In what can only be regarded as a shocking development, the United States is suing the former head of subprime mortgage trading at Deutsche Bank over “systematically and intentionally” lying about the quality of subprime mortgages that backed nearly $1.5 billion in mortgage-backed securities in the run-up to the crisis.

The lawsuit marks one of only a handful of times the government has gone after an individual for crisis-era mortgage fraud at the systemic level; an untold amount of MBS traders from this era still walk free.

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If you want to know why people in all political spectrums are angry enough to blow up stuff consider this: If any of us walked into Wells Fargo Bank and using stolen financial identities opened up a checking account, savings account, credit card account and maybe a few more credit card accounts, upon discovery, we would be accused of bank fraud and sentenced to years in prison.

Add to that total the following: an auto loan, a mortgage loan and creating an old-style “float” using newfangled EFT (eletronic funds transfer) bearing the name “shadow money” in a “shadow banking world.”

Those were all things that Wells Fargo continually committed for the last 20 years giving the false impression that its brand mattered, that they had more business than they really did, that they had mroe accounts —depository and loan accounts — than they really did and all based upon lies…

The two affiliates, Lehman Brothers U.K. Holdings (Delaware) Inc and Lehman Pass-Through Securities Inc, were put into bankruptcy as part of a deal that will generate $485 million cash for the Lehman estate, according to court documents.

The affiliates own residential mortgage-backed securities, real estate and stock in First Data Corp (>> First Data Corp), which helps process credit card transactions, among other assets, according to papers filed in the U.S. bankruptcy court in Manhattan. Affiliates of Brookfield Asset Management Inc of Canada (>> Brookfield Asset Management Inc) are buying stakes in the Lehman affiliates, which were put into bankruptcy to carry out the deal.

Administrators have spent years winding down Lehman’s holdings and have distributed around $147 billion to creditors, according to court records.

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A damning new report from a federal watchdog shows that 19 state housing finance agencies wasted millions of dollars that should have gone to struggling homeowners as part of the government’s Hardest Hit Fund program.

The report, published Friday by the Office of the Special Inspector General for the Troubled Asset Relief Program, showed that SIGTARP’s investigation found that the all 19 of the state housing finance agencies that participated in the Hardest Hit Fund collectively wasted $3 million on items like barbecues, steak and seafood dinners, gift cards, flowers, gym memberships, employee bonuses, litigation, celebrations, and cars, instead of using the money to help struggling borrowers.

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BlogPete’s Take