It seems like we’re not quite out of the woods yet. Eric Holder has announced that the DOJ may now go after individuals who worked for institutions that were involved in the selling of questionable mortgage-backed securities (MBS) (DOJ Action).
How far down the food chain he will go remains to be seen. Some may believe that such actions are justified given the results of what happened from the non-performance of the securities generated. Others say the government is just looking for scapegoats to satisfy the cry that “no one was held accountable”. I’ll admit I am not totally familiar of what all goes into the process of creating, rating and selling of MBS, but I do know what goes into creating the loans that backed these securities. The question is, did the buyers know?
Although there have been a number of fines and settlements related to the MBS, the belief is that these were small as compared to the amount of money made by the institutions that created and sold the securities, and the money made by some of individuals working at those institutions. Further, what about those at the top of the institutions involved. Did they knowingly participate in activities which undermined the strength and creditability of the securities their institutions sold?
It would seem to the casual observer that if an institution is/was found to be liable, then someone in that institution must have been involved in the policy and decision making process. After all, an institution is made up of people and the people are the ones who drive the activities.
Those in the industry say this is just a witch hunt. Those individuals involved did what they thought was best, operating within the confines of the law and the system, to produce what they believed to be bona fide investment vehicles, properly disclosed and documented.
Did they? Seems we’ll find out. Stay tuned for more from the DOJ!