Don’t Look Now

I continue to be amazed at just how naïve some of the comments we keep hearing about the economy – and some of the more problematic aspects of it – really are. Take, for example, the media reaction to FBI Director Mueller’s statement to Congress that the Bureau’s mortgage fraud caseload is larger than it was just a few years ago, and that the number of cases under investigation is continuing to rise. How can that be? I hear people wondering in alarm. The Federal government is spending close to a trillion dollars to take care of this problem, major financial institutions have improved so much that they’re now able to start giving away tens of millions of dollars in bonuses every year again, and the Fed Chairman is talking about the Great Recession being over! How can the amount of mortgage fraud still be rising? Let alone corporate fraud (which is also up dramatically)?

You can read about these gloomy reports here if you want to, but if not, just take my word for it that during the worst financial crisis in three generations, there seems to be an increase in the amount of fraud going on. What puzzles me is why anyone is surprised by this, let alone the Director of the FBI, who is supposed to be one of the top-ranking law enforcement officials in the country. The fact that these numbers are continuing to climb since May of this year, when all of the bailout money had already been spent and the worst should have been over, is upsetting, to be sure, but hardly surprising. The fact that corporate fraud is still rising after all of those corporations have been given so much of our money is even more upsetting, but it’s important to remember that in both cases, the people who are getting all of the free Federal money are probably not the same ones committing all of the bonus fraud…

I say this for two reasons: first, while the initial phases of the bailout may have been laughable from an oversight standpoint, over the past few months Congress is taking a closer and closer look at where that money went, and when (and whether) it’s coming back; and second, because if you’re having the Feds stuff random gobs of money into your face, there’s both an incentive not to draw any more regulatory attention and a disincentive to put forth the effort to commit fraud in the first place. Neither of these was exactly the point of the TARP legislation, but the outcome is the same. What I do wonder about is the climate in which all of this crime is occurring. There was a time when mortgage fraud was a crime with limited appeal and an even more limited resistance to detection and punishment. But with all of the chaos in the financial industry these days, you have to wonder if more people are getting the idea that they could carve out a little Federal money for themselves – and how many of them are getting the idea that if the people who nearly destroyed our economy can get $10 million bonuses, that they deserve whatever they can carry away…

In the long run, I expect that our economy will survive all of the idiotic things that were done to it in the early years of the 21st Century, and that when high school students 80 years from now study the Great Recession, it will look just a quaint (and just as idiotic) as the Great Depression 80 years before that. If our culture has changed to the point where people in business start to believe that they are entitled to whatever they can screw out of the system, on the other hand, I seriously doubt if there will still be a country here in 80 more years. And I’m not so sure about the planet, either…