Leftpedal

Again: it’s not the “subprime crisis” (i.e. a way to say that the current credit problems and burst housing bubble were caused by poor people defaulting on their homes because of shady and risky loans that they took out). Using that terminology really gets under my skin, because it makes poor people or people who are defaulting on their housing loans, having their houses foreclosed, into the bad guys. Into “sub”-humans who are fucking up the country. Stop blaming them.

Rather, it was a concerted effort by housing lenders and other banks and brokers and analysts and hedge funds to get into waters of complexly bundled bonds and securities that, whether or not they should’ve been traded at all, were very risky. Did they really not know what they were doing? Come on Justice Department. Find out for me. Mukasey may have myspaced on the wiretapping and waterboarding, but maybe we’ll get some answers from the following investigation. From the WSJ law blog:

[Did Wall Street companies] misled investors by booking inflated prices of mortgage bonds despite knowledge that valuations had dropped? Did they value mortgage bonds differently on their own books compared to the holdings of customers? Or did they change the way they valued the bonds to avoid or forestall taking big losses?

…Responding to the subprime mortgage-market collapse, DOJ’s emissaries are now getting into the act that’s kept the SEC and a few state AGs in high gear lately. Unlike those regulators and prosecutors, who mainly have civil enforcement powers in this area, the U.S. attorneys are searching for criminal conduct.

…[R]egulators are [also] looking at whether financial firms: properly disclosed the risky nature of mortgage bonds to investors and credit-rating firms, improperly accounted for certain off-balance-sheet entities that held mortgage bonds, insured mortgage bonds after finding out that their values were inflated.

from today’s related WSJ article:

Federal criminal prosecutors are stepping up their interest in Wall Street’s mortgage-securities activities. The Justice Department’s U.S. attorney’s office in Manhattan, based near Wall Street, has notified the Securities and Exchange Commission that it wants to see information the agency is gathering in its investigation of *Merrill Lynch* & Co., according to people familiar with the matter. The SEC is examining, among other things, whether the securities firm booked inflated prices of mortgage bonds it held despite knowledge that the valuations had dropped, the people say.