October 20th, 2010
(TimeMagazine) – So who is likely to go to jail? Obviously the first candidates are the robo-signers who were putting their names to documents that attested they had reviewed the loans documents when they hadn’t. But here’s the problem with just putting those people in jail. A number of the robo-signers have already admitted that they didn’t know what they were signing. Jeffrey Stephan, the robo-signer at GMAC who got the current crisis started, has said that it wasn’t actually his job to review the loans, just sign the paperwork. So clearly someone must have told him that was his job. Federal prosecutors are trained to use the small fish to catch the big ones.
The question when it comes to the paperwork is just how high up the chain of command the order to sign without reviewing goes. Bank of America CEO Brian Moynihan was B of A’s chief legal officer for a brief time. Did he know that the bank was filing potentially fraudulent documents with courts around the country? Did he look to make sure the bank’s foreclosure processes were sound? I mean at the end of 2008, when Moynihan was the head of B of A’s law department, foreclosures were becoming a very big part of the bank’s daily life. So I would think that a chief legal officer would look into that. FULL DISCLOSURE, I have no knowledge about Moynihan’s situation, and have not asked B of A for a comment. He was only in the job for a little while, so it is entirely possible this is an area he skipped over. I’m just saying it could get messy for some bank higher-ups.
But the real blood on the Street would be if the Feds are looking into the some of the more salacious charges that are coming out about the securitization of mortgage bonds. One being that the bankers knew many of the loans they sold to investors were deficient, and got a discount when they bought them, but then passed those loans along to investors at full face value anyway. Or, two, a charge that surfaced again today, that bankers sold the same mortgage to numerous bond pools ensuring that investors would lose money.