Last fall I wrote that the subprime mortgage mess was not quite in the Enron field of outright fraud, but was close. It has evidently edged closer.
Bloomberg is reporting that the FBI is investigating securities fraud in connection with Countrywide, the recent Bank of America acquisition. Countrywide is not alone according to the report, as several mortgage lenders are also facing increased scrutiny for past decisions and valuations.
This is inevitable. Auditors and finance managers now be asked to sign off on lenders’ balance sheets are being forced question dubious transactions. Othewise they end up on the hook for the numbers. It is a natural, needed corrective process.
Let’s hope the feds do not overreach into scapegoating, but every officer and executive who knowingly misled investors about the dreck on their books should be prosecuted.
