Email Trails Show Bankers Behaving Badly 251
An anonymous reader writes "The New York Times is running a pair of stories about U.S. financial institutions being investigated by the Federal government and courts for alleged systemic and illegal activities that helped bring about the housing crisis and collapse of the world economy in 2008. Emails produced during courtroom discovery reveal that insiders at JP Morgan Chase knew that the bundles of securities they were marketing to investors were rotten with bad loans. And emails show the credit rating agency Standard & Poor's (a division of McGraw-Hill) was determined to stop losing deals to its competitors by being too tough on the banks whose products they were evaluating."
Get a rope! (Score:5, Insightful)
Corruption is corruption.
Hang them from the trees on Wall Street as a warning to others.
And stop creating government regulations that give them lots of loopholes to exploit.
What a surprise! (Score:5, Insightful)
They're your ruling class (Score:2, Insightful)
Reform (Score:4, Insightful)
I'd be for creating banks in the other 49 states (beside North Dakota), and returning all of the 10th Amendment violations like Sallie May, Freddie Mac, and the education loans to the states where the people/places in question reside.
The federal government could then assume a more legitimate oversight role.
Are you going to alter the net corruption of the overall system? Unlikely. Can you ACTUALLY DO SOMETHING OTHER THAN THROW WORDS AT 'TOO BIG TO FAIL'? I daresay you can.
But your Ruling Class Overlords will not be separated from power by less than a crowbar, and maybe a little heavy PETN.
Until scores of these douchbags go to prison (Score:2, Insightful)
and do hard time, nothing will change.
Unfortunately, Obama has proved a friend to the wealthy and powerful, so don't hold your breath.
Re:Not exactly news (Score:2, Insightful)
It was the biggest Ponzi scheme in history--all done with the blessing of the biggest banks in the world, cheering politicians, and a gullible public that bought into the idea that less regulation and oversight would somehow not incentivize corruption and fraud.
Re:News for Nerds??!! (Score:5, Insightful)
Given that the dumb fuckers who get caught passing a few thousand in bad checks tend to do more time than the smart fuckers who get caught passing a few billion in bad securities tend to do more time, I'd say that the quants are on to something...
(Can you imagine what would happen to sentencing guidelines if we decided 'fuck this shit' and started punishing large scale fraud with the same sorts of time-per-thousand-dollars-stolen that we do for blue-collar economic crimes?)
What about Caveat Emptor? (Score:5, Insightful)
Look, at the height of madness, these derivatives which no one could possibly understand, derivatives so complex even God Almighty could not understand were given the same rating as US Treasury bonds or just a microscopically lower ratings. If these banks really believed the ratings by S&P they would have bought them at the same yields as US Treasury bonds, (or microscopically higher yeilds). But these derivatives were yielding a full percent, and then they were shooting up.
Why? These bastards knew, no matter, what lipstick S&P and Moody's slap on these beasts they are pigs. If small investors were taken in, that lone retiree conserving his/her nest egg, despairing at the ridiculously low interest rates they were getting, buying one lone bond for 12000$ and losing it all, they have my full sympathies, and wish they would be able to take on these bastards and send them to jai.
But, the buyers were the big guys. Why are they buying bonds, whose rating was paid for by the sellers?. Why can't they come up with a plan to pay for the ratings themselves? The bankers could have decided the buyers of bonds would chip in a few dollars and create an agency that will never be paid by the sellers of bonds and would be totally funded y the buyers of the bonds. They still have not done it.
What is playing out in the courts is something like a lovers spat or falling out between the thieves.
Why are investment banks allowed to rate product? (Score:5, Insightful)
Someone who sells ratings should not also be buying and selling these products. Of course there is a huge perverse incentive here.
Re:They're your ruling class (Score:5, Insightful)
FWIW, I think that would be a tragedy. They should be tried in court for felony larceny, stripped of their assets and holdings, and imprisoned. I would be happy if this was tried in the ICC at The Hague, as what they did was an international crime.
Re:What a surprise! (Score:5, Insightful)
"When the people at the top of our complex financial system, with the trust and responsibility placed on them to safeguard the well-being of the whole community, behave in such an anti-social manner they belong behind bars."
Hey now, it's not like they were downloading a bunch of academic journals or something!
We need some perspective here.
Re:Not exactly news (Score:4, Insightful)
And I wouldn't blame a few individual bankers, I think this was coordinated a bit higher up.
Who or what was coordinating it? The Bavarian Illuminati? An invisible man living in the sky? His Noodlyness? Inquiring minds want to know.
My impression of the whole mess:
1. It was fraud on a massive scale.
2. It was very very profitable to engage in. Anyone at a major bank who had even remotely suggested that this was a bad idea tended to be first laughed out of the room and then fired shortly thereafter.
3. For the last 15-20 years at least, the SEC and the Feds basically made the decision to look the other way with regards to Wall St crimes. The Bush administration in particular was notoriously lax, but Obama has done nothing to put a stop to it.
4. When it hit the fan, all the people involved got bailed out because the US Treasury Department was either (a) in on it, or (b) was scared of what would happen to the economy if that didn't happen.
None of this required any kind of coordination, all it took was somebody committing this kind of fraud and getting away with it. As a rule, if left unchecked crooked business drives out honest business because the crooks have higher profit margins.
Re:News for Nerds??!! (Score:4, Insightful)
Look, if I lend a thousand dollars to a homeless guy on the street corner, and he never pays me back, whose fault is it really? I mean, I can start jumping up and down and getting mad about it, but when it comes down to it it's the lender's responsibility to evaluate the debtor's ability to repay.
Or, I guess, you could lend money to people who you know full well can never repay it, and then sell off the debt to somebody else after obfuscating it as "AAA-rated investment grade CDO tranches"; that sounds really sustainable, too.
People are People (Score:4, Insightful)
The sad truth is people are corrupt. We all are. It's a part of human nature. What we need to start doing is accepting that people in power are going to abuse it, and put in blocks, checks to keep that from happening. The truth is, people need to be regulated. They need to be checked that they are doing what they are supposed to.
Too big to fail? Not to big to jail.
This also shows what the government thinks of everyone but the rich and corporations. They will bend over backwards to bail out the rich and the corporations while fucking the rest of us in the ass. The economy has been in the shitter but the people the caused it live like kings.
Wish some good would come of this, but our government won't do anything about it.
Re:They're your ruling class (Score:4, Insightful)
It is very common in 3rd world countries, but even in first world nations there are people that have armed guards.
However I suspect the "banker's well trained soldiers" the GP is referring to are the police forces and armies of the United States. As in, bankers buy politicians, which craft laws and direct their military forces to protect the bankers.
Re:News for Nerds??!! (Score:4, Insightful)
Even in the *best* case, if true - it indicates a *HUGE* issue.
The FBI should be professional no matter if you cooperate or not. Sure, they *can* be a dick if they want, but it's bad all the way around if they are.
It is, essentially, a violation of the constitutional rights of the accused - in that they are treated differently under the law. [Some nicely, some not.] Proving it in court is a far more difficult matter, however.
That law enforcement doesn't see it as a problem, indicates a serious flaw in their understanding of their responsibilities and have thrown away their honor.
It is, IMO, because of this kind of mind-set that the public starts to lose their respect for law-enforcement and see them as opportunistic thugs. Then the system breaks down - people feel they'll just do whatever they can, if they can get away with it. When people start shooting cops, they don't care much because the cops only care for their "friends" ... and since the cops aren't their friends, whatever bad things happen are just too bad - they're getting back what they did to the public.
It's not right for the public to feel that way - any more than the cops are right to do what they do - but it certainly makes the breakdown of respect more understandable.
So, being thugs and treating some defendants nicely and others like crap really, ultimately costs law enforcement a lot. It also costs society a lot too.
But I really, really hate "explanations" like the parent, because they seem to justify that kind of behavior. IMO, if you can't treat all your "customers" with respect you need to find another job. That doesn't mean you have to love them all - that's pretty hard - but you can at least do your job well and with respect for those you work around/ or with, and interact with.
Re:News for Nerds??!! (Score:4, Insightful)
This ^^ +1000
And tell me, who is likely to *know* who is able to afford the loan better?
A) The bank who has collective experience in the thousands of man-years in making loans and seeing the trends of who pays and who doesn't and what kind of debt load is reasonable. An institution who has NO OTHER job than to manage money, cash-flow and manage risk from loans and investment?
or
B) Sammy Homeowner who simply wants a house. He's not very sophisticated - he couldn't even calculate how his loan should work out in interest and principle. He works hard, but also wants all the good stuff, and his loan officer is telling him - "This is a great deal! You'll love it. It will be great. Here, just sign right here."
If you pick B, can I have what you're smoking - it's really incredible stuff.
The banks knew who was likely to not repay - they are vastly more sophisticated than virtually *ANY* home-owner getting a loan.
I'd agree the person taking the loan should have used more diligence - but the disparity is staggering. Blame ought to be apportioned 10:1 to the Bank.
Re:News for Nerds??!! (Score:4, Insightful)
If you buy a home, it's worth doing your homework. I delayed buying a home for well over 5 years, because the market was obviously a bubble. When everyone is talking about flipping X, and making "money for nothing", get out of that immediately. Doesn't matter if it's stock, houses, bonds, whatever. If you buy a house, you know you are going to pay X. If you can't pay X realistically on a long term basis, don't buy it. And there is a reason for the old rule of thumb of buying a house at 2.5 times your annual income. I knew people that when with interest only mortgages, ARMs, etc. They knew they were not making the best decision. But they couldn't see any other way to "get the house they always wanted".
Everyone involved went full retard. Consumers bought mortgages they knew they couldn't afford. Banks issued mortgages they knew were bad ideas. Investment companies packaged those bad idea mortgages into bundles of "really bad idea, now in bulk". Investors bought those bad idea mortgages. And then the government bailed them out. Which again, bad idea.
Only folks that got a beating were the ones that were reasonably smart and stayed within their means.
Re:News for Nerds??!! (Score:3, Insightful)
Add to that the hatred of the rich and distrust of banks, with a bit of conspiracy theory for flavor
Not hatred of the rich, hatred of greed and selfishness (and there is no groupthink about this, there are a lot of slashdotters who are fine with greed and selfishness, let alone obscene amounts of money). It's rage about the fact that bankers defrauded America, almost brought he entire economy down, and were rewarded for their evil deeds. Rage against the fact that CEOs get huge multimillion dollar bonuses for running their companies to the ground and destroying working folks' 401Ks in the process. Rage that corporations get away scott-free for what an ordinary person would spend decades in prison for. Rage that you pay a higher percent of your income in federal tax than a rich stockbroker does. Rage against unfairness. Rage against the fact that 40 years ago the CEO earned 10 times as much as the janitor but now earns 400 times as much.
None of the rage is unfounded. There needs to be more rage and constructive rage.
Nobody's surprised that bankers screwed up.
Hanlon's razor doesn't apply when the person "screwing up" benefits from the "mistake". There was no screwup, the bankers got just what they wanted. It was indeed malice, fueled by greed.
They had a nice little racket, a no-lose situation. They would let anyone take out a mortgage, and would buy insurance for it. The insurance was dirt-cheap because housing prices were ballooning. They loan Joe Sixpack $200k for a small house, and three years later when he's laid off, they not only forclose, but do their damndest to make sure once he's a single payment late he'll never catch up. Then they forclose, keeping all the payments he's made on the house, then selling he house for far more than Joe paid for it. In the unlikely event the house was worth less than $200k, insurance covered the loss. There was absolutely no risk to the bank whatever.
Until, of course, their greed destroyed them. They forclosed on so many houses when the economy soured (hard to make your payments when gasoline has gone up in price 400% in four years and you got laid off or your hours cut) that the housing market tanked, and the insurance companies went broke, then the banks.
And not a single rich person was harmed in the least. many middle class people were ruined. And you wonder where the rage comes from? A lot of rich sons of bitches should have gone to prison for that fraud, but nobody did.
Re:Get a rope! (Score:4, Insightful)
That's also why we keep hearing how much the economy is improving and about record profits being made and yet nothing seems different.
It's also how we can hear for years on end how welfare and other 'entitlements' are killing us and how we can't possibly afford them for even one more year, but as soon as a banker's bonus is in jeopardy, we somehow find an extra trillion dollars we can throw at the problem.