Monday, February 6, 2012

Bank Is Victim in Financial Crisis Case, Not Homeowners

Less than a week after the formation of a new federal-state working group that will focus on potential misconduct in the residential mortgage-backed securities market came a case against three traders at Credit Suisse who were charged with inflating the value of mortgage bonds in late 2007. But the case has little to do with the causes of the housing market collapse; at its core, it is really akin to embezzlement from a bank by its employees.

The Justice Department filed charges of conspiracy, false accounting and wire fraud against Kareem Serageldin, who was a managing director at Credit Suisse’s investment bank division in New York. Two subordinates pleaded guilty to conspiracy charges and are cooperating with the prosecution, having admitted to inflating the value of mortgage bonds held by Credit Suisse at Mr. Serageldin’s direction.

According to the indictment, the motive for tinkering with the valuations was to enhance Mr. Seageldin’s job performance and eligibility for a promotion and bonuses at Credit Suisse. At one point, he rejected a proposed markdown of $15 million to $20 million on an investment, telling a colleague, “That’s a lot of money, dude,” and when an internal inquiry raised questions about a particular valuation, he said that the entry had been recorded by mistake.

Read the rest of the article at The New York Times

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