Force people who made money from sub-prime mess to pay for it

[Voyager]

@Whack-a-Mole

More to the point is a seriously out of whack incentive system. Clearly shareholders will not enforce compensation packages that would hold the CEO fiscally accountable. No CEO would take that job when another place would lure him/her with a package that has no strings and a platinum parachute. Further, shareholders WANT the CEOs to increase the stock value and generally that means short term house of card building than long term, more sedate but sustainable growth. The severance packages are there to ENCOURAGE risk taking.

That’s what they claim. But eliminating the downside caused excessive risk taking. Win, and they get a bundle. Lose, the company tanks, and they still get a bundle. No one but a CEO gets rewarded for screwing up. And, as I said, success in one year is different from long term success.

[Voyager]

@Oy

See, this is the problem with the “star” system, in any field, whether it’s show business or corporate America. There are undoubtedly dozens of executives who would do the job just as well for a couple hundred thousand a year, but because they’re not well known to the pundits, and there won’t be any buzz about them in the WSJ, hiring them won’t drive the stock prices up, so they aren’t hired. Similarly, there are probably hundreds of actresses who could play any role that Nicole Kidman could play every bit as well or better, but they wouldn’t sell tickets the way Kidman would. No one’s going to say “Let’s go see the new Martha Gorfrish movie this weekend” unless it’s based on a well-known book or has some other ‘hook,’ and even then, producers generally hedge their bets.

Even in Hollywood, if three of your pictures tank in a row you don’t get the big bucks for the fourth. Plus, your compensation is set by your agent and the studio - not by a committee of other stars who can then use your pay as a base for their next negotiation.

[Oy]

@Voyager

That’s what they claim. But eliminating the downside caused excessive risk taking. Win, and they get a bundle. Lose, the company tanks, and they still get a bundle. No one but a CEO gets rewarded for screwing up. And, as I said, success in one year is different from long term success.

Unfortunately, with today’s market, success is defined as increasing stock prices in the short term, largely for mutual fund and pension buyers. So CEOs are doing their jobs properly if they achieve that. I think it’s become a very insular world, totally divorced from the reality of making things or providing services. It’s all about bookkeeping money. Probably has been for a very long time.

[Voyager]

@xtisme

Well, a couple of things. First of all, these Evil CEOs™ aren’t the root cause of what happened. THEY didn’t, by and large, make this situation. It was made by a combination of factors including government regulations that made this business favorable. Sure, in retrospect it seems stupid…but then the DOT COM bubble seems stupid now too.

-XT

Which regulations forced Countrywide to lend to the unqualified again? Which made a market for sliced and diced mortgages? Which caused the rating agencies to screw up? Which caused the CEOs to ignore the risk of the burst of the bubble? And how did Goldman avoid all these regulations and keep more or less clean?

[Oy]

@Voyager

Even in Hollywood, if three of your pictures tank in a row you don’t get the big bucks for the fourth.

Don’t believe it. I believe “big names” will often make multi-picture deals, just as sports stars will make multi-year deals.

[XT]

Wow, I seem to be carrying all the water in this thread.

@Whack-a-Mole

You are right this has been slowly building for years. Regulations WERE in place. Business kept neverending pressure on the government to remove regulations. Often business failed in this regard but slowly but surely they chipped away at it over the decades. Eventually there was precious little regulation and now we see the result.

The problem here wasn’t attempts at de-regulation…it was the structure put in place by the quasi-government agencies like Freddis and Fannie and the whole thought process behind it. As I said, I think the government comes into it’s share of the blame for setting up this structure in the first place…and business for being stupid about yet another bubble that was bound to burst one day and knock the bottom out of things.

Regulation is NOT a four-letter word in business. Sure it is nice to wave the free-markets-are-best flag but the reality is that unregulated markets ultimately devolve, one way or another, into a serious mess. Panic of 1873, Great Depression, S&L scandal, sub prime debacle. Of course there is a balance to strike…too much regulation is bad too but there must be some.

I’m not a foaming at the mouth fanatic libertarian type. I agree that some regulation is necessary to the system. However, the structure that was put in place and allowed to continue in place was fundamentally flawed…and both business AND the government are at fault for that in the end. And since all this is pretty much key to our economic survival we are all going to have to suck it up and bail these folks out…for our OWN good.

Semantics. I got a severance from my last company but I had been with them for 13 years and was “right-sized” out of the company. If they fired me for not doing my job or screwing up badly I would NOT have gotten a severance. Being fired for cause is not something they write you checks for where I worked. Pretty sure most people do not get a severance when they colossally screw up

Yeah…but you weren’t one of the ‘stars’ in the company. I’m going to address this point later by another poster, but essentially you didn’t have a contract of X number of years at X salary with Y amount of stock and Z severance package thrown in. I HAVE had such a contract during the hey days of the IT boom…and when my company failed (granted, it wasn’t MY fault :)) I received my severance, despite the fact that they went into bankruptcy (my stock was essentially worthless…10’s of thousands of shares that WERE $48/share to pennies a share. Which is, basically, where these CEO’s are in that regard as well).

@Voyager

The question is why the board allows it to be in the contract. Injury problems are fine - but what would you think about a contract that gave Michael $100 million if he gets canned after a season of two points a game? That’s what the problem is here.

So…let’s say that Michael Jordan is not a big star yet, but that he is a hot prospect in college and we WANTS him, oh yes precious we WANTS HIM! So, we sign a 5 year contract with Mr. Jordan at $5 million a year (with lots of injury clauses and such).

But…Mr. Jordan sucks. Or just isn’t as good as we had hoped. Or, just isn’t right for our teams structure. Or is doinking the coaches daughter at half time. Or…well, whatever. So…what happens? Well, we are obligated for that 5 year contract. So…we need to buy that contract out. We offer MJ, say, $10 million if he’ll just leave, or we sell his contract to another team.

This is essentially the same thing from what I can tell. Unless you put performance metrics into the contract (i.e. you get paid if the company does well but don’t get squat if it goes tits up) then that’s just how it is. Additionally these guys usually get a chunk of stock when they come on board…so, some of this may be an exchange of that chunk of stock (even if it’s de-valued now) being turned back over to the company in exchange for a golden parachute.

-XT

[XT]

@Voyager

Which regulations forced Countrywide to lend to the unqualified again? Which made a market for sliced and diced mortgages? Which caused the rating agencies to screw up? Which caused the CEOs to ignore the risk of the burst of the bubble? And how did Goldman avoid all these regulations and keep more or less clean?

The answers to this would take a book to write…and one I’m singularly unqualified to write. Maybe one of the economic guru 'dopers will wander in and better answer.

Which regulations ‘forced’ Countrywide to lend? None of them forced them…they created an environment that made those loans seem like a good idea because of the backing of the Federal government to those loans. Same with the ‘sliced and diced mortgages’…it was the environment created by the structure in place that made things favorable for such business.

As for the rating companies (agencies)…that’s another matter and I suspect either gross incompetence or (perhaps) even foul play. But that’s getting into deep waters so hopefully you’ll get a better answer from one of the more knowledgeable 'dopers. While this is peripherally related it’s not directly part of the discussion except to say that in this case I think some regulation on shorts WOULD be a good thing…as well as some oversight on this entire aspect as they came pretty close to fucking us all.

Which caused the CEOs to ignore the risk of the burst of the bubble? None…this was businesses part of the fuckup. Short sighted and, I think, not knowing what to do once the house of cards got beyond a certain, um, height.

As to Goldman, again, you will get a better answer from more informed 'dopers. My take is that they just didn’t dip in as deep and so ‘guessed’ right this time. Luck? Skill? Forsight? No idea…I only know the fringes of all this stuff and only the parts that directly impact me.
-XT

[Oy]

THis is exhausting, isn’t it? Sorry, XT.

[XT]

No worries. Hopefully someone with more insight than I will wander in. There are quite a few economic gurus here abouts who probably have a good idea what’s up with this situation.

-XT

[Sam_Stone]

Again, for those of you who think the Democrats are on the side of the angels and this is all the doing of evil Republicans and evil CEOs, let me remind you of some recent history:

In 2005, Alan Greenspan warned that Fannie Mae and Freddie Mac were out of control and in trouble. In response, the Senate Banking Committee was presented with a regulatory reform, Bill S.190, which was sponsored by four Republicans: John Sunnunu, John McCain, Elizabeth Dole, and Chuck Hagel.

This is what the bill did:

1/26/2005–Introduced.
Federal Housing Enterprise Regulatory Reform Act of 2005 - Amends the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 to establish: (1) in lieu of the Office of Federal Housing Enterprise Oversight of the Department of Housing and Urban Development (HUD), an independent Federal Housing Enterprise Regulatory Agency which shall have authority over the Federal Home Loan Bank Finance Corporation, the Federal Home Loan Banks, the Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (Freddie Mac); and (2) the Federal Housing Enterprise Board.
Sets forth operating, administrative, and regulatory provisions of the Agency, including provisions respecting: (1) assessment authority; (2) authority to limit nonmission-related assets; (3) minimum and critical capital levels; (4) risk-based capital test; (5) capital classifications and undercapitalized enterprises; (6) enforcement actions and penalties; (7) golden parachutes; and (8) reporting.
Amends the Federal Home Loan Bank Act to establish the Federal Home Loan Bank Finance Corporation. Transfers the functions of the Office of Finance of the Federal Home Loan Banks to such Corporation.
Excludes the Federal Home Loan Banks from certain securities reporting requirements.
Abolishes the Federal Housing Finance Board.

So, it sets up an independent regulatory board to exert control over these organizations, and set guidelines for minimum capital levels and how much risk these agencies could take on.

This floor speech by Chuck Hagel, describing the need for the bill, is very prescient. Allow me to quote from it:

Fannie and Freddie are chartered by Congress, limited in scope, and are subject to Congressional mandates, yet they are publicly traded companies with all the earnings pressure that Wall Street demands. Additionally, Fannie and Freddie enjoy an implicit guarantee by the Federal Government that has aided them in developing substantial clout on Wall Street. With their influence in the markets, their ability to raise capital at near-Treasury bill rates, and their use of the most sophisticated portfolio management tools, Fannie and Freddie today are no longer simply secondary market facilitators for mortgages.

The significance of Fannie Mae and Freddie Mac to our economy cannot be overstated. Together, the companies own or guarantee roughly 45.6 percent of all mortgage loans in the United States. The companies combined have issued over $3.9 trillion in obligations comprised of $2.2 trillion in mortgage backed securities and $1.7 trillion of GSE debt.

It is clear that the recent revelations at both Freddie Mac and Fannie Mae precipitate the need for Congress to address GSE regulatory reform. In 2003, Freddie Mac found itself treading through a wave of accounting problems and questionable management actions. That led to an income restatement of $5 billion, a penalty of $125 million and the removal of several members of its executive management. One year later, a similar surge of questionable practices was discovered at Fannie Mae. That led to the retirement and resignation of two of Fannie Mae’s top management officials, as well as last month’s ruling by the Securities and Exchange Commission, SEC, that Fannie could face a $9 billion income restatement.

Now, note the next part:

Furthermore, the bill would:

Provide the new regulator the authority of receivership to close down a failing GSE and protect against a taxpayer bailout; provide the new regulator greater discretion in raising capital standards to protect against insolvency; provide the new regulator approval power over new programs and activities proposed by a GSE; provide the regulator with greater authority to limit exit compensation packages or golden parachutes for executives removed for cause; require the annual audits of Fannie Mae’s and Freddie Mac’s affordable housing programs to ensure that these programs support the enterprises’ affordable housing mission; end presidential appointments to the board of directors of Fannie Mae and Freddie Mac, and would require all Federal Home Loan Bank directors to be elected.

So… A regulator would have had to approve the bundling of risky mortgages, a regulator would have had the power to punish CEOs and to limit the kind of excess compensation you guys are complaining about. There would have been annual audits of the very mortgage programs that turned out to be such a disaster, and it would have taken away the ability of the President to put unqualified cronies on the board of Fannie Mae and Freddy Mac.

Sounds like this was just the kind of fix needed.

Here’s what John McCain had to say about it in 2006:

Mr. President, this week Fannie Mae’s regulator reported that the company’s quarterly reports of profit growth over the past few years were “illusions deliberately and systematically created” by the company’s senior management, which resulted in a $10.6 billion accounting scandal.

The Office of Federal Housing Enterprise Oversight’s report goes on to say that Fannie Mae employees deliberately and intentionally manipulated financial reports to hit earnings targets in order to trigger bonuses for senior executives. In the case of Franklin Raines, Fannie Mae’s former chief executive officer, OFHEO’s report shows that over half of Mr. Raines’ compensation for the 6 years through 2003 was directly tied to meeting earnings targets. The report of financial misconduct at Fannie Mae echoes the deeply troubling $5 billion profit restatement at Freddie Mac.

The OFHEO report also states that Fannie Mae used its political power to lobby Congress in an effort to interfere with the regulator’s examination of the company’s accounting problems. This report comes some weeks after Freddie Mac paid a record $3.8 million fine in a settlement with the Federal Election Commission and restated lobbying disclosure reports from 2004 to 2005. These are entities that have demonstrated over and over again that they are deeply in need of reform.

For years I have been concerned about the regulatory structure that governs Fannie Mae and Freddie Mac–known as Government-sponsored entities or GSEs–and the sheer magnitude of these companies and the role they play in the housing market. OFHEO’s report this week does nothing to ease these concerns. In fact, the report does quite the contrary. OFHEO’s report solidifies my view that the GSEs need to be reformed without delay.

I join as a cosponsor of the Federal Housing Enterprise Regulatory Reform Act of 2005, S. 190, to underscore my support for quick passage of GSE regulatory reform legislation. If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole.

I urge my colleagues to support swift action on this GSE reform legislation.

Here’s the text of the bill.

So what happened to the bill? It died in the committee, on a straight party line vote with all Republicans in favor, and all Democrats opposed. It was stalled there until the session of Congress ended, at which point such bills are simply retired.

The Banking Committee chairman, Chris Dodd, is the #1 receiver of lobbying money from Fannie and Freddie. Among those who opposed the bill: Barack Obama and Hillary Clinton (#3 and #4 on the Fannie/Freddie donations list) .

See, the Democrats were concerned that people who wanted to buy homes wouldn’t be able to get them if the rules were tightened, and the Democrats are all about helping the middle class buy homes. So they shot down the very legislation that could have unraveled this mess two years ago.

So now that we’ve established that the Democrats have a significant responsibility for this mess, let’s concede that in the time before that, both Republicans and Democrats added their share to the mess.

The point being, if you’re trying to turn this into a Republican-only problem, you don’t have a clue what you’re talking about.

[Sam_Stone]

It appears the Bush administration was also on this.

From the Washington Post:

Starting in 2002, White House and Treasury Department economic policy staffers, with support from then-Chief of Staff Andy Card, began to press for meaningful reforms of Fannie, Freddie and other government-sponsored enterprises (GSEs).

The crux of their concern was this: Investors believed that the GSEs were government-backed, so shouldn’t the GSEs also be subject to meaningful government supervision?

This was not the first time a White House had tried to confront this issue. During the Clinton years, Treasury Secretary Larry Summers and Treasury official Gary Gensler both spoke out on the issue of Fannie and Freddie’s investment portfolios, which had already begun to resemble hedge funds with risky holdings. Nor were others silent: As chairman of the Federal Reserve, Alan Greenspan regularly warned about the risks posed by Fannie and Freddie’s holdings.
…
During this period, Sen. Richard Shelby led a small group of legislators favoring reform, including fellow Republican Sens. John Sununu, Chuck Hagel and Elizabeth Dole. Meanwhile, Dodd – who along with Democratic Sens. John Kerry, Barack Obama and Hillary Clinton were the top four recipients of Fannie and Freddie campaign contributions from 1988 to 2008 – actively opposed such measures and further weakened existing regulation.

The president’s budget proposals reflected the nature of the challenge. Note the following passage from the 2005 budget: Fannie, Freddie and other GSEs “are highly leveraged, holding much less capital in relation to their assets than similarly sized financial institutions. . . . A misjudgment or unexpected economic event could quickly deplete this capital, potentially making it difficult for a GSE to meet its debt obligations. Given the very large size of each enterprise, even a small mistake by a GSE could have consequences throughout the economy.”

That passage was published in February 2004. Dodd can find it on Page 82 of the budget’s Analytical Perspectives.

The administration not only identified the problem, it also recommended a solution. In June 2004, then-Deputy Treasury Secretary Samuel Bodman said: “We do not have a world-class system of supervision of the housing government-sponsored enterprises (GSEs), even though the importance of the housing financial system that the GSEs serve demands the best in supervision.”

Bush got involved in the effort personally, speaking out for the cause of reform: “Congress needs to pass legislation strengthening the independent regulator of government-sponsored enterprises like Freddie Mac and Fannie Mae, so we can keep them focused on the mission to expand home ownership,” he said in December. He even mentioned GSE reform in this year’s State of the Union address.

How did Fannie and Freddie counter such efforts? They flooded Washington with lobbying dollars, doled out tens of thousands in political contributions and put offices in key congressional districts. Not surprisingly, these efforts worked. Leaders in Congress did not just balk at proposals to rein in Fannie and Freddie. They mocked the proposals as unserious and unnecessary.

Rep. Barney Frank (D-Mass.) said the following on Sept. 11, 2003: “We see entities that are fundamentally sound financially. . . . And even if there were a problem, the federal government doesn’t bail them out.”

Sen. Thomas Carper (D-Del.), later that year: “If it ain’t broke, don’t fix it.”

As recently as last summer, when housing prices had clearly peaked and the mortgage market had started to seize up, Dodd called on Bush to “immediately reconsider his ill-advised” reform proposals. Frank, now chairman of the House Financial Services Committee, said that the president’s suggestion for a strong, independent regulator of Fannie and Freddie was “inane.”

Sen. Dodd wonders what the Bush administration did to address the risks of Fannie and Freddie. Now, he knows. The real question is: Where was he?

So… The problem here isn’t in the executive branch. Both the Clinton and Bush White Houses saw the problem and tried to do something about it. The problem is Congress. Too much lobbying money, too many constituents at home demanding cheap, easy mortgages.

But it looks like the main culprits are the big, powerful Democrats that rule these committees: Chris Dodd, Barney Frank, John Kerry. I don’t understand why Obama was getting so much Fannie/Freddie money - as a junior senator, he didn’t have a lot of power to stall legislation, and he wasn’t on the finance and banking committee anyway. Yet there he is, the #3 recipient of all their money. The only reason I can think of is that his presidential candidacy was starting up, and they wanted to buy his favor in advance.

Anyway, if you’re looking for a scapegoat to blame, before you lynch yourselves some CEOs you might want to take a hard look at Chris Dodd. It sure looks like he worked overtime to prevent any kind of regulatory oversight, and he was the #1 recipient of their lobbying money. If he walks away clean from this, we can just assume that Congress will never be held to account for even the most boneheaded and corrupt actions.

[XT]

Thanks Sam! I didn’t know that about either administration, though I did know about Dodd and Congresses culpability in all this. Thanks for the additional info.

-XT

[Oy]

If what you’re saying is true, Sam (and I assume it is), then you’re right; in this case, it is the Democratic congresscritters’ fault that they were not regulated more heavily. Which does not excuse the people who did it from the blame of doing it.

[IdahoMauleMan]

@Whack-a-Mole

You are right this has been slowly building for years. Regulations WERE in place. Business kept neverending pressure on the government to remove regulations. Often business failed in this regard but slowly but surely they chipped away at it over the decades. Eventually there was precious little regulation and now we see the result.

Regulation is NOT a four-letter word in business. Sure it is nice to wave the free-markets-are-best flag but the reality is that unregulated markets ultimately devolve, one way or another, into a serious mess. Panic of 1873, Great Depression, S&L scandal, sub prime debacle. Of course there is a balance to strike…too much regulation is bad too but there must be some.

We could have a very, very long and interesting discussion about why the Panic of 1873, the Great Depression and the S&L Scandal were caused by, or made significantly worse by, government intervention. Not by ‘the free market’. We could even toss in the Panic of 1907 if you want.

(Although I thought the RTC approach to addressing the S&Ls was pretty reasonable. They even wound themselves down and out of existence when they were done. My God. Has that ever happened to another government agency since then?)

If you’re interested, that is.

You also seem to toss the sub-prime debacle in with that crowd, when I detected a forming consensus here on the SDMB that Congressional control over Freddie and Fannie played a big role. That was pleasing to me I must admit.

I don’t want to speak for you of course, Whack-A-Mole, but I thought you were on that side of the street as well. Weren’t you? I’ll have to go back and check some other threads to make sure.

[magellan01]

Great posts Mr. Stone. We see once again the good intentions can have devastating results.

[GIGObuster]

President Bush was receptive to reform. He withheld nominees for Fannie and Freddie’s boards – a presidential privilege. While it would have been valuable politically to use such positions to reward supporters, the president put good policy above good politics.

Can someone explain this bit? Although I would put a good chunk of the blame on the democrats, it seems to me that pressure was not maintained on the boards by the executive, in 2005 the congress was still in Republican control, and somehow I’m getting the impression that this bit on the presidential privilege was not explained properly.

[Hyperelastic]

So far I’ve only heard blame being laid on CEOs and politicians. What about the millions of ordinary Americans who lived the high life off rising home values over the past few years? Flipping, HELOCs, walking away from purchase money loans made in non-recourse states (i.e. any mortgages used to initially purchase a house). A lot of people did it and are continuing to do it. The beast would never have grown unruly if it hadn’t had so much greed to feed on.

[Sam_Stone]

@Hyperelastic

So far I’ve only heard blame being laid on CEOs and politicians. What about the millions of ordinary Americans who lived the high life off rising home values over the past few years? Flipping, HELOCs, walking away from purchase money loans made in non-recourse states (i.e. any mortgages used to initially purchase a house). A lot of people did it and are continuing to do it. The beast would never have grown unruly if it hadn’t had so much greed to feed on.

People did what they do naturally - took advantage of what offers were available to them. I don’t think you can blame the average investor or mortgage holder, other than those who allowed themselves to be talked into mortgages they couldn’t afford, or the ones who recklessly leveraged their homes to the max in order to get more spending money.

But most people caught by this were victims of the bubble, and I feel sorry for them. A young couple just starting sees homes rising in price, seemingly without end. They know it’s a real stretch to be able to afford a house, but they’re thinking, “Hey, if we don’t act now, we may never get a chance to own a home again the way prices are rising. And if we buy now, if prices keep going up we’ll have enough equity in the home that we can sell if we can’t handle the payments and even make a little profit.” So they stretch, and buy a home, and live like paupers to pay for it.

Then the bottom drops out of the market, and suddenly their home is worth 2/3 of what it was, and they don’t even have minimum equity in the house. Tough spot. A lot of them looked at that and said, “You know, we’re going to wreck our credit for a few years, but let’s just walk away.” It’s either that or stare down a situation where you won’t even have equity in your home at all for ten years, and in the meantime you’re living like a pauper because 60% of your income is going to your mortgage payment.

There’s no ‘greed’ here - just people caught in an untenable situation and being forced to make a tough choice, and guessing wrong.

That doesn’t excuse the clowns who leveraged their dwellings to the max to pay for speedboats and fancy vacations, but there are lots of others who tried to be smart consumers and got burned.

[Voyager]

@Hyperelastic

So far I’ve only heard blame being laid on CEOs and politicians. What about the millions of ordinary Americans who lived the high life off rising home values over the past few years? Flipping, HELOCs, walking away from purchase money loans made in non-recourse states (i.e. any mortgages used to initially purchase a house). A lot of people did it and are continuing to do it. The beast would never have grown unruly if it hadn’t had so much greed to feed on.

Your average American didn’t flip. That was a business, and those who were in it got burned. No tears here.

But most Americans were falling further and further behind as all the benefit of their increased productivity went to the rich, and they fell into the trap of believing the ads that there was money just sitting in their homes, and it was stupid not to take it out. Not one of the ads I heard said anything about having to pay it back. Now they are paying, and so is the economy. We might have all done better if more of that tax cut went to the average American. If people lived on their incomes we would have had a recession years ago, but it would have been mild and maybe someone would get a clue about how to increase consumption without debt. It’s not like we didn’t know that the consumption was coming from home equity, after all.

[lee]

Well, I have been reading about how in Sweden when something similar happened they forced the companies to hand over equity to get money to dig themselves out of the mess. This had the result of many companies deciding to go it alone, and others being nationalized until there was a market to buy them from the government. I don’t see why something like that would not work here.

I also have been reading about appraisers pressured by banks inflated real estate appraisals, and mortgage brokers who did what ever they could to book loans because that is how they got paid, and it did not matter that the loans went bad, they still kept their portion.

And then there is Citi bank with a program which harvested any positive balances and sent them to an account for executive bonuses.

Corruption was at every level leading up to the crisis much of it was criminal. Small fry and big fishes all had a fin in the pie.

The plans I read about avoid giving the government equity because that means nationalization which is bad. Why would the Swedish method not work for us?