“Right here in Des Moines,” he said, “there was a big subprime outfit, Wells Fargo Financial. No one there has been prosecuted. They are only going after people who lost their homes after the bubble burst. It’s a scandal.”

OP-ED COLUMNIST

The Mortgage Fraud Fraud

By JOE NOCERA

Published: June 1, 2012

I got an e-mail the other day from Richard Engle telling me that his son Charlie would be getting out of prison this month. I was happy to hear it. 

Perhaps you remember Charlie Engle. I wrote about himnot long after he entered a minimum-security facility in Beaver, W.Va., 16 months ago. He’s the poor guy who went to jail for lying on a liar loan during the housing bubble.

Charlie’s ordeal isn’t over yet, of course. When he leaves prison on June 20, Charlie, 49, will move temporarily to a halfway house, after which he will be on probation for another five years. And unless he can get the verdict overturned, he will have to spend the rest of his life with a felony on his record. 

There were two things about Charlie’s prosecution that really bothered me. First, he’d clearly been targeted by an agent of the Internal Revenue Service who seemed offended that Charlie was an ultramarathoner without a steady day job. The I.R.S. conducted “Dumpster dives” into his garbage and put a wire on a female undercover agent hoping to find some dirt on him. Unable to unearth any wrongdoing on his tax returns, the I.R.S. discovered he had taken out several subprime mortgages that didn’t require income verification. His income on one of them was wildly inflated. They don’t call them liar loans for nothing.

Charlie has always insisted that he never filled out the loan document — his mortgage broker did it, and he was actually a victim of mortgage fraud. (The broker later pleaded guilty to another mortgage fraud.) Indeed, according to a recent court filing by Charlie’s lawyer, the government failed to turn over exculpatory evidence that could have helped Charlie prove his innocence. For whatever inexplicable reason, prosecutors really wanted to nail Charlie Engle. And they did.

Second, though, it seemed incredible to me that with all the fraud that took place during the housing bubble, the Justice Department was focusing not on the banks that had issued the fraudulent loans, but rather on those who had taken out the loans, which invariably went sour when housing prices fell.

As I would later learn, Charlie Engle was no aberration. The current meme — argued most recently by Charles Ferguson, in his new book “Predator Nation” — is that not a single top executive at any of the firms that nearly brought down the financial system has spent so much as a day in jail. And that is true enough.

But what is also true, and which is every bit as corrosive to our belief in the rule of law, is that the Justice Department has instead taken after the smallest of small fry — and then trumpeted those prosecutions as proof of how tough it is on mortgage fraud. It is a shameful way for the government to act.

“These people thought they were pursuing the American dream,” says Mark Pennington, a lawyer in Des Moines who regularly defends home buyers being prosecuted by the local United States attorney. “Right here in Des Moines,” he said, “there was a big subprime outfit, Wells Fargo Financial. No one there has been prosecuted. They are only going after people who lost their homes after the bubble burst. It’s a scandal.”

The Justice Department has had a tough run recently. Last week, Eric Schneiderman, the New York attorney general — who was recently given a role by President Obama to investigate the mortgage-backed securities issued during the bubble — complained publiclythat he wasn’t getting the resources he needed from the Justice Department. And, of course, on Thursday, a federal judge declared a mistrial on five charges of campaign finance fraud and conspiracy in the trial of the former presidential candidate John Edwards.

In the Edwards case, the Justice Department spent tens of millions of dollars, and trotted out novel legal theories, to prosecute a man who was essentially trying to keep people from discovering that he had had a mistress and an out-of-wedlock child. Salacious though it was, the case has zero public import. Yet this same Justice Department isn’t willing to use similar resources — and perhaps even trot out some novel legal theories — to go after the pervasive corporate wrongdoing that gave us the financial crisis and the Great Recession. (I should note that the Justice Department claims that it “will not hesitate” to prosecute any “institution where there is evidence of a crime.”)

Think back to the last time the federal government went after corporate crooks. It was after the Internet bubble. Jeffrey Skilling and Kenneth Lay of Enron were prosecuted and found guilty. Bernard Ebbers, the former chief executive of WorldCom, went to jail. Dennis Kozlowski of Tyco was prosecuted and given a lengthy prison sentence. Now recall which Justice Department prosecuted those men.

Amazing, isn’t it? George W. Bush has turned out to be tougher on corporate crooks than Barack Obama.

No.  This is hardly amazing at all.  FOR YEARS, I have been writing that Barack Obama is the best Republican President this country has ever had, better even than William Jefferson "Slick Willy" Clinton.  And just what exactly do I mean by writing that he is the best Republican President?  It means that he can always be counted upon to (1) kow tow to Israel, (2) reduce spending on social insurance - by passing legislation to do so, and (3) getting down on his knees, genuflecting, and bowing before international corporate power - he lets Goldman Sachs dictate US domestic and international foreign policy, he passes legislation that gives big pharma an historic pay day (Obamascare) without even using the collective buying power of the US governments teat trough to enforce lower pricing of pharmacuetical products, (4) he privatized the profits and socialized the losses of the "to big too fail investment banking industry" and continues to provide them with zero interest loans that they use to buy government securities paying 3% and book the interest a profits to be distributed to the managing partners.  In Obama's world, THERE ARE NO SUCH THINGS AS CORPORATE CROOKS.  He's a friggin Republican with a mulatto-colored face is all.  The new, friendly, face of the greatest purveyor of violence, mayhem, and murderer in the history of the world!  USA!  We're #1!