Criminal Charges

It does seem like more people are waking to the very real possibility of criminal charges (and I’m not talking about the diabolical PR campaign to blame the homeowners and modification shops for “fraud” –a drop in the bucket to the major accounting control fraud propogated by our “esteemed” financial institutions), what with the WaMu/Long Beach Mortgage hearings, the SEC v Goldman brouhaha, criminologist and professor of law and economics Bill Black’s straightforward testimony regarding  accounting control fraud at Aurora, Lehman, Goldman, etc.  Here’s a Bloomberg article called “Barofsky Says Criminal Charges Possible in Alleged AIG Coverup” regarding the SIGTARP head honcho, with comments by Janet Tavakoli, structured finance expert.  Full article here.  Here’s a snippet:

Janet Tavakoli, founder of Chicago-based Tavakoli Structured Finance Inc., says Barofsky hasn’t been aggressive enough. She says SIGTARP should be running criminal probes of the bankers who underwrote and managed the collateralized debt obligations that were at the center of the financial meltdown.

CDOs are bundles of mortgage-backed bonds and other debt sold to investors.

Tavakoli says the CDO managers sometimes replaced relatively high-quality securities with new ones that were more likely to default.

‘Phony Labels’

“It is securities fraud if you take securities and package them and knowingly pass them off with phony labels,” she says.

Barofsky says investigations related to the underwriting and sale of CDOs are ongoing.

Barofsky is no longer confined to a fetid basement office. SIGTARP is now in a brown-granite building on L Street, nine blocks away from the Treasury. Sitting in his office, the investigator says he was at first surprised by the resistance he got from the Treasury to his inquiries.

“When I took the job, it wasn’t like I had really contemplated for a millisecond the political aspects,” says the lawman, sipping from a can of Diet Coke.

Barofsky says he’s battling an entrenched culture of secrecy in the Treasury and elsewhere.

“One of the important lessons that I hope will be learned from this entire financial crisis is that the reflexive reaction against transparency, that disclosure will bring terrible things, has not been proven true,” he says.


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