GE's Former Subprime Unit Probed For Possible Fraud
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It's been three long years since the housing bubble cratered the economy and not a single top mortgage executive sits behind bars. But sometimes the wheels of justice just turn extra slowly.
The FBI and the Department of Justice are probing possible fraud at WMC Mortgage Corp., the former subprime mortgage division of General Electric, reports the Center for Public Integrity's Michael Hudson.
Federal authorities are "asking whether WMC used falsified paperwork, overstated borrowers' income and other tactics to push through questionable loans," reports Hudson. The unit was owned by GE from 2004 to 2007, when it was shut down as the housing bubble burst, leading to numerous civil lawsuits. Last fall, WMC and EquiFirst Corp. were sued in a Minneapolis federal court by a bank trustee over a $550 million pool of subprime mortgage-backed securities.
Though low-level mortgage fraudsters have been prosecuted, most top lenders and executives have evaded punishment. Last month, Bank of America agreed to a $335 million settlement with the Department of Justice over claims that its Countrywide Financial mortgage lending unit discriminated against Hispanic and African-American borrowers by pushing them into high-risk subprime loans.
But the bank has avoided prosecution and Countrywide founder Angelo Mozilo, the poster boy of the subprime debacle, settled securities fraud and insider trading charges with the Securities and Exchange Commission in 2010 for $67.5 million -- a fraction of his estimated $600 million fortune.
In the case of WMC, former CEO Amy Brandt who helped lead its push into subprime mortgages, left in late 2006 to start up an indie rock label and to head up a private equity fund that invests in undervalued mortgage assets. Her short-lived successor as CEO, Laurent Broussard, now runs the retail cards unit at JPMorgan Chase.
A GE spokesman wrote in an email to HuffPost, "WMC is aware of multi-year investigations into participants across the subprime industry. WMC has been cooperating fully with such investigations. We have no reason to believe that WMC is currently a target of these investigations."
Spokesmen for the Justice Department and FBI declined comment.
FDA Risks Ire of Lawmakers With Missed Deadline
It's been a tough year for regulatory agencies, with Republican lawmakers complaining about "overregulation" and the massive federal deficit forcing steep budget cuts across the board.
So, it was curious to see the Food and Drug Administration risk even more pain by recently missing a crucial deadline that is sure to anger some members of Congress. The regulators have been arguing with medical device makers over the cost to speed up reviews of products such as hip implants and heart stents, which is paid for by industry -- with the FDA seeking $805 million and companies such as Johnson & Johnson preferring to pay $447 million. The agency missed a Jan. 15 deadline to submit a new agreement and probably won't have one by Feb. 15, when the House holds a hearing on the matter. If they miss the mark again, the FDA "will have the wrath of a bunch of exercised politicians on them who are running for re-election and want their pictures on TV that night," Ira Loss, senior health policy analyst at Washington Analysis, told Bloomberg News.
IRS Punishing Reformed Tax Evaders?
It's the IRS version of "no good deed goes unpunished."
The Internal Revenue Service has been promoting its voluntary disclosure program to help reduce the $385 billion owed by tax evaders who often hide assets overseas. But the program ends up hurting participants, potentially costing them more than if they continue to evade the IRS, National Taxpayer Advocate Nina Olson said in her annual report to Congress, reported Bloomberg.
High-Risk Chemical Plants Go Uninspected
The Department of Homeland Security's plans to inspect the 100 most high-risk chemical facilities in the country by the end of 2010 have been delayed due to the time needed to build a roster of inspectors, among other factors, according to a Congressional Research Service report. Only nine such Tier 1 facilities -- those deemed most at risk of a successful attack -- have been inspected as of last September and fewer than 50 have had their site security plans approved.
Citi, Morgan, RBC Hit For Muni Violations
Citigroup Global Markets, Morgan Stanley and RBC Capital Markets were among five firms fined a total of $220,000 for violations of municipal securities rules by the industry's self-regulatory body, the Financial Industry Regulatory Authority. The violations involved a failure to disclose material information -- such as a downgrade of a security by a ratings agency -- to customers and to report trades on a timely basis.
Today's must-reads
- Less than four years after a head-on train collision that caused 25 deaths prompted safety legislation, those rules are in danger of being watered down in the face of industry pressure. (FairWarning)
- Nevada politicians, including Attorney General Catherine Cortez Masto, accepted thousands of dollars worth of gifts -- including tickets to NASCAR races, clothing and travel accommodations -- from various organizations in 2011. (Las Vegas Review-Journal)
- Does the Environmental Protection Agency have the political will to “use its existing authority to re-shape the United States' dependence upon high-carbon power,” asks Center for Progressive Reform Member Scholar Alice Kaswan.
- Three former top executives of failed bank Washington Mutual will pay nearly40 million -- through their insurers and out of their own pocket -- as part of a proposed settlement with the Federal Deposit Insurance Corp., according to documents filed in Delaware bankruptcy court Thursday. (Law360.com)
- Grossest regulatory news headline of the day: "Scab Check for Poultry to Be Scrapped Under Food-Safety Rule" (Bloomberg News, of course)
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Posted: 01/20/2012 5:41 pm