Criminal Mortgage Probes Fizzle Out
Professor Joseph Grundfest spoke with The Wall Street Journal's Jean Eaglesham about recent criminal mortgage probes and why the scarcity of high-profile prosecutions could reflect the nature of the crisis, rather than a failure by prosecutors.
Federal criminal investigations of IndyMac Bancorp and New Century Financial Corp. have stalled and could result in no charges being filed, said people familiar with the situation.
Separately, the U.S. Attorney's office in Seattle announced Friday it had closed its investigation of Washington Mutual Inc., another failed mortgage lender, with no criminal charges being brought.
The three separate investigations, among the first to weigh criminal charges against the companies and their executives at the heart of the housing crisis, each hit major stumbling blocks. The WaMu probe had been inactive for more than a year, according to people familiar with the matter. The IndyMac and New Century investigations are essentially dormant at the moment, according to people familiar with those probes.
Joseph Grundfest, a former SEC commissioner, said the scarcity of high-profile prosecutions could reflect the nature of the crisis, rather than a failure by prosecutors.
"It's entirely possible to have the kind of calamity we experienced as a result of mass delusion, ignorance, mistakes, stupidity and cupidity. All of that can be true without there having been criminal conduct," said Mr. Grundfest, a law professor at Stanford University.