In Miami the fraud goes on, by gimleteye

Recent examples of apparent mortgage fraud (dredged up by our blog, eyeonmiami.blogspot.com, through an analysis of publicly available data) show that gaming big lending institutions is still a victimless crime so long as everyone gets a slice of the vig.

We're not sure who gets paid off or how the fraud is tolerated by banks: those aren't phantom losses that are being reported, in the hundreds of billions.

Today's credit crisis started in subprime mortgages and is spreading to other forms of consumer debt: it was tripped by a chain of fraud stretching from the top/ down and bottom/ up: from sleazy land use lobbyists to appraisers on the take, from mortgage brokers to zoning councils in the back pocket of developers, from local county commissioners taking Bahamian poker chips, to bankers on Wall Street taking down millions in bonuses, straight through to Congress and the Bush White House.

President Bush, the decider, isn't solely to blame for steering the US economy into a long-delayed recession. The essential feature of the credit crisis--the explosion of toxic financial derivatives that no one, not even financial institutions appear to fully understand--was the decadal shift in the structure of the US economy from a nation that produced what it consumed, to a nation increasingly in debt to producers and energy suppliers.

In those years when the future president was trying to be an oil man or baseball executive, Wall Street was practicing how to sell junk as AAA rated investments. That wasn't George's fault.

It was Wall Street, itself, that prevailed during two terms of President Clinton to reduce, eliminate, and eviscerate the capacity of regulation and regulators to track exactly what risks were being undertaken, in the pursuit of "free markets".

But it was Dubya who ascended to the presidency through the enthusiasm of big campaign contributors from the Growth Machine that understood--in the example of Florida's hands-off approach to growth that pushed Jeb Bush into Florida's Governor Mansion in 1998--how victory resided in limited government.

Of course, the size of government hasn't been reduced at all. To the contrary, as trenchantly noted by Floyd Norris in the New York Times, "... seven years into his presidency, George W. Bush is in line to be the first president since World War II to preside over an economy in which federal government employment rose more rapidly than employment in the private sector." (Job Growth Where Bush Didn't Want It, February 9, 2008)

It's the collateral price of homeland security: the proverbial bank vaults were left unattended while law enforcement stretched to the point of breaking, spying on and hunting down purported enemies of the state.

If you are startled by news that Miami courts dealing with foreclosures are clogged, imagine if all the cases of Miami mortgage fraud were prosecuted.

This is what disaster capitalism looks like and it is why investor confidence in the good faith and credit of the United States has been badly shaken.