The mortgage crisis was caused by malfeasance in both the board room and the boiler room. From the arrests of Bear Stearns' hedge fund managers to the widespread sweep of small-time crooks for fraud, the government is taking strong action toward prosecuting those responsible for the current credit crunch and over $350 billion in Wall Street write-offs.

Let the healing begin.

Two former managers of hedge funds at Bear Stearns, Ralph R. Cioffi and Matthew Tannin, have been charged with securities fraud on email and testimonial evidence that they misled investors about the health of the funds they were managing. While expressing their doubts about the health of their hedge funds to employees and others, they allegedly failed in their fiduciary duties to investors by letting them know the facts. The funds were heavily leveraged, causing not only the investors but the company itself to go into bankruptcy when the subprime loans failed to perform.

The names of the funds should be enough to put them in jail. High Grade Structured Credit Strategies Fund and the High Grade Structured Credit Strategies Enhanced Leverage Fund obfuscated the fact that the funds were loaded with the purchases of high risk subprime securities.

In similar news, the FBI and the Department of Justice have commenced with the arrests of over 400 people in major cities across the nation for their roles in committing mortgage fraud to consumers.

The reason this is important is that the secondary market for buying mortgage-backed securities is crucial to keeping mortgage money flowing. Banks make loans, and then sell them to investors in the secondary market. As they are repaid for the loans, money is available to new home buyers.

The collapse of the Bear Stearns and other funds has caused investors to lose faith in buying mortgage-backed securities. By purging the fraudsters, the government and banks are sending a strong message that today's mortgage loans are much safer bets.

When the secondary market's outlook improves, so will bank lending to consumers. And this market will be on the road to recovery.