A big day for mortgage fraud… and class warfare?

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I was getting ready to go on CNN earlier today to talk about a story that’ll be in tomorrow’s dead-tree version of Time when I saw the breaking news about the DOJ and FBI busting 406 people, 60 of whom were arrested yesterday, for mortgage fraud.

The denouement of the three-and-a-half-month-long “national takedown” dubbed Operation Malicious Mortgage kind of freaked me out, because the thing I was going on CNN to talk about was a new breed of company that purports to help people get out from under their mortgages. I thought I was going to have to bring being an insta-expert to a whole new level, but luckily, no. We talked about my story. Which I’ll be able to link to tomorrow.

Anyway, back at the office I realized that there was not one, but two news conferences I wanted to watch at 1:15. While officials in DC were describing the results of Operation Malicious Mortgage (an estimated $1 billion in losses from 144 different instances of lending fraud, foreclosure rescue scams and mortgage-related bankruptcy schemes), prosecutors in Brooklyn were detailing the charges against Ralph Cioffi and Matthew Tannin, those two Bear Stearns hedge fund managers who maybe weren’t completely honest with investors or their employer as they went about losing $1.4 billion last summer. They’re now up against conspiracy, securities fraud and wire fraud charges. Cioffi also got a charge of insider trading. It’s really not cool to lie about how much money is getting yanked from your fund, or how much of your own money you’re transferring elsewhere, especially if you’re acting all perky on the outside then secretly panicking over e-mail. Now we get to find out if it’s illegal. You can read a PDF of the indictment here.

As these two cases unfold—well, the Bear Stearns case and the 144 from Operation Malicious Mortgage—I think it’s going to be interesting to watch how much blame the various victims (alleged victims?) get lobbed their way. Already, some of the cable-news chatter around the Cioffi/Tannin indictment pivots on the fact that hedge fund investors are very sophisticated people. If you’ve got $57 million to threaten to pull from a hedge fund, then maybe you’ve got a little more financial wherewithal than some guy getting lied to about how an ARM works. Does that mean you’re less of a victim?

I guess my suggestion as we go through all this excitement is to remember that a lot of people—rich and poor alike—have gotten screwed over. In a world where Ed McMahon faces the prospect of foreclosure, surely we can figure out a way to come together and stay there.