MALFEASANCE in the mortgage industry, with the wave of foreclosures and other financial difficulties that have followed, competes only with the sharp rise in gas prices on conditions that have soured Americans on the state of the economy.
Unethical behavior, illegal practices, and a lack of enforcement of standards within the housing-finance industry lie at the root of the sub-prime mortgage collapse.
Buyers who did not have the wherewithal to purchase dwellings, lenders who were prepared to overlook potential borrowers' financial problems, bankers who sold the shaky mortgages to investors who then bundled and traded them as solid assets - all of these contributed to the house of cards that began to tumble across the American financial landscape.
The collapse sent shock waves around the world, based on the sheer weight of the United States as the world's largest economy. The FBI is now trying to put names and faces to some of the authors of this financial morass.
Recently, executives Ralph Cioffi and Matthew Tannin, former hedge-fund managers at Bear Stearns, a onetime pinnacle of gaudy Wall Street success, were arrested and led away in handcuffs. The two have been charged with nine counts of securities, mail, and wire fraud.
The Department of Justice also announced that in recent months it has indicted more than 400 people on charges of mortgage fraud. The counts focused on crimes including foreclosure "rescue" schemes, lending fraud, and bankruptcy scams. The FBI has 1,400 cases pending, and more than 40 task forces around the country are working on mortgage-related crimes.
The coordinated efforts by federal, state, and local government entities have two objectives. The first, of course, is to punish those whose practices ran afoul of the law. The second is to make it clear to unscrupulous operators in the field that they need to reform, unless they want to trade their pinstripes for prison stripes.
The message is clear. Successful prosecution is one step toward restoring integrity and confidence in the nation's housing finance industry.