. The suit contends that San Francisco-based Wells engaged in “regular practice of reckless origination and underwriting” of government-backed loans. The company said that more than 100,000 FHA loans met federal guidelines when more than half of them didn’t, according to the complaint.
Unsurprisingly, it’s the bank as a corporate entity getting sued here, which means no individuals are being held accountable. It’s as if the fraud magically committed itself, without fraudsters. Neither the WSJ nor the NYT points out that no individuals are being sued, much less prosecuted.
— Bethany McLean has a terrific column up at Reuters on the weak-sauce fraud lawsuits governments have recently brought against Bear Stearns and JPMorgan Chase.
This is the case finally brought by the New York AG over Bear Stearns knowingly securitizing bad loans, demanding payment from originators, and then keeping the money for itself rather than passing it on to the investors to whom it was owed. Unsurprisingly, the same thing going on with Wells Fargo is happening here:
The biggest flaw is that Schneiderman decided not to name any individuals, a practice that is sadly all too common in financial fraud cases. The New York Times argued that it’s a strength that the case doesn’t focus on individuals and specifics, and instead alleges a broad pattern of fraud. But naming names is powerful. Anonymity is weak, and that is amplified when the generalized wrongdoing allegedly occurred at a now-defunct bank. In addition, the lack of names is weird. How could the actions alleged in the complaint have been accomplished if real people didn’t do them?…
Another possibility is that those who say that federal agencies simply don’t have the appetite to pursue the banks are right. Whether that’s because they lack the resources and the political will, or because bringing criminal charges against individuals would inexorably lead up the chain to the institution, which would destroy it, and no one wants to see that happen, it doesn’t much matter. If Schneiderman’s lawsuit is the best we can manage under those constraints, then that’s a tragedy.
— FireDogLake’s David Dayen makes a nice catch on the Obama campaign’s new Big Bird ad, which says, “Mitt Romney knows it’s not Wall Street you have to worry about. It’s Sesame Street.”
The ad starts with a list of big white collar criminals, and Dayen notices that it’s awfully dated:
Let’s look at that litany of Wall Street “criminals” and “gluttons of greed,” which later get juxtaposed with Big Bird. You have Bernie Madoff, Ken Lay and Dennis Kozlowski. So two CEOs prosecuted and convicted by George W. Bush’s Justice Department, and Madoff, whose son turned him in before Obama took office, in December 2008, and who pleaded guilty.
So the Obama campaign could not fill a list of three Wall Street criminals that the Obama Justice Department actually sent to jail. Heck, they couldn’t fill a list of one!
This after the greatest Wall Street scandal in history.
Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR’s business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.