Interestingly the response to the 2008 financial crisis, in which “too big to fail” (and AG Holder appears to see this) was recognized as a big problem was legislation that actually makes it likely that the biggest banks would get even bigger–and they have.
While some parts of the Federal bureaucracy may feel “too big to fail” is bad (and I personally feel that is the case), a lot of the banking regulators sort of talk out of the side of their mouth on that issue. What I mean is, they may say they dislike TBTF, but they also appear to like big banks because it makes the regulatory job easier, and it is easier to get compliance with Byzantine regulations from big banks than it is from small banks.
You’re blaming the victim (the American people). So what if someone put in “1,000,000” for income on the mortgage application? It’s the banks responsibility to confirm income by insisting on copies of recent pay stubs and contacting the employer of the applicant to confirm employment. It’s also the banks responsibility to obtain a credit report of the applicant. The fact that many borrowers were given loans they didn’t qualify for, doesn’t speak badly of the borrowers, rather, it shows that banks were furiously rubber-stamping loans without confirming income of applicants. The Banks had the tools (to confirm income) but deliberately chose not to use them.
No, it speaks badly of both. It’s unambiguously a crime to lie on a mortgage application. Not doing due diligence in verifying claims on a mortgage application is definitely bad fiscal responsibility from the banks, the resultant loans defaulting are in large part also the fault of bad responsibility from the banks. The banks are the professionals and the ones making a profit, it is expected they verify and do due diligence, you’ve absolutely correct on that.
But what we’re talking about is sending Wall Street executives to prison for crimes they committed prior to the financial crisis. When you have someone lie on a mortgage application, that individual has committed a crime. I don’t believe it is a crime at all to “not thoroughly investigate claims made on a mortgage application.” I also think even if it was a crime it’d be very difficult to lay responsibility for that crime on the CEO, unless you had clear evidence he had made decisions or issued directives ordering his underlings to do such things. (Of course those orders are only evidence of a crime if the underlying act–failure in due diligence, is a criminal act, which I do not believe it is.)
This, again, is a major side issue and as usual no one wants to actual talk about the ugly reality of “real crimes need to be proven by evidence.” I’ll note deltasigma has still yet to provide one scintilla of evidence of any crime where we know who the perpetrator most likely is and where no one has acted.
And you’re right, it is disingenuous to blame any single homeowner (or group of same) for crashing the economy, but as Honesty ( :snerk: ) illustrates yet again, people are quite willing to ignore fraud done by one group to prosecute fraud committed by another… which, in my humble opinion, is even more disingenuous.
Is there anybody in this thread who thinks the housing crisis would not have been mitigated had ALL homeowners and ALL mortgage origination personnel (all “little guys”) been completely honest in their dealings, with the resulting securitizations and CDO’s and CDS’s all based upon honest, true appraisals of the underlying assets?
Just a point of order - MBSs are a type of CDO but CDO is a much broader category. Also, credit default swaps (CDSs) wouldn’t have been involved in the housing crisis except to the extent that there were CDSs out on individual institutions like Lehman or AIG.
I’d also like to correct a mistake I made earlier. When I said if you have 20 CDSs and you sold the net present value of their payment streams, that would probably not be a CDO but something more akin to a Total Return Swap - another type of derivative.
I think you’ve misinterpreted. I was responding only to this narrow point. I guess I should have made that clear.
No CDS’s were based on asset appraisals AFAIK except indirectly as a part of determining the ability of an entity to repay it’s debts. Further, I interpreted John’s comments to be limited to the MBS market but perhaps that was my mistake and if so I apologize.
I think it’s tangential to focus on whether it is homeowners or finance professionals who could be more easily prosecuted for fraud.
Human nature doesn’t change much. If a large number of homeowners committed fraud in recent years, why didn’t they 40 years ago? If brokers and bankers engaged in large-scale fraud in recent years, why didn’t they 40 years ago? IMO, we should blame systemic changes, rather than focus on blaming individuals, or large groups of people.
The U.S. financial system has been steered toward corruption and unfettered greed, and away from the public interest. That is the problem. The purpose of jailing Wall St. criminals is not to “punish evil,” but to steer the financial system back toward sanity by sending a message that financial crimes will be punished. (Perhaps hundreds of thousands of homeowners did commit fraud, but would prosecuting them serve a purpose? Jailing the most egregious financiers might be useful.)
Let me unconfuse you. The people with the primary responsibility for the fraud involved in some of those loans were the bankers and real estate agents who made them. They are trained in their respective fields, including what is fraud and how not to do it.
In short, they knew what they were doing, and that it was wrong. They were nothing but fraudulent criminal scum in suits. I mean, right here in Atlanta they were calling their home loans to middle class black people “jungle loans.”
Their victims, er, customers, may have known to some extent that their mortgage papers were off, I don’t know. I am sure the bankers and real estate agents assured them that everything was all right, and that they were believed, after all, they were experts in their field … weren’t they?
But hey, there was money to be made, and as we all know the new conservative ethos is that any considerations of morality are unimportant, where there is money to be made.
When an investment bank knowingly bundles up bad/non-performing mortgage loans, and sells them to investors, it has committed fraud. Plain and simple. No matter how many legalese terms you use, its still fraud. The CEOs who allowed this to happen are guilty-they made huge incomes and bonuses through financial fraud.
It really kills me when a CEO stands up and says that he “didn’t know” what was going on-bullshite-he was paid MILLIONS to know what his firm was doing.:smack:
No, there has been a TON of evidence presented in this very thread that the financial execs committed fraud, the cites of the Matt Taibi articles and others are very convincing. You just don’t want to accept it, you’re just sticking your fingers in your ears and going “LA LA LA LA LA NO EVIDENCE HERE.” There IS evidence here, lots of it, if you’d care to look at it objectively.
Precisely. And I should point out that in many if not most cases of subprime loans, these were marketed VERY aggressively to people who did not really understand what they were signing but instead were relying, and I believe justifiably so, on the good faith and bona fides of the professionals that they were dealing with.
So for example, in the case of ARM loans where people were qualified at teaser rates, I think most borrowers were truly shocked when their rates reset and virtually doubled. In most cases I really don’t think they had any idea that was going to happen.
Even more tragic are the HELOC loans - Home Equity Lines of Credit. Here you had people with substantial equity in their homes or who owned them outright and lost them because these loans were marketed so aggressively to a public that was not really in a position to understand what they were getting themselves into and instead relied on the misleading and self-serving lies of loan officers and others in the banking industry.
It’s a fundamental principle of criminal law that the law must exist first and then be violated. In other words, the law must exist before the crime happens. It must be clear and unambiguous and give an ordinary person reasonable notice of the conduct that is prohibited.
It’s telling that all the people in this thread who keep insisting that these things are crimes cannot actually specify what crime they are. Despite my explanation that “fraud” standing alone is generally not a crime, I keep seeing people desperately say, “But…but…but… it’s fraud!”
Whatever, dude. If you’re a multi-billion dollar international banking institution and cannot be bothered to
A) Insist on recent pay stubs from the applicant;
or
B) Confirm applicant’s employment with employer’s HR;
or
C) Pull up credit history of the applicant to determine credit worthiness
Then it’s the Banks fault for approving loans without proper documentation. The banks had the tools to confirm pay, employment history, and credit worthiness but decided NOT to use those tools.
I’m of the opinion that the Federal government ought to open a publically owned bank. Private banks are modern day pirates: hoarding money from the government at 0.25% interest and then charging the people 4% on a mortgage loan or 20% for credit cards. That’s well over a 1000% mark-up.
Federal banks ought to be able to compete in this market. I - and every single American person - would love to borrow money from the people’s bank at 0.25% interest. Why are we forced to beg JPMorgan Chase or Bank of America for a loan when they’re flush with cash at low interest from the government? Why is it that we’re forced to have an unnecessary middle-man to get money? It’s stupid and the system seems to be designed to provide an industry with a stream of revenue on the backs of the people. There should be a cap that makes it so that market rates can never exceed 100% of the discount rate (the amount banks pay to the government).
You misunderstand Bricker, deltasigma. From what I’ve observed, Bricker examines the world under the narrow microscope of law. If we were to transport Bricker 100 years in the past to Sojourner Truth’s famous speech Ain’t I a Woman, he’d likely be confused as to why someone would expect the law to have a thick vein of morality running through it.
Can you elaborate on this, because I sense a semantic subtlety here that may be immaterial to the actual debate. Whether it’s “fraud” or “fraud to commit ‘x’ crime” is something most people are probably not sensitive to, if I’m getting this write.
Is it because there has to be some actual damages for the fraud to be actionable? That is, I can lie about my income on my mortgage application, but if no damages are incurred by the bank, then I can’t be prosecuted, criminally, for fraud.
Emphasis added. In a debate about the law, such as this one, that is absolutely the correct perspective to take.
Note that the thread title is not “Did Wall Streeters do something bad”? It asks if a crime was committed.
Personally I have no doubt that countless crimes were committed. The mere fact that I’m not going to waste my time searching the internet for what evidence there might be or what statutes they might satisfy is totally irrelevant. Anyone with even a modicum of common sense, no I take that back, you don’t even need that much - pretty much anyone who knows ANYTHING about what happened understands that virtually every legal principle our judicial system is based on was flaunted. Matching that behavior up with particular statutes or regulations is mere clean-up duty.
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