The FBI, in conjunction with the Securities and Exchange Commission on corporate-fraud, is investigating 14 companies to determine criminal conduct that contributed to the subprime mortgage crisis.

The Feds are worried about irregularities that include the timing of stock sales by executives at companies like the bankrupt New Century Financial Corporation. They're also looking at whether publicly-held homebuilders manipulated financial statements to inflate revenues. And they're looking at whether Wall Street hid information about the degree of high risk loans that were bundled into mortgage-backed securities and sold to investors.

Well, you can't say the grass grows under their feet, even though Realty Times was raising the alarm way back in 2004 that something was seriously wrong with housing. The fever pitch of homebuying propelled by high-risk loans.

The states noticed something was wrong. Attorney Generals for Connecticut and New York have issued subpoenas to Fannie Mae and Freddie Mac over how home loans were handled, including appraisals.

Which brings us to the question: where are the federal probes into all banks that contributed to this mess?

Curiously absent from the search for the guilty is the U.S. Treasury that oversees banks.

Why? It wasn't just subprime loans that caused the mortgage meltdown. Some say inflated appraisals were encouraged by banks which helped drive home prices up to record levels. That contributed as much to the record level of loan defaults as the nature of the loans, so why aren't all banks being investigated for mortgage fraud?

One appraiser who tried to take on Wells Fargo thinks he knows why; the Feds will do anything but go after employers.

During 2006 and 2007, Texas appraiser Gary Geraci says he worked with the SEC, IRS, and FBI by providing them with facts about lender pressure to hit appraisal numbers and bank fraud. Under the Sarbanes-Oxley whistleblower statutes, Geraci filed suit against Wells Fargo.

On his blog, he writes, "Sworn to a code of ethics in both appraisal and engineering, I continue to uphold certain civil and social responsibilities to the public I serve. Fighting appraisal fraud on a daily basis for two years was not enough and ultimately resulted in blacklisting and the decline of my appraisal business. Rather than simply go away, I made the conscious choice to take the heat up a notch and file a federal whistleblower lawsuit. I was forced to do so alone as no attorney would take my case. To go up solo against the high paid attorneys of one of this country’s top banks was demoralizing, and yes, rife with corruption in itself. The pursuing year-long court battle was clearly the most difficult challenge I had ever taken on to date. I witnessed firsthand a patronizing court and a legal system noticeably tilted to the benefit of this country’s employers."

"I am no longer an appraiser but looking at today’s mortgage meltdown crisis -- I am at peace in that I did my part," says Geraci.

All this makes the $150 billion economic stimulus package just approved by the House of Representatives a little suspect. They're putting the bandaid on the wrong wound.

Instead of cleaning up banks and their lending practices, which would immediately help consumers, the package raises loan limits for loans sold to Fannie Mae and Freddie Mac so consumers can borrow more money from banks guaranteed by government sponsored enterprises that are also under investigation.

Frankly, they all deserve a kick in the pants.

Published: January 31, 2008

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