What We're Hearing

So, is the FHA's reserve fund in the red or not? We understand it hasn't gone negative yet but we'll know for sure by tomorrow morning. That's when HUD secretary Shaun Donovan and FHA chief David Stevens will provide what they call an "in-depth review" of the actuarial study they ordered on the reserve and "financing" funds. (Claims on delinquent loans are paid out of the financing fund. Money flows from the reserve fund -- which is housed at Treasury -- into the reserve fund. Confused? I'm not even sure I have that right.) Stay tuned. Meanwhile, former criminal defendants Ralph Cioffi and Matt Tannin -- they of the Bear Stearns subprime hedge fund species -- were all smiles outside the federal court house in Brooklyn yesterday when a jury acquitted them of fraud and insider trading charges. The trial lasted three weeks. I didn't attend the proceedings but I've read both the civil and criminal complaints against the two men and interviewed mortgage bankers that worked with them and did business with Bear. (Both men were minor characters in the book I co-authored 'Chain of Blame, How Wall Street Caused the Mortgage and Credit Crisis.') A few observations here: even though they beat the criminal charges, they still have civil culpability in a handful of cases tied to the funds' collapse; White collar crime cases (or alleged white collar crime, I should say) can be a hard sell to juries especially when prosecutors have to prove "who knew what when" and how their actions violated the law. I have to admit, the insider trading charges against Cioffi looked strong -- but the jury has spoken. In a criminal case the jury's decision must be unanimous. In a civil case the plaintiff needs a majority. The jury's acquittal also means that prosecutors may be loathe to bring criminal charges against other alleged mortgage/Wall Street wrongdoers, leaving such matters to the civil division of the Securities and Exchange Commission. This also cements my belief that the Department of Justice will in no way bring criminal charges against Angelo Mozilo, the founder and former CEO of Countrywide Financial...