Bear Stearns announced their first loss in over 100 years and they blame mortgage fraud for a large measure of it. They are reffering to a ring of people including a mortgage broker and even a Bear insider.

"We didn't do anything different from the rest of the industry" quotes the Wall Street Journal today.

Bear Stearns says falsified income and asset documents are difficult to detect "if they are part of a sophisticated fraud ring."

And here's a good one:

In this case, the closing attorney was part of the fraud ring. The 58-year-old lawyer, Raymond Costanzo Jr., known in the ring as "Uncle Joe," signed off on several fraudulent sales, and collected $250,000 from the scheme, the indictment alleges.

Bear Stearns isn't the only victim of mortgage fraud. What about the people who were pushed into loans that put $5000 or $10,000 into some mortgage broker's pockets…loans they could never pay back without getting another horrendous loan?

And what about the fraud amongst investors who bought these loans? Tens of billions, no, hundreds of billions of dollars of these mortgages were packaged as investment grade obligations with the blessing of certain credit agencies such as Fitch, and sold off to investors. Do you think the State of Florida money market fund that lost several billion dollars of school system money happened for this reason? You betcha.

The real fraud was perpetrated by Bear Stearns and Wall Street. Fortunately, Goldman Sachs succeeded in shorting these mortgages and making many billions. There will be nice Christmas bonuses all around for Goldman Sachs employees this year. I can't say the same for the typical homeowner.

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