the bubble and securities fraud
Countrywide Financial is being investigated by the FBI for securities fraud...

A step in the right direction, but I take issue with the first sentence of the article, which implies they may be the "Enron of the housing crisis".

Fine, except the problems here are not limited to one company - the issues are systemic, involving mortgage originators, appraisers, real estate agents, mortgage purchasers/repackagers/resellers, bond insurers, etc., to varying degrees. And, of course, two individuals in an identical position - say, mortgage brokers, can have vastly different levels of complicity in the whole thing.

The underlying question here is: at what point do bubbles - which I would say markets are prone to create/participate in from time to time - become a) an ethical issue and b) a legal issue? I think it's all a matter of deceit - closers neglecting to mention the rate reset and approximate new monthly payment after the reset date; banks misrepresenting how their securitized mortgages are performing and misleading investors, etc. These problems may contribute to a bubble, but I don't think they're in any way responsible for the bubble as a whole.

Is Countrywide responsible to some extent? It's quite possible - in a company of that size there are likely to be bad actors somewhere. The extent of the corruption remains to be seen, however - and I'm not sure it'll end up being comparable to Enron, where the problem was more or less systemic.
- posted by vcmc @  3/10/2008 04:59:00 PM