Justice Department Investigates Wall Street
They got greedy, and now the American people are paying a high price for it. The Feds themselves aren’t innocent.
Those lapses included:
— Failing to rein in what Chairwoman Sheila Bair of the Federal Deposit Insurance Corp. called a “shadow banking system” in which major banks ramped up their risks by making hundreds of billions of dollars in exotic, off-the-books bets.— Deciding to scale back the FBI’s resources for tracking white-collar crime after Sept. 11 , and assigning scant personnel at the Securities and Exchange Commission to monitor major investment banks after they were given new freedom in 2004 to take on added risks.
— Adopting rules in 2004 that restricted state regulators from policing predatory lending and other mortgage abuses, prompting some major lenders to seek federal charters to avoid tough scrutiny.
— Relying too much on the credit ratings of Wall Street agencies, which had financial incentives to bestow high ratings on dubious mortgage-backed securities.
— Failing to monitor major banks’ compensation arrangements that gave bonuses for completing mortgage securities sales, regardless of the risks of default.
— Ignoring a warning to Congress by the FBI’s investigation chief in 2004 that widespread subprime-related mortgage fraud would lead to a financial crisis
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