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THE MORTGAGE MELTDOWN….From the LA Times this morning:

Long before the mortgage crisis began rocking Main Street and Wall Street, a top FBI official made a chilling, if little-noticed, prediction: The booming mortgage business, fueled by low interest rates and soaring home values, was starting to attract shady operators and billions in losses were possible.

“It has the potential to be an epidemic,” Chris Swecker, the FBI official in charge of criminal investigations, told reporters in September 2004. But, he added reassuringly, the FBI was on the case. “We think we can prevent a problem that could have as much impact as the S&L crisis,” he said.

You gotta be kidding. Even a guy at the FBI saw this coming? But the rocket scientists at the Fed somehow slept through it anyway? Yeesh.

Still, the conclusion of the story should restore your faith in the federal bureacracy: after writing his memo, Swecker’s budget was cut. “Nobody wanted to listen,” Sharon Ormsby, the chief of the FBI’s financial crimes section, explained. Partly this was because of an increased focus on counterterrorism, but apparently much of it was also because Ashcroft & Co. insisted on shifting resources into the movement hot button areas of illegal immigration and child pornography. Now that’s the approach to regulatory and fraud issues we’ve come to expect from the Bush administration.

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