Carl Cole, 66, his son, Caleb, 38, their business partner, David Crisp, 34, and 11 other people associated with their Bakersfield, Calif.-based firm, Crisp & Cole, have all pleaded guilty in a mortgage fraud scheme that “helped turn Bakersfield into one of the home foreclosure capitals of the U.S.,” the Financial Times reports.

At a sentencing hearing next week, the senior Cole is facing at least eight years in prison, and could end up serving more than 15 years for his part in a scheme that allegedly cost banks $30 million.

Case closed, and justice served?

Not quite, says former Wall Street Journal reporter Ryan Chittum, writing for the Columbia Journalism Review. Crisp, Cole and other “small fry” helped supply the shoddy loans that were packaged into what turned out to be very risky mortgage-backed securities that were sold to unwitting investors. But it was Wall Street that created the demand for such products, Chittum says.

As the Financial Times’ Gary Silverman notes in a sympathetic profile of Cole, “Banks that cheat people pay fines, but people who cheat banks do time.”

But Chittum takes issue with Silverman’s willingness to let Wall Street “off the hook, as if it were a victim” of the subprime securitization boom.

In Silverman’s telling, “local real estate people” like Crisp & Cole “were in a position to pull the wool over the eyes of Wall Street,” by creating “qualified buyers” who were anything but.

But Chittum notes that there’s plenty of evidence that the Wall Street firms that securitized and sold the loans that came out of Bakersfield and hundreds of other cities around the country know perfectly well that many didn’t meet declared underwriting standards, or involved fraud.

Silverman’s profile of Cole, Chittum says, is “yet another reminder of how the relatively small fry have gotten pinched after the crash, while everyone on Wall Street remains free.” Source: crj.org.

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