On May 31st, Manhattan prosecutors filed criminal charges against Abacus Federal Savings Bank and 19 employees. These are the first criminal charges against an actual bank associated with the financial crisis. This very small bank issued fraudulent mortgages, otherwise known as liar loans and sold them to Fannie Mae.
Abacus Federal Savings Bank, a small bank with a major presence in New York City’s Chinese community, and 19 of its former employees have been charged with inflating the qualifications of mortgage applicants to meet federal loan standards, a scheme that prosecutors say brought the bank tens of millions of dollars in ill-gotten fees and sent hundreds of millions of dollars in risky mortgages to the investment market.
The thing is liar loans were extremely common, so why would New York Prosecutors go after this small community bank instead of the larger fish? Politics and resources.
Bill Black in the below Bloomberg law interview says this prosecution will probably be our token sacrifice. In other words, don't expect Countrywide, notorious for liar loans and now part of Bank of America to be put in cuffs, doing the perp walk.
At the Federal level there have been no criminal prosecutions for any aspect of the financial crisis. Some claim the Obama administration is still working to bring criminal charges, yet Lehman Brothers was completely left off the hook.
Liar loans were the base offense upon which the crisis was built, but truly minor players were involved, so we view the Abacus bank criminal prosecution announcement as throwing the public a bone.