Edvenson Consulting

Subject:  The sub-prime 'lending' crisis in the U.S., which might better be entitled, The mortgage pay-back crisis in the U.S.

Bottom Line:  The FBI is getting involved in the investigation

A few weeks ago, I commented in this blog about this issue, asking, precisely, "who are these guys"?  More on that soon, as the various players are culled out of the banking mix, and separated (well, you decide) from those that delivered to us the 1980's 'savings and loan crisis.' 

Who are the people behind this latest activity, and what did they know when?  The white collar crime investigation area is continuing to develop, and internal and external auditors - both - are interested in watching to see:  how the extent of this economic meltdown could be permitted to occur, and how controls can be put into place to prevent it from happening in the future. 

From both an attorney's and an auditor's viewpoint, the results will be of very special interest to the development of law and routine.  Or am I ever hopeful?

Perhaps... I recall walking empty and brand-new mega malls in Tulsa, Oklahoma just before the savings and loan meltdown of the late 1980's, wondering how anyone could build so much so quickly without a market.  The old adage, "Build it and they will come," was also abused by the eager Chinese, as the vestiges of the Communist economy crumbled, and concrete tourist villages dotted the coastline of the South China Sea, waiting for buyers. 

I digress.

CNN, as well as others, report today that the U.S. Federal Bureau of Investigation is actually investigating this topical area.  Their latest statements suggest that consumers will be glad for their involvement:  Per CNN online, an FBI spokesman stated, "On insider trading, we're looking in some cases at whether executives were aware that the value of their holdings would be going down and the executives traded on that information ...On accounting fraud, we're looking at housing developers who may have reported cash reserve accounts to reflect falsely inflated values."

Excellent news! 

The FBI also gave the press an idea of the size and extent of the activity in this area that had been reported to them.  The number of suspicious activity reports they reviewed (for possible investigation) climbed from 3,000 in FY 2003 to nearly 35,000 in FY 2006, and 48,000 in FY 2007. Between July 1 and September 30, 2007, the FBI received 15,000 related reports, which, when projected, would give them 60,000 complaints in FY 2008.  Add to this the fact that they investigate only cases with losses over $500,000, and that this past year, 56% of all cases had losses of over $1 million, and you have a still-growing pool of activity to review. 

They will be coordinating with staffs of various other federal agencies, so this sounds very promising, from an investigative perspective.  To date, they state that the worst states for such activity were: California, New York, Texas, Florida, Georgia, Utah, Illinois, Indiana, Ohio and Michigan.

For your information.