White Collar Crime

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The “Subprime Mortgage” mess that made in a short-time many unemployed and robbed of the shortterm fortunes and it came to light the true danger and nature of White Collar Crime and its perpetrators. These many individuals who were captains of some of the most wealth wielding and making investment companies in the world, did not accomplish their ability to fool the nation and the authorities of the Government by luck or without certain accomplices knowing, greedy and those who were ignorant to themselves desiring only to get a mortgage for that home so sought after as the very symbol of American hood, that so many for generations have been sold on. There were many instances of Fraud committed during the crisis but there were very few who would be convicted of the White Collar Crimes accomplished because of the very creative nature of its inventors and the inability of the Governments Prosecutors to prove it in the courts. To describe the elements the “Subprime” lending mess, it must be defined so that a basic understanding van be had to gain the focus of this discussion. In finance, subprime lending means making loans to people who may have difficulty maintaining the repayment schedule. These loans are characterized by higher interest rates and less favorable terms in order to compensate for higher credit risk. Proponents of subprime lending maintain that the practice extends credit to people who would not have access to the credit market. The main thing that innovations in the mortgage market have done is to let in the excluded: the young, the discriminated-against, the people without a lot of money in the bank to use for a down payment. It is considered that this form of risky investment in giving mortgages and the selling and buying of these investments and lax standards for under writing them led to this mess. There are many roles that were played by individuals and not merely greedy Banks. This is a White Collar Crime where no one walked into someone’s home with a gun and forced them to accept the terms of owning a home at a not so favorable rate. The crime committed was not understood or seen by the individual or family applying for that mortgage, so their crime is not one that this discussion is concerned with. Ignorance and wanting a better life for your family is not a crime. But what crimes can be pursued under White Collar by the authorities to who are entrusted to ensure that justice is dealt with. This matter has only led to a few civil and criminal cases against the executives, even those focused on peripheral issues, Goldman Sachs peddling of credit derivatives and the communications of two former Bear Stearns hedge fund managers. S.E.C.’s securities fraud action against the former chief executive of Country wide Financial exposes the aggressive mortgage practices of what was then the nation’s largest mortgage leader. The charges under Rule 10b-5 and the wire fraud statute (18 U.S.C. § 1343) require the government to prove more than just dissembling. Fraud is a type of larceny, so the defendants have to make misstatements or omit to disclose information to gain something from their victims. A false hope that the hedge funds would pull through, no matter how misguided, can be a defense to a fraud charge. Showing that there were many minds, or conflicted about where the market was headed, does not mean that the statements to investors were part of a fraudulent scheme. Whether the S.E.C. had gathered enough evidence to show investors were misled about the company, if lax underwriting standards that led to the granting of highly risky mortgages to borrowers with questionable finances constituted securities fraud then this might have been an open and shut case. That’s

not what the law prohibits, however, and the S.E.C. had to show that the Executives misled investors by promoting the strength of the company’s mortgage underwriting standards while he was aware that increasingly lax lending was pushing Country...
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