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."
Not exactly news (Score:5, Interesting)
And I wouldn't blame a few individual bankers, I think this was coordinated a bit higher up. American banks had been selling way too many loans, and when they saw this was becoming a huge problem that might bring down the entire American economy, they made the brilliant move of packaging these loans in nice AAA investment vehicles and selling them to the rest of the world. Now it became a global crisis instead of an American one.
Not a very moral or honest thing to do, but it sure was ingenious.
Re:News for Nerds??!! (Score:4, Interesting)
Obviously you don't appreciate how many nerdy quants there were on Wall Street painting over these bag-of-shit securities packages with a fresh coating of technical bullshit to make them look like roses.
Re:What a surprise! (Score:4, Interesting)
Obviously, you haven't been watching Fox News. They have assured me that it was the evil government, and not base greed and the free market, that caused the crash.
Didn't you hear? It was Bill Clinton's army of crafty welfare negroes who somehow managed to sucker the brightest lights on Wall Street, despite having minimal prior experience with anything other than check-cashing joins and sleazy rent-to-own financing schemes... Makes perfect sense!
Re:Reform (Score:5, Interesting)
"...anybody who wants to see anything different has got to tell me how we de-centralize."
It's starting, and slowly gaining momentum. Support any efforts in your state or local government to re-assert sovereignty. CO and WA are actively defying federal drug laws. Twenty six states sued to block Obamacare and many governors are actively resisting its implementation. Several states have passed resolutions asserting that the NDAA won't be enforced in their states. With all of the anti-gun hysteria, we're seeing states and even county LEOs claiming that they will stop any new gun control laws being forced on their citizens. Something really interesting is that several county LEOs are claiming that they will actively thwart federal LEOs from enforcing the laws in their jurisdictions.
Maybe if we could elect some courageous state AGs, they could prosecute these banking slime on charges of fraud, forgery, perjury, etc.
I like the idea of state banks. Until fractional reserve banking is banned, I think that's the best way to restore the money power to the people.
F*** the federal government's "oversight" role. They have the FDIC, OTS, OCC, SEC, FBI, CFTC, etc. etc. and they not only failed to stop the Wall St. fraud factory and thwarted any investigation and prosecution, they actively conspired to facilitate and cover up the frauds. There is little hope of positive change at the federal level.
Perspective (Score:5, Interesting)
Let's remember, these "smoking gun" emails are the result of exhaustive, comprehensive searches of EVERY ingoing and outgoing email from the respective organizations. In a large enough company I can guarantee you I can find emails that "prove" almost anything relating to thier business, their customers, etc.
That some employees expressed doubts or questioned the value of the products or services their company offers means very little if they are not the decision-makers.
Anyone surprised that a salesman at an investment house might be selling something they either don't understand or personally see the value in shouldn't be investing in the stock market. Would you be surprised to find out the guy selling you a Chevy Volt doesn't believe it is the best car in the world? What a salesman says to a customer is not neccessarily what he believes in his heart or in his mind.
Re:Get a rope! (Score:5, Interesting)
In all honesty, I have just realized a simple fact, America is a country with 2 economies. The rich people's economy and everybody elses, they follow 100% different rules, their money comes from 100% different sources, they are literally 2 distinct economies. The only way they intermix is that the rich one get's all it's money through tricking and extorting the money from the other one (and others, internationally), and the other one generates money for itself by internally ebbing the money about as well as importing money from other countries through valuable exports. The country's GDP comes from everyone's, however the country's GDP goes to the rich people's.
Viewing them as two totally separate and distinct economies the same way you view america's economy and mexico's economy actually makes a lot more sense...
Re:Get a rope! (Score:4, Interesting)
I think you left out "and producing -actual goods and services- which is the only source of money's value"...
Along the lines of your division into two distinct economies, I now am careful to use the term "making money" only to refer to the activities of engineers, scientists, mechanics, assembly-line workers, and the like. The financial sector, lawyers, politicians, CEOs and similar do not actually "make money"--they "get their hands on money". If everyone, including the media, paused carefully and selected the appropriate term, consistently asking when speaking to engineers, say, "How much money are you expecting to make", versus when speaking to investment bankers, "How much money are you expecting to get your hands on"--we'd go along way not only toward using language accurately but significantly improving society.
Re:News for Nerds??!! (Score:4, Interesting)
Joe Sixpack: Yanno guy, I don't think I can afford a $500,000 house on a police officer's income.
Scamming Broker: Don't worry about it. Housing prices keep going up. Sure, the interest payments on this mortgage are going to balloon in five years, but that's why you refi in four years instead.
Joe: Are you sure about this? I'm a little worried. What if I can't refi?
Broker: Don't worry about it. We've been doing this for years. I'm a certified professional. You're paying me thousands of dollars because I know what I'm doing. Trust me, you will be okay.
---
Is it still Joe's fault for believing the certified professional from which he sought advice?
And by the way, the security ratings mean quite a lot, actually. Many investors, such as pension funds, are only legally allowed to buy AAA-rated debt. The demand for AAA-rated debt is quite large, which is why they were able to sell so many toxic MBS/CDO. The demand for less-than-AAA-rated debt is MUCH smaller, and certainly not big enough to absorb all those toxic mortgages. Had the ratings agencies done their job (all of them, not just one or two), Wall Street would have been unable to sell toxic CDOs, which means they were unable to buy/sell toxic MBS, which means they were unable to buy toxic mortgages from scammers, which means the scammers were never able to lend money to people for toxic mortgages.
Investors should be able to count on the debt ratings. They're baked into laws, after all. The problem is that the people bundling the CDOs were the ones who paid for the ratings agencies to rate their debt. This creates a conflict of interest - the ratings agencies don't want to rate the debt too low or they'll lose market share to their competitors when all the firms on Wall Street go there for the better ratings. Instead, ratings should be paid for by investors, not the people peddling the debt.