F.B.I. opens subprime inquiry

I guess better late than never. The NYTimes is reporting that the Federal Bureau of Investigation has opened criminal inquiries into 14 companies as part of a wide-ranging investigation of the troubled mortgage industry. The F.B.I. is supposedly looking into possible accounting fraud, insider trading or other violations in connection with loans made to borrowers with weak, or subprime, credit. F.B.I. is also cooperating with the Securities and Exchange Commission, which is conducting about three dozen civil investigations into how subprime loans were made and packaged, and how securities backed by them were valued.

I am not holding my breath on this ever resulting in more than a hand slap to a few or at most a few peripheral or dying players will get put out of business.

What really needs to happen are two things: serious regulation of the industry as a whole, and real enforcement with the Fed’s sharing authority with the States.

Anytime you cut regulations, cut investigators, prohibit states from even enforcing federal law themselves, and state your going to trust corporations to “do the right thing” it is only a matter of time before things get out of hand.

Corporations can’t help it, they are designed to maximize profit by externalizing costs. If there isn’t a law specifically on point they will do it until told otherwise.