How was a financial system like this ever supposed to work:
In 2002, when Lee B. Farkas was running a relatively small mortgage company, it got caught selling eight fraudulent mortgages to Fannie Mae. To make things even worse, the mortgages — all of which defaulted without a single payment being made — listed Mr. Farkas as the borrower.
Fannie Mae stopped doing business with the firm, called the Taylor Bean & Whittaker Mortgage Corporation.
For Taylor Bean, it was a crisis. Its checks bounced.
But Mr. Farkas scrambled, and Taylor Bean survived to commit more frauds.
This week, Mr. Farkas, 58, was convicted of 14 counts of fraud and conspiracy in what had become a $2.9 billion scandal.
Testifying in his own defense in federal court in Alexandria, Va., Mr. Farkas explained that in 2002 Taylor Bean had sold eight real loans to a lender who resold them to Ginnie Mae, the government agency that buys loans guaranteed by the Federal Housing Administration. When the loans were found to be ineligible for F.H.A. guarantees, Ginnie Mae demanded its money back.
Taylor Bean did not have the cash. So it created fictitious loans and used them as collateral to get the money from a bank. The loans were not supposed to be sold, he said, but a subordinate mistakenly put them in a group of loans to be sold to Fannie Mae.
“I had no intention of paying payments on those loans,” he testified. “It wasn’t my obligation. It was simply a way to keep track of it, and it was, it was an idea I had that probably wasn’t a great idea, but it was an idea that I had how to do it.”
It was also an idea that indicated something very strange was happening at Taylor Bean. It should have been the end for the company.
Looking at stories like this, the 2012 Republican field, and cable news, some days it really does feel like all we do in this country is package and repackage bullshit.
cathyx
It doesn’t have to work, you just have to make money from it before anyone notices.
Hermione Granger-Weasley
Is Mr. Farkas a libertarian?
It sure looks like that from here.
;)
Just Some Fuckhead
Do you have a link?
JonF
I hate to say it, but every since Bubba “liberalized” a lot of banking/investment rules, its easier to commit fraud, take the profits and use them to hire enough lawyers/politicians to get off from any charges.
Reinstitute Glass-Steagal, give the SEC/Consumer protection agency some real teeth and push capital back into what made us great: industry/infrastructure. It just pushes paper profits around because its easier.
cathyx
@Hermione Granger-Weasley: Could you at least preview what you write before you submit it?
Delia
Mr. Farkas wasn’t thinking big enough. You have to steal trillions before you’re officially too big to fail and able to get away with shit like this.
Steal a little and they throw you in jail;
Steal a lot and they make you king.
Bob Dylan
KG
Then whose obligation would it be, sir? And what were those loans secured by? If nothing else, the failure to pay those loans would have resulted in a judgment against the business, followed possibly by a bankruptcy and then the loss of a license (fiduciary and all).
In my time litigating some of these cases, I learned very quickly that the parties with the most liability were the brokers. The problem is/was, they also had the fewest assets. Many didn’t have insurance, or their insurance refused coverage, or they were fly by night operations that couldn’t be found (a lot of firms were “renting” licenses).
It’s going to take another decade or two to get out of this mess.
RossInDetroit
What distresses me more than this greedy man’s petty little frauds is that it can happen again. And with all of the easy money at stake it surely will.
Just Some Fuckhead
Haven’t read the article yet but I’m guessing the lesson here is you can’t use government money to help the less fortunate because the lords of finance will steal you blind.
JPL
@Just Some Fuckhead: I found the link…it’s behind the pay wall at the NYTimes.
Hermione Granger-Weasley
@cathyx: well, this is a continuation from Coles “Ask and You Shall Recieve Post.”
Farkas looks like a libertarian to me.
Where Taylor Bean libertarians too?
BTW, I am axin for a defintion of libertarianism.
Can you help a sister out?
keestadoll
Next to football and NASCAR, it’s a favorite pastime! Where have you been???
Beta Magellan
And the top of the homepage has an apropos Kardashian Collection ad.
keestadoll
@Hermione Granger-Weasley: It’s a political philosophy of convenience and changes depending on what Libertarian you ask. Inevitably, any blog/site discussing it will be fraught with commentary to the effect of “Yes, but…” or “You’re neglecting to note _____”
joeyess
Farkas! He had yellow eyes!! Yellow! Eyes!
joeyess
@Hermione Granger-Weasley: A Libertarian is what a Republican calls themselves when trying to get laid.
Brian S (formerly Incertus)
I’m not even beginning to understand what this guy got away with for a while, and I read L=A=N=G=U=A=G=E poetry on occasion. What the hell?
Newly-minted MBA
My mortgage got bought by TB&W about 5 months before they went bust. All of sudden, I started getting letters from Cenlar which was assigned to service the loan. It was really weird and I got worried about fraud and payments being properly made. Turned out okay in the end, but I was glad I didn’t have auto payment because I am certain a payment would gone into the bankruptcy black hole.
AAA Bonds
It was supposed to work like this:
Mr. Farkas and a bunch of other people like Mr. Farkas swindle many people to get rich.
Mr. Farkas gets caught – that is, he is allowed to be caught.
Many other people like Mr. Farkas are not allowed to be caught, such as the heads of the largest investment banks in the country.
Mr. Farkas gets in serious trouble.
The other people like him get serious money.
We all wake up the next day and note the unemployment figures and worry about whether Donald Trump will run for President.
It seems to have gone pretty smoothly so far, no?
RossInDetroit
I hope to FSM that he’s making this up as a defense and it’s not an order of magnitude close to true or we’re really screwed.
burnspbesq
@AAA Bonds:
Your world view only makes sense if there is some grand invisible puppet-master holding and pulling all the strings according to some great plan to which only a handful of the elite are privy.
Care to identify the puppet-master for all of us who aren’t as visionary as you?
DonkeyKong
Your name is “you’re wanting”, and you can’t play the man’s game, you can’t close them, and then tell your wife your troubles. ‘Cause only one thing counts in this world: get them to sign on the line which is dotted. You hear me you fuckin’ faggots?
AAA Bonds
@JonF:
I agree. I just hope we all come to not “hate to say it” when we point out when Democrats go astray. This usually happens with the passage of time. LBJ’s Great Society was a good Democratic idea. Escalating the war in Vietnam was not. Most Democrats would probably agree with this.
The Democrats are the people who support the party platform, one that promotes sensible regulation of financial matters. They are also the people who disregard that platform for whatever reason but rep the name. They are all of us.
“The Democrats” are not the most charismatic Democrat with the best name recognition. They are not the smartest Democrat with the most degrees. They are not the raddest Democrat who owns a signed Nolan Ryan rookie card and popped a wheelie over our prone forms after beating us up on the playground.
Those people merely work for us. They are each merely “a Democrat”.
If they are not very good Democrats, the only thing we should feel bad about is if we let them convince us to be not-very-good Democrats too.
AAA Bonds
@burnspbesq:
Unfortunately, you are incorrect. This is something you keep saying in response to me and I don’t understand it. You seem to believe that an unjust system that protects the wealthy and powerful can only happen under extraordinary circumstances and requires coordination at the highest levels by an all-knowing brain.
This is a strange claim that seems to go against most human experience.
schrodinger's cat
Welcome to the Enron economy.
Fred
If you want to blame someone blame voters. That would be YOU….collectively!
People who don’t vote or vote for Repukes get EXACTLY the gov’t they deserve!
maya
George Bailey should have leaped off that bridge and drowned and taken that stupid fucking wino Clarence with him to the bottom. Mr Potter is the role model for our economy. I wonder if someone will do the necessary remake.
dmbeaster
What an unimaginative liar this Mr. Farkas is. He should have blamed it on government mandated minority loans.
Hob
So… the guy’s “defense” is that he didn’t intend to sell those fraudulent mortgages; he just intended to use them as collateral with which to obtain further loans, i.e. money, under false pretenses? And he had to do that in order to raise cash to refund the sale of things he had previously sold under false pretenses? Do I have that right?
“Your honor, I only stole that car because I needed to get across town in a hurry after my bank robbery to be on time for a drug deal. I was going to give it back after that, but, well, someone fucked up– you know how interns are…”
WaterGirl
@Hob: Perfect.
JonF
@AAA Bonds: There’s a lot to criticize Obama over, but he’s successfully turned back the clock on the financial industry to even to a small extent. Doesn’t mean the job is done, but the disclosure rules+Volker rule+CFPB+upgunning the CFTC is a good start.
Tissue Thin Pseudonym (JMN)
But, but , how can this be? I’ve been assured that the Obama administration has refused to prosecute anyone involved in the financial crisis! That let everyone get away with it! Now you mean to tell me that, in a case where there’s actually enough evidence to convict someone of fraud, they prosecuted?!?
I’m so disillusioned.
kdaug
It’s called a “service-based economy”.
Korea Beat
Here’s the money shot.
dww44
@JonF: Exactly.
Have you ever read any of Thomas Geohegan’s work? He wrote an article in Harper’s Magazine in April of 2009 that showed how the uncapping of usury rates 30 plus years ago sucked all the investment money out of manufacturing and threw it all into one pot controlled by Wall Street.
As one who spent 28 years in the brokerage industry and saw all the deregulation and blurring of the lines between commercial and investment banking, I cannot understand why any prudent person, (GOP, I’m talking to you!) could still advocate for the privatization/personalization of Social Security retirement funds. If there’s one rationale that proves to me that they are either stupid and uninformed or they are simply bought it’s that one.
No sane person would advocate putting the Social security trust funds into the hands of the markets and individuals for them to gamble with and for brokers to get rich off of. As a branch office compliance person I saw all too frequently what clients and brokers managed to do with their IRA’s and 401K’s.
Here’s a link to an interview Geohegan did on Marketplace.
dww44
For the life of me, can’t figure out why the link I thought I provided didn’t show up, it does when I try the edit feature.
maus
@joeyess:
Or an Atheist Republican who thinks Ron Paul gives a damn about the separation of church-state.
DPirate
On NPR this morning, they had a show about how bad British Petroleum was because they didn’t immediately hire public relations firms to
get it’s message outlie to the public. The premise seemed to be that BP was otherwise a responsible company, but caused unnecessary worry, lol.EDIT: Because it is people’s feelings that matter, regardless of outcome, I suppose.
cthulhu
@JPL: That’s weird. I didn’t hit the pay wall. Disturbing article though at least the end result does seem to be a fair number of major convictions.
I thought the best part was the bank’s rep ordering up $100 million of funding for the fraudulent loans while waiting in line to buy a Happy Meal at McDonalds.
TruthOfAngels
@cthulhu:
I didn’t hit the paywall either but then I never do.
Is it cause I iz a limey, I wonder?
RosiesDad
The one saving grace, maybe, will be if they actually throw the guy in prison and keep him there until his own funeral.
Hob
@dww44: Your link didn’t show up because you didn’t put anything in between the “a” and “/a” tags– that’s where the text would go that you want to show blue & underlined. This is the link, right?
I did read Geoghegan’s article, liked it a lot. Here’s the whole thing.
Hob
@dww44: Whoops, my second link isn’t very useful – you can’t read the whole thing unless you’re a Harper’s subscriber. Never mind.
Did you see the comments on that Marketplace interview? Only five of them, but two are pure wingnut gold– one literally: “Interest rates shot up because the US government delinked the dollar from gold and began setting rates to control the money supply. You can’t regulate private interest rates when the Fed could easily charge over the same amount.” I’ve seen a lot of strange logic from goldbugs but never something so entirely backwards.
Ruckus
Looking at stories like this, the 2012 Republican field, and cable news,
somemost days it reallydoes feel likeis all we do in this country is package and repackage bullshit.Fixed
The perfect description of US politics/big business.
Paul in KY
@TruthOfAngels: They give you 30 ‘free’ articles to read a month. After that, you haz to pay to read them.