Where are the Indictments?


Sorry…a brief departure from the normal post on this blog.  I must admit that my blood pressure rose today when reading that Richard Fuld, disgraced leader of the now defunct Lehman Brothers, questioned the US government about why they did not bail him out

Reuters, via Yahoo! Finance, reports that Fuld takes full responsibility for his actions but “said US regulators knew exatly what the firm’s liquidity was and how it was pricing its distressed assets.”  The article goes on to state that Fuld lost patience several times during his testimony before Congress, when members tried to “pin him down on precise answers.” 

“Fuld said he did not know why the US government chose to help other financial companies, but not Lehman.”

Call me crazy, but did he just say, “yeah, I did something horrible…but where’s my money?” 

I’m sure that Bernie Ebbers and Jeffrey Skilling are throwing temper tantrums in their prison cells right now.  It’s great the bail-out passed, now where are the indictments?  Bernie Ebbers caused investors only $11 billion when he filed false financial reports for his company WorldCom.  He was sentenced to 25 years in prison.  Jeffrey Skilling and Kenneth Lay, ex-CEO and chairman of Enron, were indicted on charges of conspiracy, securities fraud, false statements, and insider trading.  Skillman was sentenced to 24 years and fined $45 million; Lay would have been sentenced to 20-30 years had he not passed away shortly before his sentencing.

Is this situation really any different?  These CEOs created a financial crisis that has no boundaries – CNNMoney.com reports that Latin America (yes, an entire region!) could be devistated by this market collapse.

For years these finanical institutions were able to charge higher interest rates and make money on sub-prime loans.  Adjustable rate mortgages, zero-down financing, reverse mortgages, interest-only mortgages.  “If the borrowers defaulted, they could simply seize the house and put it back on the market.  On top of that, they were able to pass the risk off to mortgage insurers or package these mortgages as mortgage-backed securities,” says Pinyo, of Moolanomy.

My lender Rodney Anderson (plug: he’s great! and he really knows his stuff!) has a local radio show on Saturday mornings in Dallas.  One caller a month ago says that his lender (not Rodney) told him to adjust his 2007 tax return in order to qualify for a lower interest rate on his home loan.  Since the caller is self-employed, he needed to show a higher 2007 income.  Sounds easy.  Great!  The caller says he refiled with the IRS and was approved for a loan which saved him about $15,000.  Bad news: Soon after, the IRS hit him for back-taxes of approximately $30,000.  (And, although he didn’t say it on the phone, I’m sure he’ll be on the IRS watch list for the rest of his life…hello, audits.)

We have a government that spent months investigating steroids in baseball (big, SO WHAT?!).  When are they going to hold someone accountable for this fraud and greed?


3 responses »

  1. The problem is when those making and enforcing the law are also the ones who would be punished by it. Quis custodiet ipsos custodes? Who will watch the watchers?

  2. Pingback: Taking the Brunt of the Bailout « 11th Hour Brilliance

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