FBI investigates subprime debacle
TheThere have been a substantial number of borrower fraud cases that should be included in the mix. You also have to consider whether some of these companies even comprehended the risk posed by the investment vehicles. Surely the major investment banking firms never intended to lose billions of dollars on purpose. on Tuesday said it is investigating 14 companies for possible fraud or insider trading violations in connection with loans made to risky borrowers, and investments spun off of those loans.
Agency officials did not identify the companies under investigation but said the wide-ranging probe, which began in spring 2007, involves companies across the industry, from mortgage lenders to financial firms that bundle home loans into securities sold to investors.
Theis working in conjunction with the , Neil Power, chief of the FBI's in Washington, said during a briefing with reporters.
The development comes as authorities inand investigate whether hid crucial information about bundled into securities that were sold to investors.
Power said federal authorities are looking into the practices of so-called subprime lenders, as well as potential accounting fraud committed by financial firms that hold these loans on their books or securitize them and sell them to other investors.
Referring to certain unnamed bankrupt subprime lenders, Power said there are "some irregularities there that we're looking into," including the timing of stock sales by executives. Dozens of subprime lenders have filed for bankruptcy in the past year, most prominently.
Power also said law enforcement officials are looking at whether homebuilders manipulated financial statements to inflate revenues....
Previous posts on predatory borrowing here, here, and here. The evidence suggest an organized criminal enterprise in many of these cases.