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Obama Administration Rounds Up The Usual Mortgage-Market Suspects: Seven And A Half Things To Know

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JUSTICE DEPARTMENT MORTGAGES
Attorney General Eric Holder. The Justice Department would like you to know how tough it is on mortgage fraud. | AP
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Thing One: Busy Work: The Obama administration would really like you to know how tough it is getting with evildoers in the housing market.

Manhattan U.S. Attorney Preet Bharara yesterday sued mortgage giant Wells Fargo, accusing it of lying to the government about the quality of loans it managed to get insured by the Federal Housing Authority, ultimately costing the government $190 million. Meanwhile, Attorney General Eric Holder went before the microphones yesterday to announce that the Justice Department had charged 530 people in the past year with mortgage fraud, part of a wide-ranging crackdown to protect borrowers. “Each of these efforts sends the same message,” Housing and Urban Development Secretary Shaun Donovan said at the press conference with Holder. “That when it comes to harming homeowners, no one is above the law.”

That message will likely be lost on many on Wall Street who were involved in helping to dangerously inflate the mortgage market before the housing bust, cramming as many bad mortgages as they could fit into mortgage-backed securities and then selling them to unsuspecting investors as fast as they could. None of those people have been charged, and likely will never be charged with any crimes. The tough-as-nails Justice Department quietly closed the books on its Goldman Sachs mortgage probe without bringing charges. When New York Attorney General Eric Schneiderman sued Bear Stearns over these practices recently, not a single individual involved was named in the lawsuit. Unlike many homeowners following the downturn, most of those bankers easily found lucrative new jobs after Bear Stearns collapsed.

According to the Washington Post, Holder denied that there was any political motivation for holding a press conference about his mortgage-fraud crackdown just four weeks ahead of the election. Of course he would, and of course we know otherwise. It's an easy political point to score. But the stronger political tactic would have been to truly get tough with Wall Street malfeasance long ago. Yesterday the Obama campaign released an ad making fun of Mitt Romney for wanting to crack down on Sesame Street instead of Wall Street. It's a good line, but the ad tries to ironically contrast Big Bird with a series of corporate wrongdoers -- Bernie Madoff, Dennis Kozlowski -- who were not prosecuted by the Obama administration. If Obama had claimed just one big Wall Street scalp, it might have made that Big Bird ad more effective. More importantly, it might have made Wall Street take seriously all of this talk about how nobody is above the law.

Thing Two: Merkel Makes Nice: Great news, Greece, Angela Merkel sees the light at the end of your tunnel. Unfortunately, it is probably just a Molotov cocktail. The German Chancellor yesterday offered encouraging words to a Greek government struggling to meet European austerity targets amid a crushing depression, saying the worst was juuuust about over, the Wall Street Journal writes. Greeks responded by rioting in the streets. They do not care for this Angela Merkel, who has repeatedly required ever-more-dire austerity measures in exchange for fresh bailout cash. The trouble is that austerity crushes economic growth, which hurts government budgets, which leads to more austerity, et cetera. The International Monetary Fund warned yesterday that many other countries are going to struggle to meet their own austerity targets, including France and Spain. The IMF was full of warnings, in fact, noticing that capital is fleeing banks all over the euro zone and warning that said banks may have to hold fire sales of assets to raise up to $4.5 trillion. The debt crisis continues.

Thing Three: Rich Wall Street, Poor Wall Street: There were two very different ways to read a report on the state of Wall Street released yesterday by New York State Comptroller Thomas DiNapoli. There's the Wall Street Journal take, which is to focus on the DiNapoli's warning that Wall Street is going to keep cutting jobs, after already cutting 1,200 since the start of 2012, part of a net loss of more than 20,000 jobs in the past five years. Then there's the New York Times take, which is to focus on the fact that fewer bankers are slicing up an even bigger pay pie, meaning "annual compensation in total is at near-record levels. The two views are not mutually exclusive, the NYT notes: Wall Street seems to think that, in order to attract talent, it has to keep raising pay into the stratosphere. In order to be able to afford to do that, it just keeps cutting jobs.

Thing Four: Bain Ignores Mitt On China: Mitt Romney is just so mad at China, you guys, promising that the first thing he does when he gets to the White House, after unstrapping the dog from the roof of his car, will be to declare China a currency manipulator. Romney's old employer, Bain Capital? Not so mad. The New York Times reports that the private-equity company owns a Chinese car-parts maker that has directly cost American jobs. This investment, and investments in other Chinese companies, directly benefit Romney, through his retirement plan, the NYT notes.

Thing Five: Will The Real Paul 'Slim Shady' Ryan Please Stand Up? Vice President Joe Biden is gearing up to debate his counterpart on the Republican ticket, Rep. Paul Ryan (R-Objectivism) tomorrow night. His job is to help erase the memory of his boss's poor debate performance last week. Reuters notes that the task is made more difficult by the fact that nobody knows which Paul Ryan is going to show up: Will it be the supposedly serious, wonky Paul Ryan, always spouting numbers (but not really), or will it be the post-nomination vague Ryan, always trying to avoid talking about specifics?

Thing Six: Another Way The Facebook IPO Sucked: Just before Facebook launched its much-ballyhooed IPO in May, it warned investors about its struggles to make money in the mobile market. The timing seemed odd, but you sort of had to hand it to the company for being honest. It turns out that announcement was the result of a long struggle between the Securities and Exchange Commission and Facebook over whether to reveal this weakness to investors, according to Bloomberg. Facebook resisted such a disclosure for months before finally succumbing. Even had they revealed it earlier, it's doubtful it would have slowed the Facebook IPO hype machine much, though.

Thing Seven: Wal-Mart Takes On Amazon, Workers: Wal-Mart is testing a same-day delivery service that is a direct challenge to Amazon.com's business model, the New York Times writes. This comes shortly after the big-box behemoth kicked Amazon's Kindle out of its stores. But Wal-Mart has headaches of its own, including a first-ever worker strike, that the Huffington Post's Alice Hines notes has spread to 12 cities. The workers say they are fighting back against company efforts to crack down on employees who complain about work conditions and pay.

Thing Seven And One Half: What Have We Learned? BuzzFeed reminds us of the strange, terrifying history of TLC, as a warning of why we should keep PBS from being privatized.

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Calendar Du Jour:

Economic Data:

2:00 p.m. ET: Fed Beige Book for September

Corporate Earnings:

Not much.

Heard On The Tweets:

@BCAppelbaum: Angry man just ran into our offices yelling about conspiracies. Would feel better about future of newspapers if that happened more often.

@ObsoleteDogma: @BCAppelbaum Jack Welch is trying to jump to the NYT from Fortune?

@ShitGermansSay: All the joy has been cancelled.

@eddiepepitone: A great way to release tension is to realize that you are inconsequential.

@JimGaffigan: You people without kids will never know the joy of successfully getting a 2-year old down for a nap. Unfortunately neither will I.

And you can follow me on Twitter, too: @markgongloff

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