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January 07, 2009

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The Modesto Kid

Absent a large tangible loss, perpetrators are unlikely to get much of a sentence beyond probation

This also seems like it means, even if the FBI had pursued mortgage fraud aggressively, it would not have had much impact on what was going down -- if the scenario is "Don't get caught, get rich; get caught, receive a slap on the wrist and keep the money", there would not be much of a deterrent effect regardless of how many people were getting caught.

PG

There was this kind of overt fraud, but there also was the problem of insane over-estimates, not even connected to bubble prices, of what a house was worth. There was no reason for a lender to be serious and rational about appraisals, because he always could just repackage the loan and sell it to someone else.

dsquared

Nahhhhhhh. Crashes always bring the fraudsters out the woodwork but they're always an interesting sideshow rather than the main event. Honest people doing things they thought were sensible, those are the buggers you've got to watch out for. JK Galbraith wrote a book about this called "The Economics of Innocent Fraud" (and then sold the bloody thing for £11.99 for an 80 page hardback, just to drive the point home).

mortgages

It’s just one of the latest schemes and frauds we’re [teh FBI] seeing these days across the financial services industry, our senior criminal investigators said during a briefing Tuesday with the news media in Washington.

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