Eric Holder Refuses to Prosecute Mortgage Loan Fraud
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UPDATED: Aug 22, 2012
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Earlier this month, the Securities Exchange Commission (SEC) and the Department of Justice (DOJ)—headed by Eric Holder—announced that it will not pursue charges against Goldman Sacs’ executives for lying under oath about their part in the mortgage loan fraud that contributed to the recent housing crisis.
Goldman Sachs was accused of betting against their own clients’ purchases by investing in markets directly opposite of the products Goldman was selling. In other words, if the home loan packages that Goldman sold to clients failed, Goldman would profit.
In April 2010, Lloyd Blankfein, the CEO of Goldman Sachs, testified before the Senate.
“Much has been said about the supposedly massive short Goldman Sachs had on the U.S. housing market,” said Blankfein in his testimony. “The fact is, we were not consistently or significantly net-short the market in residential mortgage-related products in 2007 and 2008. We didn’t have a massive short against the housing market, and we certainly did not bet against our clients.”
The Senate Subcommittee on Investigations, which was headed by Carl Levin, didn’t believe Blankfein.
They launched an investigation and unearthed mountains of incriminating paperwork and emails revealing that Blankfein and Goldman did, in fact, know about the mortgage loan fraud they were committing.
One of the most astounding finds was a statement that used Blankfein’s exact terminology, but in a manner contrary to what he claimed before the Senate hearing.
“In Goldman’s own internal memoranda, the bank calls its giant, $13 billion bet against mortgages ‘the big short,’” said Matt Taibbi, contributing editor for Rolling Stone, in his 2011 article, The People vs. Goldman Sachs.
Levin and his committee put together a complete case regarding Blankfein’s blatant lie that he and Goldman Sachs did not participate in mortgage loans fraud, and delivered that case to the Justice Department.
But Eric Holder’s recent refusal to follow up on this case has experts scratching their heads in confusion.
“In the notorious Hudson transaction, for instance, Goldman claimed, in writing, that it was fully ‘aligned’ with the interest of its client, Morgan Stanley, because it owned a $6 million slice of the deal. What Goldman left out is that it had a $2 billion short position against the same deal,” said Taibbi in a recent analysis of Holder’s decision. “If that isn’t fraud, Mr. Holder, just what exactly is fraud?”
Instead, Eric Holder continues to prosecute small cases involving individuals and relatively de minimis amounts of money.
“It’s inconceivable to me that the Justice Department would not look at all this evidence and do something,” said Eliot Spitzer on a recent episode of his show Viewpoint.