High-ranking FBI officials say they were aware of widespread mortgage fraud years ago, but that they were “stretched too thin” and couldn’t do anything about it.
The Seattle-Post Intelligencer has the report:
“We knew that the mortgage-brokerage industry was corrupt,” the first of the retired FBI officials told the Seattle P-I. “Where we would have gotten a sense of what was really going on was the point where the mortgage was sold knowing that it was a piece of dung and it would be turned into a security. But the agents with the expertise had been diverted to counterterrorism.”
The FBI not only lacked the resources, but also never got the tips it needed from the banking regulatory agencies. The Securities and Exchange Commission, the Office of Thrift Supervision and the Office of the Comptroller of the Currency also failed to detect the securities issue, said the first retired FBI official.
To some extent we can believe this. In retrospect, it appears we erred by assuming, post 9/11, that terrorism was the biggest immediate threat to our society. But would agents with the proper “expertise” have really grapsed the issue?
We think it’s doubtful. Sure, the FBI might’ve made a few more arrests here and there, but the fact remains that the vast majority of people, including regulators — outside of a few Cassandras — were totally blindsided in the way it went down. Something about this feels a little bit like a ‘Just-So’ story, with a lot of hindsight assumptions built in.