Last week, the federal government earmarked $19 million to help stabilize neighborhoods hit hard by foreclosures in Stanislaus, San Joaquin and Merced counties.
Rep. Dennis Cardoza, D-Merced, proved instrumental in getting additional funding through the Neighborhood Stabilization Program element of the recently passed Wall Street Reform Act. It allows local governments to buy, restore and then sell abandoned homes and properties.
That's fine. But if you read Bee reporter Garth Stapley's piece a week ago, nothing in this legislation addresses a real problem that has plagued the valley and Stanislaus County in particular: Unscrupulous real estate agents and investors who have manipulated the market through short-sale fraud.
In such cases, agents conspire to freeze out legitimate offers on short-sale properties only to submit their own lower offers through third parties or by hiding behind the anonymity of a limited liability corporation. The banks, trying to cut their losses, accept the lower offer because they were unaware of the higher one. The fraudmeister then quickly sells the property -- possibly to someone who tried to bid on it earlier -- for a higher sale price in a practice called "flopping."
Sales affect other home values, which, in turn, affect property tax values that help pay for government services. Our tax dollars -- or worse yet, money borrowed from, say, China -- are used to bail out the corrupt or irresponsible bankers.
Everyone loses in these cases except for the crooks, and nobody's even trying to stop them. And when someone like Glenn Gully, a Stanislaus County district attorney's office investigator, tries to do something about it, he gets no help from the banks. There's nothing in the Wall Street Reform Act that compels financial institutions to cooperate.
Cardoza said it was all he could do to get the $1 billion of extra funding (nationwide) into the Reform Act, the original intent of which was to limit corporate thievery on Wall Street. Of course, lobbyists watered down the legislation considerably before it went to a vote.
"I've been screaming about it," Cardoza said. "There's been too much coziness with Wall Street (in Washington). It's a problem."
He said the scamming at the local level has been discussed but will have to be addressed in a different bill at a later time.
Stanislaus County District Attorney Birgit Fladager and Merced County District Attorney Larry Morse II broached the issue with him last year, Cardoza said. So he discussed it with Jerry Brown, asking California's attorney general and gubernatorial candidate to step in and help.
They're still waiting.
With the budget crisis, these so-called white-collar crimes basically go uncontested at the local level because prosecuting violent crimes, gangs and drug cases take precedence. The Stanislaus County district attorney's office has only one real estate fraud investigator, and although there are piles of files, not one charge has been filed in a bogus short-sale case because the banks won't cooperate.
The big banks don't need to. They've backfilled some of their foreclosure and short-sale losses with bailout money from the government. Their smirking chief executive officers then help themselves to hefty bonuses despite public tongue-lashings from the very sound-biting politicians who allow it to happen.
So what can be done?
Since the federal government backed most of the mortgages in default, it has a vested interest in stopping the fraud. Just as with the COPS (Community Oriented Policing Services) grants that put extra police officers on the streets, it should make money available directly to local district attorneys to hire investigators and prosecutors to go after these bilkers. Bypass the state. The money doesn't need to stick to the state legislators' fingers in a Sacramento pass-through.
Sending just one of these crooks to jail -- or even losing a case -- would at least show that someone is watching them.
As for the Wall Street goons, impose a 120 percent tax on the bonus taken by any executive whose company took bailout money from the government. Call it a stimulus processing fee.
At the state level, revise limited liability corporation laws to identify everyone in an LLC before it can purchase any property that involves government-backed funding.
Finally, any bank that refuses to cooperate in a real estate fraud investigation should lose its ability to offer government-guaranteed loans.
If none of that works, then just change the name of the law to the Wall Street Greed and Local Real Estate Scam Preservation Act.
At least that way, it would be accurate.
Jeff Jardine's column appears Sundays, Tuesdays and Thursdays in Local News. He can be reached at 578-2383 or firstname.lastname@example.org.