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Businesses The Almighty Buck

Email Trails Show Bankers Behaving Badly 251

Posted by samzenpus
from the sniffing-out-the-rats dept.
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."
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Email Trails Show Bankers Behaving Badly

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  • Get a rope! (Score:5, Insightful)

    by hessian (467078) on Friday February 08, 2013 @08:21AM (#42831133) Homepage Journal

    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.

    • good luck with that. Maybe if they didn't have all those armies of well trained soldiers with machine guns...
      • by L4t3r4lu5 (1216702) on Friday February 08, 2013 @09:10AM (#42831531)
        I don't think I've seen anybody who isn't a head of state moving around in public with an armed guard, much less an actual army. They hire ex police to patrol their private driveway, and maybe the chauffeur carries a pistol. There is next to nothing to stop some crazed nutbag, or a concerted group, from offing one of them in broad daylight except the rule of law.

        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.
        • by nitehawk214 (222219) on Friday February 08, 2013 @10:34AM (#42832509)

          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.

        • by Magada (741361)

          I would be happy if this was tried in the ICC at The Hague, as what they did was an international crime.

          I could settle for an old-fashioned tar&feathering. If their security is as bad as you imply, it should be easy&fun.
          But I doubt it.

    • by c0lo (1497653)

      And stop creating government regulations that give them lots of loopholes to exploit.

      Yeap. Better totally deregulate the industry... you see?... no loopholes to exploit

      (ducks)

    • 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.

      You beat me to it. Hang 'em. Hang them high.

  • What a surprise! (Score:5, Insightful)

    by furbyhater (969847) on Friday February 08, 2013 @08:24AM (#42831147)
    Now we can see who sits in the cockpit of the "invisible hand". 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. Overt anti-social behaviour is to be punished, that's the whole point of laws. That these people will get of scot-free or with only small (for them) fines is fresh evidence that the structure of our society needs mending. News at 11'!
    • Re: (Score:2, Troll)

      by crazyjj (2598719) *

      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.

      • Re:What a surprise! (Score:4, Interesting)

        by fuzzyfuzzyfungus (1223518) on Friday February 08, 2013 @08:52AM (#42831339) Journal

        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!

    • by sesshomaru (173381) on Friday February 08, 2013 @09:15AM (#42831583) Journal

      "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.

      • Great comparison! It's difficult to stay sane in such an environment... and reading slashdot regurarly validates this assumption ;-)
      • by DeadCatX2 (950953)

        I've wondered a few times whether Mr. Swartz should have created something like "Information Liberation Inc." or something to that effect. Perhaps if he had engaged in his actions as a company instead of an individual, he could have avoided being labeled a felon and thrown in prison.

        I mean, Carmen Ortiz let it work for St. Jude's. And GlaxoSmithKline. And Forest Laboratories.

    • by ElmoGonzo (627753)
      Really, cue Claude Rains and all that.
    • by Mitreya (579078)

      Now we can see who sits in the cockpit of the "invisible hand". 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...

      The mechanism operates just as intended. Bankers are not really there to "safeguard" our community and it is foolish to expect them to do so.
      If they are punished for bad behavior, they will (mostly) stop behaving badly. If they are rewarded for bad behavior, they will behave worse and worse until they are punished
      Even if they aren't sociopaths, that is a normal reaction.

  • by NoNonAlphaCharsHere (2201864) on Friday February 08, 2013 @08:24AM (#42831151)
    This reminds me of the "Barry Bonds took steroids, reports everyone who ever watched baseball" story from The Onion. I'm shocked, simply shocked at how unsuprised I am.
    • I'm with you here, but the lack of shock, surprise, and outrage is a terrible indication that we've become so comfortable with the misdeeds of our political and financial leaders that we expect no better from them. They egregiously abuse their positions for monetary gain, quite often with consequences no more severe than the obligatory 50 lashes with a wet noodle, when a federal sentence with a side of prison rape seem much more appropriate.
  • Not exactly news (Score:5, Interesting)

    by michelcolman (1208008) on Friday February 08, 2013 @08:24AM (#42831153)

    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: (Score:2, Insightful)

      by crazyjj (2598719) *

      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.

    • Of course I blame the individual bankers who made the decisions that led up to this, who else is there to blame?!
      I dont' think that anything was coordianted "higher up" than those finiancial institutions who made profit from the whole fiasco.
    • by dkleinsc (563838) on Friday February 08, 2013 @09:52AM (#42831967) Homepage

      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.

      • In the 1990's there was a suggestion that over the counter derivatives (CDS, MBS included) be regulated by the then head of the CFTC, Brooksley Born.

        This got slapped down hard by Greenspan, Summers, Rubin etc.

        Regulated derivatives like options are far less profitable and far more transparent so of course the issuers of the OTC derivatives don't want that.

        Regulation is still needed. People in the industry will tell you that the games are still going on.

  • Reform (Score:4, Insightful)

    by smitty_one_each (243267) * on Friday February 08, 2013 @08:37AM (#42831235) Homepage Journal
    Look, anybody who wants to see anything different has got to tell me how we de-centralize.
    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.
    • Re:Reform (Score:5, Interesting)

      by moeinvt (851793) on Friday February 08, 2013 @09:00AM (#42831415)

      "...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.

      • Yes, but if you follow the frogskins, these efforts at restoring state/local sovereignty will be crushed by turning off the money spigot.
    • by dkleinsc (563838)

      Look, anybody who wants to see anything different has got to tell me how we de-centralize.

      Something the Occupy Wall St folks did was organize a "Move your Money Day", which was a mass effort to have people close out their accounts at the big banks and put the money into local banks and credit unions. They claim to have pulled $50 million out of the big banks and put it into small banks. These were the same people talking about "Too Big to Fail" - they were actually trying to decentralize, exactly as you suggested.

  • and do hard time, nothing will change.
    Unfortunately, Obama has proved a friend to the wealthy and powerful, so don't hold your breath.

  • Standard and Poor may not have acted quickly on downgrading these bad loans (they ALL were reluctant to downgrade them, S&P were losing business because they weren't keen to give them good ratings!). The reason S & P are currently under attack is simple:

    They downgraded the dollar because Congress wouldn't tackle the government debt. As soon as they did that, the Fed started threatening them with prosecution over bad ratings.

    The current deal with the Republicans in Congress includes a raising of the

  • by 140Mandak262Jamuna (970587) on Friday February 08, 2013 @08:53AM (#42831349) Journal
    I am no fan of S&P rating agency and what they did was horrendous. There was clear conflict of interest in rating a bond/secutiry/instrument and getting paid by the sellers of the very same instruments. But on the other hand the people who were "duped" by the practice are not tiny small investors, without the means to do independent verification or the means to do due diligence on the rating agencies. Heck, the very same big banks that claim to be "duped" by the inflated ratings given by S&P actively participated in the very same rating rigging scheme. They know very well every body is doing it. These banks that bought the bonds were also repacking the very same bonds and putting them back on the market, and they paid the very same rating agency the very same "commissions" to get them inflated too.

    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.

    • Great comment :-) Especially the last phrase made me chuckle.
      The car's engine is breaking down and needs a change...
    • by trepanne (2648397)

      I am no fan of S&P rating agency and what they did was horrendous. There was clear conflict of interest in rating a bond/secutiry/instrument and getting paid by the sellers of the very same instruments. But on the other hand the people who were "duped" by the practice are not tiny small investors, without the means to do independent verification or the means to do due diligence on the rating agencies. Heck, the very same big banks that claim to be "duped" by the inflated ratings given by S&P actively participated in the very same rating rigging scheme. They know very well every body is doing it. These banks that bought the bonds were also repacking the very same bonds and putting them back on the market, and they paid the very same rating agency the very same "commissions" to get them inflated too.

      All quite true. It's important to understand the the most important modality of Wall Street greed is *individual* greed. Generally speaking, each employee has massive incentive to game the system in order to get a huge bonus at the end of the year. If his gaming of the system subsequently blows up his employer, or the US financial system, the worst that happens is that he gets fired - but he gets to keep bonuses reaped to date. This asymmetry explains much Wall Street behavior... make hay while the sun

    • by Vaphell (1489021)

      Egan-Jones is a small ratings agency that is paid by the buyers. It's famous for harsh ratings and coincidentally got hit by the 18month ban on govt bond ratings few weeks ago.

  • by h4rr4r (612664) on Friday February 08, 2013 @09:01AM (#42831427)

    Someone who sells ratings should not also be buying and selling these products. Of course there is a huge perverse incentive here.

    • Investment banks don't rate their own products.

      They pay ratings companies to rate them.

      Do you see the difference?

      If you do please let me know what it is.

  • Perspective (Score:5, Interesting)

    by kenh (9056) on Friday February 08, 2013 @09:18AM (#42831607) Homepage Journal

    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.

    • TL;DR Lying is A-OK if you're a businesman trying to make money. ???
    • I would prefer to make my living as a traditional prostitute than to work at one of the companies you describe, prostituting my mind and "soul".
  • But we get the [rollingstone.com] point [pbs.org].

    It's very well established that banks committed fraud. It's very well established that the US Government protected these very institutions when they were knowledgeable of the fraud being committed.

    It's also very well established that no one's going to criminal court. Wall Street and Washington D.C. have been coupled together in such an orgy of conspiracy that neither will willingly do anything to jeopardize their sybiotic relationship.

  • It's a long time ago that I heard from "Feathers" McGraw. (For those who don't know: https://wallaceandgromit.wikia.com/wiki/Feathers_McGraw [wikia.com] )
  • The thing is, if we allowed the free market to work, then AIG, JP Morgan, Morgan Stanley, and all the big banks who participated in this would have evaporated overnight and regional banks who acted responsibly would have stepped in to fill the void. But the free market was not allowed to do its thing and we have a doubling down on crony capitalism that will fail again, bigger.

    A lot of people like to pretend there's an all-powerful government out there that can suppress any dissent, but we've all seen the l

  • The US still hasn't had it's revolution (since it's establishment after the seccesion from the British), I guess it's really about time!
  • People are People (Score:4, Insightful)

    by Nyder (754090) on Friday February 08, 2013 @10:02AM (#42832103) Journal

    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.

  • As far as I could tell (as an about to graduate or just graduated CS major) the economy crashed somewhere around 2000/2001 and never really did recover. It's only been downhill since. That's what I remember hearing in the media at the time too. The economy was crashing. It was only after the housing market did it's thing that suddenly history was rewritten and the crash didn't happen until later. I guess the world just cares more about realestate agents than geeks.

    • by Skapare (16644)

      Hard on the edges, soft in the middle ... the "2000 to 2013" "economic minimum" which actually had several ups and downs, including three biggies.

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