Following the financial crisis, is there anyone you feel deserved punishment who didn't receive it?

I want to avoid populist retribution, but of the actors involved in the financial crisis, who do you feel should have been prosecuted who was not? For each name, what crime should they be charged with?

Thanks,
Rob

I am not an expert on anything financial and I don’t have any names to give. Here’s the problem as I see it.

If we take an ordinary criminal, such as a guy who knocks over liquor stores for cash, what he does is against the law. He can’t change that. The best he can do is to avoid getting caught, but if he does get caught, what he did remains illegal.

If we take a CEO of a bank who wants to steal vast sums from his investors and/or customers, he’s powerful enough to change the definition of “illegal”. He just needs to shuffle a few million dollars to the President and members of Congress through various means, and then he has leverage with which to either change the law, change individual regulations, or hold up the enforcement of laws or regulations. So then the theft that he’s chosen to commit becomes legal, or close enough to legal that he can’t be prosecuted for it.

Hence many of the worst actors in the financial industry may never have committed anything that’s officially a crime, so there’s no way to prosecute them. For example, Citibank has been on a non-stop crime spree since it was founded in the Clinton Administration, yet as far as I know, none of its executives have been prosecuted.

What prompted the question was the anger I hear at the lack of prosecutions. However, if what the actors were doing was legal, they can’t be prosecuted.

Now if said actors are using their influence to forestall an investigation or prosecution, that falls nicely under the auspices of my original post.

Rob

Thousands of people. For example thousands of people were falsifying house appraisals–giving values for substantially more than the houses were worth, which resulted in mortgages for much more than the houses’ values, which resulted in massive losses when the buyers defaulted.

Make that tens of thousand of people.

Such people are not likely to be among the moneyed elite (although their bosses might be).

I wasn’t aware of mortgages being issued in excess of a property’s value. I am more familiar with loans being given to those who did not have the means to cover the mortgage, especially when interest rates rose.

Happened to me when I bought my house, back in 2011. The seller and I agreed on a price, the bank was fine giving the loan, but when the appraisal came back at $7k less than the price agreed on, HOLD EVERYTHING! The bank couldn’t issue the loan? Solution? the bank just sent the appraiser back - surprise, surprise, the next appraisal was for the exact amount of the loan.

It was hugely sketchy to me, but we wanted the house, so we kept our mouths shut.

Although, to be technical, when you and the seller agree on a price, that’s the price.

Appraisals are just guesses at the value of a house. You set the fair market value with your transaction. It was worth exactly what you paid for it.

A question is fraud or incompetency or not really doing the job.

Appraisals are a guess. I did a refi and because i put in my own irrigation system, I didn’t have a $15k project receipt from a landscape architect, and I got a low appraisal (didn’t matter for the refi, but it was annoying as hell).

Self reported income was a problem with some loans. People who worked for cash would just claim an income and sail right through.

Some of the auto signing was a problem when deals were transferred from loan, to CMO, etc. but I don’t know again if it was criminal.

I think a lot of people just rode the tide. My issue was bailing out banks that didn’t watch their risk levels, and allowing bonuses to be paid after the bailouts. THAT would have been the right punishment for the elite. Something that said that if you took the government dime, you lose a lot of access.

I’m not seeing a problem with this scenario.

Which is why it is the politicians who pass the laws and the public servants who should make sure businesses comply with the law that are mainly to blame but they don’t really account for their deeds, which shows democracy isn’t only imperfect by definition, but also dysfunctional.

So if an insane rich person buys a Detroit crack house for a billion dollars, that house is worth a billion dollars.

Sounds legit.

Privatize the profits, socialize the risk :slight_smile:

Honestly, in terms of the crisis, I’m saddened that the government bailed out the financial firms. The thought, wrongly in my opinion, is that if they failed they would have sent the financial world into chaos.

What should have happened is what’s supposed to happen in a free market: The banks should have been allowed to fail, and their creditors should have taken every penny they had. Replacing the banks would have happened by other banks that would have bought the pieces at an auction used to pay the creditors. The government should only have paid for any FDIC insured deposits that may have been eaten by those banks, which of course is given priority as a creditor.

The fact that this didn’t happen, in addition to the long-running refusal to do more than token punishments, clearly spells out just how corrupt government has become overall. This may have made the crisis worse, as some allege, but in reality the crisis hasn’t barely begun to stop for the lowest people on our financial totem pole. The people who were guilty should be there suffering, not random strangers.

But, then, this is historically how it plays out in the US. Those with political connections get help and no one else does.

The appraisal is to make sure the house is worth enough that if I default on the mortgage, the bank can sell it off without losing money. The ‘fake’ appraisal was to make the paperwork for the bank happy - do this a lot in a hot market and the bank’s assets are not as good in reality as they look on paper. Hmm, when has that happened before…

Exactly

I always think that economists that kept pushing for the “exuberance” then are getting scott free, at least an official censure from their universities or think thanks should be in order.

When you look at documentaries like the Oscar winning “Inside Job” you realize that many economists had (and still have) huge conflicts of interest that makes them ignore when bubbles or underhanded and flawed economical devices are happening or being used.

IMHO I would take seriously an economist that would include “crazy agents” to their “representative agents” and “heterogeneous agents” in their models.

Unfortunately, what typical policy maker or businessman would take seriously an economist that would tell a good number of their clients that the way they are using some economical tools in a rising market is crazy?

Then the appraisal serves no purpose.

There are multiple reasons for the appraisal. However, a difference of $7k between appraisal and loan is small enough to be glossed over. A house appraisal is just short of a WAG no matter who’s calculating it.

On my reading desk is BAILOUT: How Washington Abandoned Main Street while Rescuing Wall Street by Neil Barofsky. He discusses malfeasance and missed prosecution opportunities in the TARP program. (I’m reading the book slowly and reluctantly, afraid it will just make me mad.)

Barofsky, BTW, is no pinko greeno gun-grabbing Kenyanist. He was the Special Inspector General for TARP, appointed by George W. Bush.