Economy and Ethics Intersect in Week’s News
Jul 13th, 2009 • Posted in: NewsMortgage fraud soars as desperate homeowners and lenders try to maintain the standard of living enjoyed in boom times, says FBI; USA Today probe looks at ethics of overdraft loans; Bernard Madoff won’t appeal, making it a virtual certainly he will die in prison
NEW YORK and WASHINGTON
Financial-sector ethics were key to several top developments last week. Among them:
- Mortgage fraud has skyrocketed as desperate homeowners and industry professionals try to maintain the trappings of boom years, according to a report from the Reuters news agency. The triple whammy of the housing bust, the stock market implosion, and the credit crunch contributed to what an FBI report called “a rampant mortgage fraud climate fraught with opportunistic participants desperate to maintain or increase their current standard of living.” In total, mortgage fraud reports rose 36 percent last year, compared to the year before. Common frauds include falsifying sales data, phony reverse-mortgage schemes, bogus bankruptcy filings, and even arson to collect insurance money.
- A USA Today investigation claims that even as regulators crack down on abusive mortgage and credit card lending, there is another practice that can mire borrowers in a credit trap: “courtesy overdrafts.” While the practice of covering checks that were drawn on insufficient funds began as a courtesy, it has become a major revenue source — driven by stiff fees — that USA Today claims takes advantage of the most vulnerable customers. “Overdraft fees are the mother lode of (deposit) fees,” Michael Moebs of Moebs Services, an economic research firm, told USA Today. “If it weren’t for overdraft fees, 45% of banks and credit unions wouldn’t have made money in 2008.”
- Jailed swindler Bernard Madoff will not appeal his 150-year prison term, Bloomberg reports. The 71-year-old Madoff, who once was regarded as a lion of Wall Street, was sentenced for masterminding what appeared to be the largest Ponzi scheme in U.S. history. Bloomberg notes that it is likely Madoff will die in prison, because while federal guidelines allow for so-called compassionate releases of inmates who are nearing death, such actions are rare and must involve “extraordinary or compelling circumstances” that could not have been foreseen at the time of sentencing.
Sources: Reuters, July 9 — Bloomberg, July 9 — USA Today, July 9.
For more information, see: Related Newsline story, June 29 — Related Newsline story, June 22 — Related Newsline story, May 11 — Related Newsline story, Mar. 30 — Related Newsline story, Mar. 16.
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