Arnold Kling  

What is Massive Financial Fraud?

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This story says that the government has decided to prosecute one Lee Bentley Farkas for financial fraud. As a non-lawyer, and seeing only the description in this and related stories, it is very difficult for me to discern the difference between what Farkas did and what Citigroup did. I have a generic concern that there are enough laws to make many activities illegal, particularly in finance. As a result, there is much discretion for prosecutors to focus on the politically vulnerable and exempt the politically connected.


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COMMENTS (2 to date)
stefan writes:

Citibank misreported account balances by tens of millions of dollars for years by an active scheme of balance sweeps? They sold hundreds of millions of dollars of loans multiple times to different buyers?

The TBW fraud looks pretty basic, misreporting of cash balances and who owns what, all on a sustained basis in an active scheme, not any accounting judgment issues.

Ted writes:

Are you kidding? They are alleging he sold $400 million in FAKE mortgage assets. They are alleging he took thousands of the same mortgages and sold them multiple parties to different parties. It's alleged he funneled $50 million of company funds for his own personal use. He apparently lied about the quality of billions in mortgage assets he sold to other banks. He even is alleged to have created a fake equity investment for a bank to access TARP funds, although it failed.

If that's not breaking the law (assuming the charges are true) - what is? Citigroup did none of those things. I don't know how you can possible use this story to make your case that our laws give prosecutors too much discretion. You can find much better examples.

Honestly, did you even read what is alleged against him?

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