# Could we convict major bank and Wall Street figures?
**URL:** https://boards.straightdope.com/t/could-we-convict-major-bank-and-wall-street-figures/653463
**Category:** Great Debates
**Created:** [March 20, 2013, 4:45pm UTC](https://boards.straightdope.com/t/could-we-convict-major-bank-and-wall-street-figures/653463 "2013-03-20T16:45:14Z")
**Posts on this page:** 20
**Page:** 3
### Author:  [@Trom](https://boards.straightdope.com/u/Trom)
#### Post date: [March 21, 2013, 3:29pm UTC](https://boards.straightdope.com/t/could-we-convict-major-bank-and-wall-street-figures/653463/41 "2013-03-21T15:29:27Z")
> [@Ann\_Hedonia](#):
>
> No suprise here but I’m a huge Taibbi fan.
>
> I stuck to official government sites for the most part when I was posting my cites earlier but these are much more entertaining and guaranteed to induce lots of recreational outrage.
>
> On BOA
>
> [Bank of America: Too Crooked to Fail](http://www.rollingstone.com/politics/news/bank-of-america-too-crooked-to-fail-20120314)
>
> ON HSBC
>
> [Gangster Bankers: Too Big to Jail](http://www.rollingstone.com/politics/news/gangster-bankers-too-big-to-jail-20130214)
>
> On Goldman Sachs
>
> [The People vs. Goldman Sachs](http://www.rollingstone.com/politics/news/the-people-vs-goldman-sachs-20110511)
>
> And on all the sleazebags in general
>
> [Looting Main Street](http://www.rollingstone.com/politics/news/looting-main-street-20100331)
>
> [Invasion of the Home Snatchers](http://www.rollingstone.com/politics/news/matt-taibbi-courts-helping-banks-screw-over-homeowners-20101110)
One more - Taibbi on Jon Corzine:
[Jon Corzine is the Original George Zimmerman](http://www.rollingstone.com/politics/blogs/taibblog/jon-corzine-is-the-original-george-zimmerman-20120424)
---
### Author:  [@puddleglum](https://boards.straightdope.com/u/puddleglum)
#### Post date: [March 21, 2013, 3:30pm UTC](https://boards.straightdope.com/t/could-we-convict-major-bank-and-wall-street-figures/653463/42 "2013-03-21T15:30:51Z")
> [@Ann\_Hedonia](#):
>
> You’re right in that they aren’t doing it so much TODAY but in the years following the crisis - **during the time the banks were being fined** – they did it to the tune of 9 trillion or so
> [http://money.cnn.com/2010/12/01/news/economy/fed\_reserve\_data\_release/index.htm](http://money.cnn.com/2010/12/01/news/economy/fed_reserve_data_release/index.htm)
>
> Trillion with a T…or 9 million million dollars
> This is a lot of money…enough to pay off every outstanding mortgage in the USA and to buy an average priced house for every family that doesn’t own one.
>
> Then there is this little program which expired at the end of 2012 in which our tax dollars were used to guarantee repayment of loans the banks made to each other, removing all risk from the loan process
>
> [Temporary Liquidity Guarantee Program | FDIC.gov](http://www.fdic.gov/regulations/resources/TLGP/index.html)
> [Monthly Reports Related to the Temporary Liquidity Guarantee Program | FDIC.gov](http://www.fdic.gov/regulations/resources/tlgp/reports.html)
>
> The deliberate issuance of billions of dollars in bad and even fraudulent debt was fueled by demand from the top down and is only part of the financial crisis story. The really obscene part of the scam lies in the techicalities of how these bad and sometimes blatantly counterfeit loans were packaged and sold, and how the large financial institutions reacted when they became aware of the problem… but that seldom shows up in the “Financial Crisis for Dummies” version of the story sold to the general public
>
> Imagine if an auto manufacturer became aware of a fatel flaw in one of their products and instead of sending out recall notices they continued to sell the cars to unsuspecting customers… and then took out life insurance policies on those customers.
> I recommend the following books for more juicy tales of malefesance
> Neil Barofsky----------- Bailout
> Matt Taibbi ------------Griftopia
> Michael Lewis-----------The Big Short
> Jeff Counnaght…The Payoff - Why Wall Street Always Wins
>
> and the long but suprisingly readable
>
> Wall Street and the Financial Crisis ---- by the Permanent Subcommittee on Investigations of the US Congress
>
> which is available as a FREE Kindle download
>
> A note to those who may feel my reading list is biased
>
> I enjoy reading books about ALL viewpoints but I have yet to find a book supporting the conservative notion that the banks were forced to make bad loans by the Community ReInvestment Act and that the bankers were the heros of the story— only rather thin Op-Ed pieces. If someone can recommend a book expousing this POV I’ll gladly give it a shot.
Its not a book but [here](http://www.nber.org/papers/w18609.pdf?new_window=1)is a paper about how much the Community Reinvestment Act lead to riskier loans and upped the chances of default.
I read the Big Short too, but one of us missed the point of it. From my reading the only fraud was committed by the people who applied for the loans and were encouraged by their mortgage brokers to lie on their loan applications. Except it was not real fraud because the people that were giving them the loans did not care if the information was true they just wanted loans to be able to sell. The people who bought the loans didn’t really care about how good they were since they thought that securitization had reduced the risk of default. All the computer models said that house prices had gone up for seventy years and there was no reason to think that was going to change. As long as prices went up it did not matter if the people could not afford the mortgages, if they could not make payments they could sell the house for a profit and the mortgage would be paid off.
Because mortgages had been so historically safe mortgage backed securities were treated as nearly cash equivalents by bank regulators. This meant banks could apply huge amounts of leverage in these securities and still comply with the laws.
The credit default swaps that people get so angry about because the banks were selling them and then betting against them is not like a car company not making a recall it is more like a bookie taking bets from stupid people. If a german bank goes to an american bank and says they want to buy mortgage backed securities the bank needs to find someone to take the other side. There were people who were convinced their was a real estate bubble and these mortgage would soon default. They made bets that the mortgages would default and the other people made bets that they would not default. The people who thought it was a real estate bubble did not have priveleged information, they just had a contrarian outlook. Those who thought the mortgages would not default had access to the same information and made the bets anyway. Sometimes the banks were convinced by the people who made the bubble bets and took the short side themselves. But the people who took the long side always had access to the same information that the banks had, they just ignored it or disagreed with what it meant.
When the real estate market collapsed the mortgages defaulted, the computer models were proven wrong, and companies that had huge leverage in the mortgages collapsed. Not because of criminal activity but because they were wrong about things they had made huge bets on.
---
### Author:  [@newcomer](https://boards.straightdope.com/u/newcomer)
#### Post date: [March 21, 2013, 3:31pm UTC](https://boards.straightdope.com/t/could-we-convict-major-bank-and-wall-street-figures/653463/43 "2013-03-21T15:31:02Z")
> [@Ann\_Hedonia](#):
>
> No suprise here but I’m a huge Taibbi fan.
>
> I stuck to official government sites for the most part when I was posting my cites earlier but these are much more entertaining and guaranteed to induce lots of recreational outrage.
>
> On BOA
>
> [Bank of America: Too Crooked to Fail](http://www.rollingstone.com/politics/news/bank-of-america-too-crooked-to-fail-20120314)
>
> ON HSBC
>
> [Gangster Bankers: Too Big to Jail](http://www.rollingstone.com/politics/news/gangster-bankers-too-big-to-jail-20130214)
>
> On Goldman Sachs
>
> [The People vs. Goldman Sachs](http://www.rollingstone.com/politics/news/the-people-vs-goldman-sachs-20110511)
>
> And on all the sleazebags in general
>
> [Looting Main Street](http://www.rollingstone.com/politics/news/looting-main-street-20100331)
>
> [Invasion of the Home Snatchers](http://www.rollingstone.com/politics/news/matt-taibbi-courts-helping-banks-screw-over-homeowners-20101110)
I was just being snarky.
The bigger problem I have is the relatively recent development – say last 15 to 20 years - of paradigm control in terms of language, semantics, conflation of logic and assumption and similar high-level and meta-level lawyer-speak by Government and its agencies.
The most prominent place in the new paradigm is held by Orwellian-like (as there cannot be any other when it comes to English language manipulation) phrases that envelope the sphere of public discourse such as “admit no wrongdoing”, “revolving door”, “too big too fail”, “incompetence”, “public-private partnership” and many other.
What I would argue is that while there was no any individual and specific plan or idea on it the whole paradigm got created as a survival instinct by certain groups intertwined with Government and, in my opinion, very good at lobbying efforts.
The net result is that the whole thing – weather we are talking about “financial crisis”, “public debt”, “Iraq war” or “Middle-East policy” – is being designated as the most complex thing ever in which everything is done in accordance to law yet outcomes are similar to those of organized crime – theft, wealth redistribution, many innocent people killed and many more put in worse situation than a year before.
What is proof anyway?
---
### Author:  [@Magiver](https://boards.straightdope.com/u/Magiver)
#### Post date: [March 21, 2013, 3:35pm UTC](https://boards.straightdope.com/t/could-we-convict-major-bank-and-wall-street-figures/653463/44 "2013-03-21T15:35:00Z")
Congress sets the banking rules and they were warned about the problems in the mortgage industry as well as the derivative market and did nothing. If there’s going to be a cattle call for the crime of malfeasance they should be added to the list of those responsible.
---
### Author:  [@newcomer](https://boards.straightdope.com/u/newcomer)
#### Post date: [March 21, 2013, 3:48pm UTC](https://boards.straightdope.com/t/could-we-convict-major-bank-and-wall-street-figures/653463/45 "2013-03-21T15:48:05Z")
> [@Bricker](#):
>
> So I’m asking for a cite to US Code, something that lays out a crime and the elements of that crime, together with an example of what conduct actually happened that is a violation of that criminal statute.
> [@](#):
>
> A person is criminally liable for conduct constituting an offense
> which he performs or causes to be performed in the name of or in behalf
> of a corporation to the same extent as if such conduct were performed in
> his own name or behalf.
> **[Article 20 Penal Law | Liability through Accessorial Conduct](https://ypdcrime.com/penal.law/article20.php)**
>
> Criminal Liability. No Defense. Exemption. Criminal Liability of Corporations. Offense Convictions | NYS Penal Law
Mortgage security fraud as per Goldman emails is an example of such conduct. Those guys writing or receiving those emails should be on the hook. Just because you work for a “corporation” does not mean that you’re not personally responsible.
By the way, let’s make one thing clear - I’m not calling for banks or institutions to fail. I’m calling for an examination of each individual role in accordance with hierarchy of decision making and signatures.
That’s all.
However, this is as much as my understanding of law goes. I’m sure that there is some fine lawyer-speak – and I say this with as much prejudice as possible – that will turn it upside down.
---
### Author:  [@puddleglum](https://boards.straightdope.com/u/puddleglum)
#### Post date: [March 21, 2013, 4:20pm UTC](https://boards.straightdope.com/t/could-we-convict-major-bank-and-wall-street-figures/653463/46 "2013-03-21T16:20:46Z")
> [@newcomer](#):
>
> [Article 20 Penal Law | Liability through Accessorial Conduct](http://ypdcrime.com/penal.law/article20.htm#p20.25)
>
> Mortgage security fraud as per Goldman emails is an example of such conduct. Those guys writing or receiving those emails should be on the hook. Just because you work for a “corporation” does not mean that you’re not personally responsible.
The Goldman case is a good example. They are being sued for allowing a person shorting an investment to pick what went into the investment. However, everyone who bought the investment knew exactly what was in the investment and had access to the same information about the investment as the person who made it. If the American real estate market had followed Canada’s instead of collapsing then the person who designed it would have lost all his money instead of the people who bought it.
Furthermore banks have to hedge all their bets. Even if they believe the investments are great they still have to bet a little bit against them so if they are wrong they are not wiped out.
All of this amounts to a call to enforce what the laws should have been with the benefit of hindsight instead of what they were.
---
### Author:  [@Ann\_Hedonia](https://boards.straightdope.com/u/Ann_Hedonia)
#### Post date: [March 21, 2013, 5:35pm UTC](https://boards.straightdope.com/t/could-we-convict-major-bank-and-wall-street-figures/653463/47 "2013-03-21T17:35:59Z")
> [@puddleglum](#):
>
> Its not a book but [here](http://www.nber.org/papers/w18609.pdf?new_window=1)is a paper about how much the Community Reinvestment Act lead to riskier loans and upped the chances of default.
> I read the Big Short too, but one of us missed the point of it. From my reading the only fraud was committed by the people who applied for the loans and were encouraged by their mortgage brokers to lie on their loan applications. Except it was not real fraud because the people that were giving them the loans did not care if the information was true they just wanted loans to be able to sell. The people who bought the loans didn’t really care about how good they were since they thought that securitization had reduced the risk of default. All the computer models said that house prices had gone up for seventy years and there was no reason to think that was going to change. As long as prices went up it did not matter if the people could not afford the mortgages, if they could not make payments they could sell the house for a profit and the mortgage would be paid off.
> .
I’ve read a lot of books on this issue ( the ones I recommended are among the best but only a small fraction of what I’ve read) so sometimes I don’t really remember the books individually as well as I would like, but I seem to recall the main story in the Big Short being about investment fund managers that scoured RMBS offerings looking for incredibly crappy deals and then taking out insurance policies on those instruments even though they didn’t own any of them.
Sort of like driving around town looking for rattletrap, ill-maintained houses and taking out fire insurance policies on them ( except this tactic isn’t legal with legitimate insurance )
---
### Author:  [@deltasigma](https://boards.straightdope.com/u/deltasigma)
#### Post date: [March 21, 2013, 6:47pm UTC](https://boards.straightdope.com/t/could-we-convict-major-bank-and-wall-street-figures/653463/48 "2013-03-21T18:47:23Z")
> [@Bricker](#):
>
> And that’s a criminal act?
Not as far as I know. Did you have a point?
---
### Author:  [@Bricker](https://boards.straightdope.com/u/Bricker)
#### Post date: [March 21, 2013, 7:15pm UTC](https://boards.straightdope.com/t/could-we-convict-major-bank-and-wall-street-figures/653463/49 "2013-03-21T19:15:26Z")
> [@newcomer](#):
>
> [Article 20 Penal Law | Liability through Accessorial Conduct](http://ypdcrime.com/penal.law/article20.htm#p20.25)
>
> Mortgage security fraud as per Goldman emails is an example of such conduct. Those guys writing or receiving those emails should be on the hook. Just because you work for a “corporation” does not mean that you’re not personally responsible.
>
> By the way, let’s make one thing clear - I’m not calling for banks or institutions to fail. I’m calling for an examination of each individual role in accordance with hierarchy of decision making and signatures.
>
> That’s all.
>
> However, this is as much as my understanding of law goes. I’m sure that there is some fine lawyer-speak – and I say this with as much prejudice as possible – that will turn it upside down.
Yes. A person who works for a corporation is guilty of criminal conduct if the action he takes to complete a crime is on behalf of the corporation.
But then you go on to simply cite “the Goldman emails…” without any real specificity about what crimes they reveal.
The Rolling Stone article does the same thing. It explains certain conduct, then likens it to obviously criminal conduct:
> [@](#):
>
> To recap: Goldman, to get $1.2 billion in crap off its books, dumps a huge lot of deadly mortgages on its clients, lies about where that crap came from and claims it believes in the product even as it’s betting $2 billion against it. When its victims try to run out of the burning house, Goldman stands in the doorway, blasts them all with gasoline before they can escape, and then has the balls to send a bill overcharging its victims for the pleasure of getting fried.
A ha! Goldman blasted people with gasoline! That’s certainly a crime.
But of course, they didn’t. They did have $1.2 billion worth of toxic assets, and they did dump those assets on their clients. But that’s not necesssarily criminal. As Rolling Stone says:
> [@](#):
>
> Here is where the supporters of Goldman and other big banks will stand up and start wanding the air full of confusing terms like “scienter” and “loss causation” — legalese mumbo jumbo that attempts to convince the ignorantly enraged onlooker that, according to American law, these grotesque tales of grand theft and fraud you’ve just heard are actually more innocent than you think. Yes, they will say, it may very well be a prosecutable crime for a corner-store Arab to take $2 from a customer selling tap water as Perrier. But that does not mean it’s a crime for Goldman Sachs to take $100 million from a foreign hedge fund doing the same thing! No, sir, not at all! Then you’ll be told that the Supreme Court has been limiting corporate liability for fraud for decades, that in order to gain a conviction one must prove a conscious intent to deceive, that the 1976 ruling in Ernst and Ernst clearly states…
The problem with that trenchant analysis is that simply because you find terms like “scienter” and “loss casuation” confusing, you cannot sweep them away and declare your analysis complete. Even if they confuse you, they are still key concepts in obtaining a criminal conviction.
If there is a specific crime that you contend Goldman (or anyone else) committed, please identify it. But claiming that elements of the crime are “legalese mumbo jumbo” is not going to work.
---
### Author:  [@Bricker](https://boards.straightdope.com/u/Bricker)
#### Post date: [March 21, 2013, 7:17pm UTC](https://boards.straightdope.com/t/could-we-convict-major-bank-and-wall-street-figures/653463/50 "2013-03-21T19:17:00Z")
> [@deltasigma](#):
>
> Not as far as I know. Did you have a point?
Yes. I haven’t seen anyone in this thread identify a specific crime.
---
### Author:  [@deltasigma](https://boards.straightdope.com/u/deltasigma)
#### Post date: [March 21, 2013, 7:28pm UTC](https://boards.straightdope.com/t/could-we-convict-major-bank-and-wall-street-figures/653463/51 "2013-03-21T19:28:03Z")
> [@Bricker](#):
>
> If there is a specific crime that you contend Goldman (or anyone else) committed, please identify it. But claiming that elements of the crime are “legalese mumbo jumbo” is not going to work.
If you’ve read this thread, that has been made abundantly clear. Institutions took mortgage loans which were either bad on their face due to improper and/or insufficient underwriting documentation or were otherwise at a very high risk of default and packaged these for sale as investment grade securities.
I really don’t think you need even a perfunctory familiarity with the law to realize that trying to sell loans with a high probability of default as investment grade constitutes fraud - do you?
Then there is the conduct of the rating agencies which gave said securities AAA ratings when it was impossible for them to inquire into the quality of the paper in those securities. As I’ve said before, that is willful negligence at best.
---
### Author:  [@puddleglum](https://boards.straightdope.com/u/puddleglum)
#### Post date: [March 21, 2013, 7:35pm UTC](https://boards.straightdope.com/t/could-we-convict-major-bank-and-wall-street-figures/653463/52 "2013-03-21T19:35:37Z")
> [@Ann\_Hedonia](#):
>
> I’ve read a lot of books on this issue ( the ones I recommended are among the best but only a small fraction of what I’ve read) so sometimes I don’t really remember the books individually as well as I would like, but I seem to recall the main story in the Big Short being about investment fund managers that scoured RMBS offerings looking for incredibly crappy deals and then taking out insurance policies on those instruments even though they didn’t own any of them.
>
> Sort of like driving around town looking for rattletrap, ill-maintained houses and taking out fire insurance policies on them ( except this tactic isn’t legal with legitimate insurance )
The deals were kind of like insurance policies in that they paid out if the instruments burned down. The difference is that the did not own what they thought was going down. I don’t see that they did anything wrong since they did not cause the fires, they merely profited from predicting the fires.
The banks were akin to sports books in that some people thought the Ravens were going to win and some people thought the 49ers were going to win. What the sports books do is try to make the odds so that equal numbers bet on both sides and they keep the vigorish.
What happened in the financial crisis is that one side wanted to make bets on the financial equivalent of betting on the 1985 Patriots to beat the Bears. The question is whether Goldman should have stopped them from doing so since in retrospect that was such a stupid bet. These were not brain damaged toddlers making the bets, they were professional investors who were very intelligent and it is not the banker’s job to protect people from their own stupidity.
---
### Author:  [@puddleglum](https://boards.straightdope.com/u/puddleglum)
#### Post date: [March 21, 2013, 7:43pm UTC](https://boards.straightdope.com/t/could-we-convict-major-bank-and-wall-street-figures/653463/53 "2013-03-21T19:43:41Z")
> [@deltasigma](#):
>
> If you’ve read this thread, that has been made abundantly clear. Institutions took mortgage loans which were either bad on their face due to improper and/or insufficient underwriting documentation or were otherwise at a very high risk of default and packaged these for sale as investment grade securities.
>
> I really don’t think you need even a perfunctory familiarity with the law to realize that trying to sell loans with a high probability of default as investment grade constitutes fraud - do you?
>
> Then there is the conduct of the rating agencies which gave said securities AAA ratings when it was impossible for them to inquire into the quality of the paper in those securities. As I’ve said before, that is willful negligence at best.
The point is whether they did have a high probability of default. Most of the financial world thought mortgages were very safe investments because they had always been safe investments.
You say packaged as safe investments, that does not mean that those who bought them were under the impression that the investments were anything different than what was being sold to them. They just thought the investments were not as risky as the people selling them thought they were. Differences of opinion over what something is worth is what drives every commercial transaction in the world.
The rating agencies had the same opportunity to investigate the quality of the securities as those who assembled the security. They failed to do their job because they failed to foresee the first housing downtown in living memory, they did not have any competition so they could be bad at their job, and the people who were investing did not want to know what the real risk was they just wanted them rated highly so the banking laws would allow them to buy as much as possible.
---
### Author:  [@deltasigma](https://boards.straightdope.com/u/deltasigma)
#### Post date: [March 21, 2013, 7:50pm UTC](https://boards.straightdope.com/t/could-we-convict-major-bank-and-wall-street-figures/653463/54 "2013-03-21T19:50:01Z")
> [@puddleglum](#):
>
> The point is whether they did have a high probability of default. Most of the financial world thought mortgages were very safe investments because they had always been safe investments.
> You say packaged as safe investments, that does not mean that those who bought them were under the impression that the investments were anything different than what was being sold to them. They just thought the investments were not as risky as the people selling them thought they were. Differences of opinion over what something is worth is what drives every commercial transaction in the world.
> The rating agencies had the same opportunity to investigate the quality of the securities as those who assembled the security. They failed to do their job because they failed to foresee the first housing downtown in living memory, they did not have any competition so they could be bad at their job, and the people who were investing did not want to know what the real risk was they just wanted them rated highly so the banking laws would allow them to buy as much as possible.
No, you’re simply wrong. You need to look up what investment grade means. It means a low risk of default.
As for the rating agencies, it was their JOB to know what was going into the sausage and there was simply know way they ever could.
As for investors, you have things confused. They were NOT the ones paying for the ratings. You would think that’s how it should work but it isn’t. Please do some research on this.
---
### Author:  [@puddleglum](https://boards.straightdope.com/u/puddleglum)
#### Post date: [March 21, 2013, 8:02pm UTC](https://boards.straightdope.com/t/could-we-convict-major-bank-and-wall-street-figures/653463/55 "2013-03-21T20:02:50Z")
> [@deltasigma](#):
>
> No, you’re simply wrong. You need to look up what investment grade means. It means a low risk of default.
>
> As for the rating agencies, it was their JOB to know what was going into the sausage and there was simply know way they ever could.
>
> As for investors, you have things confused. They were NOT the ones paying for the ratings. You would think that’s how it should work but it isn’t. Please do some research on this.
Low risk of default is only meaningfull if there is an accurate way of meauring risk. There simply is not, it is inherently subjective. It was their opinion that the risk was low because their computer models toldthem the risk was low. Unfortunately the computers were wrong about the risk, that is not fraud, that is not knowing the future.
The rating agencies should have done their job and they could have if they had been interested. These investments were not written in Ancient Sumerian, if the people who created them knew what they contained the agencies could have as well. Unfortunately, the had the same opinion as everyone else about the riskiness of the mortgage business.
Investors were not paying for the agencies but they were the one consuming the reports and buying the investments.
---
### Author:  [@deltasigma](https://boards.straightdope.com/u/deltasigma)
#### Post date: [March 21, 2013, 8:39pm UTC](https://boards.straightdope.com/t/could-we-convict-major-bank-and-wall-street-figures/653463/56 "2013-03-21T20:39:05Z")
> [@puddleglum](#):
>
> Low risk of default is only meaningfull if there is an accurate way of meauring risk. There simply is not, it is inherently subjective. It was their opinion that the risk was low because their computer models toldthem the risk was low. Unfortunately the computers were wrong about the risk, that is not fraud, that is not knowing the future.
>
> The rating agencies should have done their job and they could have if they had been interested. These investments were not written in Ancient Sumerian, if the people who created them knew what they contained the agencies could have as well. Unfortunately, the had the same opinion as everyone else about the riskiness of the mortgage business.
>
> Investors were not paying for the agencies but they were the one consuming the reports and buying the investments.
You don’t seem to understand how any of this works I’m afraid and if you won’t accept my explanations, I’m not sure what I can do to help you.
First of all, there are an infinite number of ways of measuring risk so I don’t know where you got that idea. In this context, the primary way you do that is through underwriting standards. If you know that underwriting standards are lacking or non-existent, then you must also realize that the risk of default goes up astronomically.
Second, no, the agencies could never have done their jobs since they never had access to the underlying paper that constituted the MBSs or the supporting documentation.
As to your last point, I don’t see the relevance.
---
### Author:  [@CurtC](https://boards.straightdope.com/u/CurtC)
#### Post date: [March 21, 2013, 9:47pm UTC](https://boards.straightdope.com/t/could-we-convict-major-bank-and-wall-street-figures/653463/57 "2013-03-21T21:47:37Z")
> [@deltasigma](#):
>
> No, you’re simply wrong. You need to look up what investment grade means. It means a low risk of default.
But what do you mean by “default” here? If an individual mortgage holder defaulted, but it was backed by an appreciated house, the to the investor that’s not a default - he still gets his money out of it.
The investors who were buying these MBSs thought that they were very low risk, because even if some of the mortgagees couldn’t pay, the investors would still have the expensive property.
Should they have evaluated the risk differently? In retrospect, absolutely. Some people did, others didn’t. It was all made much more complicated by how new this was to the investors, and how the Giant Pool of Money was demanding something to invest in that would give better returns that bonds and the stock market.
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### Author:  [@deltasigma](https://boards.straightdope.com/u/deltasigma)
#### Post date: [March 21, 2013, 9:55pm UTC](https://boards.straightdope.com/t/could-we-convict-major-bank-and-wall-street-figures/653463/58 "2013-03-21T21:55:50Z")
> [@CurtC](#):
>
> But what do you mean by “default” here? If an individual mortgage holder defaulted, but it was backed by an appreciated house, the to the investor that’s not a default - he still gets his money out of it.
>
> The investors who were buying these MBSs thought that they were very low risk, because even if some of the mortgagees couldn’t pay, the investors would still have the expensive property.
>
> Should they have evaluated the risk differently? In retrospect, absolutely. Some people did, others didn’t. It was all made much more complicated by how new this was to the investors, and how the Giant Pool of Money was demanding something to invest in that would give better returns that bonds and the stock market.
Sorry, but that’s not how you look at debt instruments. Just because i know that if company X defaults and goes into bankruptcy that I’ll get 100 cents on the dollar for my company X bonds, that does not get those bonds a AAA rating.
Come on people, this is some basic stuff here.
I WILL grant you that’s how the people putting these derivatives together looked at things and it may be possible to make a plausible argument here, but that doesn’t lessen the degree of the fraud which is the issue at hand.
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### Author:  [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)
#### Post date: [March 21, 2013, 10:02pm UTC](https://boards.straightdope.com/t/could-we-convict-major-bank-and-wall-street-figures/653463/59 "2013-03-21T22:02:16Z")
intentional ignorance.
You really think Angelo Mozillo didn’t know that the stuff he was packaging and selling was rife fraud?
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### Author:  [@newcomer](https://boards.straightdope.com/u/newcomer)
#### Post date: [March 22, 2013, 1:46am UTC](https://boards.straightdope.com/t/could-we-convict-major-bank-and-wall-street-figures/653463/60 "2013-03-22T01:46:35Z")
> [@Magiver](#):
>
> Congress sets the banking rules and they were warned about the problems in the mortgage industry as well as the derivative market and did nothing. If there’s going to be a cattle call for the crime of malfeasance they should be added to the list of those responsible.
Funny you should say that as a petition is being signed [Make Lawmakers Wear Logos Of Financial Backers On Clothing, Like In NASCAR](http://www.huffingtonpost.com/2013/03/20/white-house-petition-logos_n_2912087.html?utm_hp_ref=mostpopular).
No, no corruption here. Carry on. :o
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