2/20/13

Say what you will about Liz Warren, she knows how to give the feckless bank regulators hell on camera. It's kinda funny that a Senate hearing is blowing up on YouTube, but here we are. It's hilarious how not one bank regulator can cite a single case of a Wall Street bank being brought to trial. It's no secret that I have a lot of respect and admiration for Warren, which I realize is not a popular opinion on Wall Street. But you have to give credit where credit is due, and she's definitely a bigger asset on the Senate Banking Committee than we've seen in a long time. Give 'em hell, Doc:

And here's the uncut testimony that's going viral:

Comments (160)

Best Response
2/20/13

I don't mind that she's hard on banks. Charlie Gasparino is hard on banks, and I think he's great.

I can't stand her because she is hard on banks while peddling populist rhetoric. Then there is her role in the CFPB...a new, remarkably unaccountable government agency that "solves" non-existent problems.

Were swipe fees really an issue? Really? How about overdraft fees and payday lending? Yes, those products are terrible values, but it was not exactly a secret...Then you have her role in Dodd-Frank, the grandfather of all "fixing problems that don't exist" acts. 4 years, thousands of pages, and it still fails to address the causes of the crisis.

And personally she's atrocious. The affirmative action fraud is the least of my objections. Whenever she opens her mouth, you could swear she's the bastard offspring of Pelosi and Matt Taibbi. Bullshit enveloped in the authority of academia.

2/20/13
2/20/13

"We truly believe that we have a very vigorous enforcement program."
-SEC Chairwoman

L.O.L.

2/20/13

Even if people dont' like this stuff, the end is actually fairly relevant. Prosecuters go out of their way to take small people to trial to "set an example", yet refuse to touch the banks.

2/20/13

Eddie I suggest u spend more time reading zerohedge and less on pony shows

In reply to newfirstyear
2/20/13

newfirstyear:
Nobody wanna watch this liberal junk.

"They are all former investment bankers that were laid off in the economic collapse that Nancy Pelosi caused. They have no marketable skills, but by God they work hard."

2/20/13

Well, all the co-mingled issues aside it is certainly refreshing to actually see someone start going after the regulators asking, " what the fuck were you clowns doing?" I don't agree with most of what she says and traditionally she makes my head want to push itself through a window. That said, these settlements are a fucking joke and someone needs to actually ask the question of what is the point of regulation if you have no authority or will to actually enforce it. To a few of the posters above, I suggest you actually watch this "liberal junk" because guess what? It's about to consume us for the next 4, and realistically the next 8 to 12 years. There are very few people who could end up having more of a direct impact on your jobs and future going forward outside of this woman. She is powerful, popular, smart and most importantly shrewd as hell. I respect her even If I don't agree with her.

Obviously, she knows the answer going into this and is simply showboating the incompetence of the current regulators which then gives rise to the ability to set up new agencies which will go in and do what the current ones cannot; or just give the current ones sweeping authority and even stricter regulations. Frankly she scares the shit out of me. haha.

2/20/13

Wasn't this the lady who lied about being a native American? Maybe conservatives and moderates should just join the Democratic party in Massachusetts, since that seems to be the only necessary qualification to get elected there. That's my rant for today.

In reply to JulianRobertson
2/20/13

JulianRobertson:
Wasn't this the lady who lied about being a native American? Maybe conservatives and moderates should just join the Democratic party in Massachusetts, since that seems to be the only necessary qualification to get elected there. That's my rant for today.

That was a pretty irrelevant rant.

"For I am a sinner in the hands of an angry God. Bloody Mary full of vodka, blessed are you among cocktails. Pray for me now and at the hour of my death, which I hope is soon. Amen."

2/20/13

She is a liberal and a liar, which is synonymous. And why hasn't a bank been brought to trial? Plenty of individuals in finance have been arrested and tried. Just because a bank fails or had poor controls doesn't mean the CEO has committed a crime.

But sure, if the sheep want it, why not imprison everyone who works at Citi. I mean that would be throwing a bank in jail and I am sure the morons would cheer for it.

Government creates a problem, then creates more government to solve the problem it created. The SEC is and was incompetent and now we have an elected official who is trying to increase government to solve the problem.

Fail ^3

In reply to JulianRobertson
2/20/13

JulianRobertson:
Wasn't this the lady who lied about being a native American?

Yes, and I get the impression that she a lot of skeletons in her closet. Perhaps not as funny as Bill O'Reilly's vibrating dildo (true story) or J Hoover's cross dressing....but no one's taken a close look into her past. I'm all for slipping through the cracks and moving past youthful indiscretions, but I'd like some integrity in investigators or we just end up with another Elliot Spitzer who screws us all over and then goes down in a fiery ball of flames themselves.
Addinator:
it is certainly refreshing to actually see someone start going after the regulators asking, " what the fuck were you clowns doing?"

Hell yeah dude.

Get busy living

2/20/13

I think France is turning you socialist. Get out now!

2/20/13

When's the last time a politician didn't have skeletons in their closets?

In reply to TNA
2/20/13

TNA:
She is a liberal and a liar, which is synonymous. And why hasn't a bank been brought to trial? Plenty of individuals in finance have been arrested and tried. Just because a bank fails or had poor controls doesn't mean the CEO has committed a crime.

But sure, if the sheep want it, why not imprison everyone who works at Citi. I mean that would be throwing a bank in jail and I am sure the morons would cheer for it.

Government creates a problem, then creates more government to solve the problem it created. The SEC is and was incompetent and now we have an elected official who is trying to increase government to solve the problem.

Fail ^3


Fuck are you talking about? Angelo Mozillo isn't guilty? Jon Corzine isn't guilty? Dick Fuld had no idea what the fuck was going to happen?...and I call bullshit on that because I and other guys KNEW that Bear and Lehman were in deep shit during recruiting season months before. A family member was specifically told NOT to accept the offer at Bear because their shit was getting jacked and the firm was getting fucked all ways like a hooker at a gang bang. Nothing was fucked? ....uhm, everything was fucked, and everyone knew about it. At the time, I was fucking bartender....IF I KNEW THAT, THEY DEFINTELY KNEW ABOUT IT.

I'm not sure how much clearer I can make this to you, unless you just don't want to see, and therefore just aren't worth acknowledging.

Just to illustrate how little accountability there was in industry, Jim Cramer was telling people to buy Lehman shares days before and still has his show. Had that been any other sector, any other field, these people would all be unemployed at the least, much more likely behind bars. He still has credibility? He still has a fucking job in this business??? HOW? It's an insult to guys like you and me who know what the fuck they're doing. He's a fake, a snake oil salesman, and it's fucking demoralizing when a crook gets ahead. If you just want to rationalized that away, good for you, but personally it pisses me the fuck off.

I call bullshit, they cruise on momentum and buy corruption, and unlike you I personally don't care what side of the political isle they come from.

Look at it this way:

Truthfully, in my darker days, I look at this stuff and conclude "shit, the rules are selectively enforced and your precious fucking America is bullshit so I'm just going to do whatever the fucking hell I can get away with, your Constitution and nosy rule books be damned. Fuck the rules, fuck 'capitalism', and fuck you. I'm just taking what I want." Not bad if it's just me, one person, but you seem to have no comprehension of how many people, more and more, see things this way. If a bad law is made, then argue it, but if basic fraud laws aren't going to be enforced then the system that you profit so much from starts to break down. Truth also is, I'd get away with anything I tried, but I have a concience. Getting away with something doesn't make it right, and these guys are still fucking crooks. If someone fucks up, they get canned. If they cross the line, they go to jail. It applies for you and me and I'll be damned the day I condone things just because someone has a lot of money and power. IT'S STILL WRONG.

You ever play in a hockey game where the ref is just calling one side? You want to just take it out into the parking lot after the game, it's maddening, and you cease to care what the consequences are because, shit, it doesn't matter anyway. THAT'S how a lot of America feels right now, especially the ones hurt by the recession who had NOTHING to do with the fucking bubble. 40% of American wealth was vaporized, and it's no one's fault? Dude, seriously, you need to get in touch with reality, I truly don't understand where you're coming from and you sound ridiculous.

Disagree if you must argue just to do it, I'm just the messenger.

Get busy living

In reply to TNA
2/20/13

TNA:
She is a liberal and a liar, which is synonymous.

Thoughtful.

TNA:
And why hasn't a bank been brought to trial? Plenty of individuals in finance have been arrested and tried.

Who exactly has been arrested and/or tried stemming from the financial crisis? Most high profile cases I can think of involve rogue traders (who harmed the banks).

TNA:
Just because a bank fails or had poor controls doesn't mean the CEO has committed a crime.

Negligence is a crime. If you are supervising employees who are laundering money for terrorist organizations (HSBC) you are breaking the law.

"For I am a sinner in the hands of an angry God. Bloody Mary full of vodka, blessed are you among cocktails. Pray for me now and at the hour of my death, which I hope is soon. Amen."

2/20/13

"ehhhh she's a liberal!"

If that's your only response to what she said, you either:

a.) Didn't watch the video

or

b.) Are an assclown walking through the world with blinders on

2/20/13

In the USA it is innocent until proven guilty. The onus is those who think there is guilt to prove it. While I have no doubt the players in the financial crisis hold a lot of the blame for what happened, that doesn't mean they were committing a crime.
http://dealbook.nytimes.com/2012/08/15/no-criminal...

"After 10 months of stitching together evidence on the firm's demise, criminal investigators are concluding that chaos and porous risk controls at the firm, rather than fraud, allowed the money to disappear, according to people involved in the case.

The hurdles to building a criminal case were always high with MF Global, which filed for bankruptcy in October after a huge bet on European debt unnerved the market. But a lack of charges in the largest Wall Street blowup since 2008 is likely to fuel frustration with the government's struggle to charge financial executives. Just a few individuals -- none of them top Wall Street players -- have been prosecuted for the risky acts that led to recent failures and billions of dollars in losses."

"...concluding that chaos and porous risk controls at the firm, rather than fraud, allowed the money to disappear..."

"...The hurdles to building a criminal case were always high with MF Global..."

Hey, fuck it. Because your family members knew that you shouldn't accept an offer at Bear or Lehman then everyone knew Fuld was committing crimes. Makes perfect sense. Let me know where to send my payment for the 1-800 Lawyer services people are offering here.

And she is a liberal, which means she supports more government, more taxes and less freedom. I ignore Nazi's and racists because I know the shit that will come out of their mouths. Same with liberals. Every problem in the world can be solved with more government and more taxation. Yeah, I don't need to pay attention to that Anti-American bullshit.

In reply to duffmt6
2/20/13

duffmt6:
TNA:
She is a liberal and a liar, which is synonymous.

Thoughtful.

TNA:
And why hasn't a bank been brought to trial? Plenty of individuals in finance have been arrested and tried.

Who exactly has been arrested and/or tried stemming from the financial crisis? Most high profile cases I can think of involve rogue traders (who harmed the banks).

TNA:
Just because a bank fails or had poor controls doesn't mean the CEO has committed a crime.

Negligence is a crime. If you are supervising employees who are laundering money for terrorist organizations (HSBC) you are breaking the law.

Criminla negligence is a crime. Negligence in its most simple for is a CIVIL offense. Big distinction.
http://en.wikipedia.org/wiki/Criminal_negligence

The management at HSBC were guilty of civil negligence. Criminal negligence is much harder to prove and the government probably wouldn't have been able to make a case.

In reply to TNA
2/20/13

TNA:
In the USA it is innocent until proven guilty. The onus is those who think there is guilt to prove it. While I have no doubt the players in the financial crisis hold a lot of the blame for what happened, that doesn't mean they were committing a crime.
http://dealbook.nytimes.com/2012/08/15/no-criminal...

"After 10 months of stitching together evidence on the firm's demise, criminal investigators are concluding that chaos and porous risk controls at the firm, rather than fraud, allowed the money to disappear, according to people involved in the case.

The hurdles to building a criminal case were always high with MF Global, which filed for bankruptcy in October after a huge bet on European debt unnerved the market. But a lack of charges in the largest Wall Street blowup since 2008 is likely to fuel frustration with the government's struggle to charge financial executives. Just a few individuals -- none of them top Wall Street players -- have been prosecuted for the risky acts that led to recent failures and billions of dollars in losses."

"...concluding that chaos and porous risk controls at the firm, rather than fraud, allowed the money to disappear..."

"...The hurdles to building a criminal case were always high with MF Global..."

Hey, fuck it. Because your family members knew that you shouldn't accept an offer at Bear or Lehman then everyone knew Fuld was committing crimes. Makes perfect sense. Let me know where to send my payment for the 1-800 Lawyer services people are offering here.

And she is a liberal, which means she supports more government, more taxes and less freedom. I ignore Nazi's and racists because I know the shit that will come out of their mouths. Same with liberals. Every problem in the world can be solved with more government and more taxation. Yeah, I don't need to pay attention to that Anti-American bullshit.

As far as I'm concerned the MF Global situation simply highlights how weak US regulators are. You're telling me that overseeing a multi billion dollar brokerage firm with "porous risk controls" isn't worthy of a criminal conviction?

"For I am a sinner in the hands of an angry God. Bloody Mary full of vodka, blessed are you among cocktails. Pray for me now and at the hour of my death, which I hope is soon. Amen."

2/20/13

Eddie, if you're into that testimony, you have to see this: http://www.pbs.org/wgbh/pages/frontline/untouchables/

The DoJ's Criminal Chief said he was afraid of what would happen if he went after the banks. He stepped down about a week after this episode.

In reply to UFOinsider
2/20/13

UFOinsider:
TNA:
She is a liberal and a liar, which is synonymous. And why hasn't a bank been brought to trial? Plenty of individuals in finance have been arrested and tried. Just because a bank fails or had poor controls doesn't mean the CEO has committed a crime.

But sure, if the sheep want it, why not imprison everyone who works at Citi. I mean that would be throwing a bank in jail and I am sure the morons would cheer for it.

Government creates a problem, then creates more government to solve the problem it created. The SEC is and was incompetent and now we have an elected official who is trying to increase government to solve the problem.

Fail ^3

Nothing was fucked? ....uhm, everything was fucked, and everyone knew about it. At the time, I was fucking bartender....IF I KNEW THAT, THEY DEFINTELY KNEW ABOUT IT.

LOL. If you knew what was going on at the time, you'd be retired on a fucking beach right now. Anybody can talk shit about knowing something AFTER it happens, but the fact is that you were too much of a pussy to do anything about it. That's why Fuld, Corzine, and every other CEO who's bank went under is unemployed, and why Cramer was recommending a stock days before it collapsed. Nobody, including the employees knew the scale of the situation. They were only speculating, and that's how Paulson made $4B that year. He figured he might as well make the best out of the situation for his investors, and there was no going back at that point. It's not like he was hoping America would fail, which is how every idiot perceives short sellers.

People make mistakes, were human, and you can't predict the future. I'm sure Fuld didn't wake up everyday and think, "hmm, how can I bankrupt a 100 year old investment bank, lose my job, and make the entire human population hate me?"

In reply to TNA
2/20/13

TNA:
In the USA it is innocent until proven guilty. The onus is those who think there is guilt to prove it

I learned this in kindergarten too, congrats buddy.

If no one's ever being taken to trial then that's a pretty easy way to redefine the rules in favor of those pulling the strings, yes? They're just throwing money out for a settlement with "no admission of guilt", and I'd fault the regulators like Warren is. Settling is probably a better idea in small cases, but these guys wrecked the global system....and by system, I don't mean some abstraction, I mean people. A world full of people that were adversely affected by this, and nothing happened to the people with the most power and responsibility. Talk about irresponsible: if one idiot takes out too much mortage and loses his home, he's irresponsible. If a bank takes the wealth of a nation and levers it 40x on stuff they themselves call horseshit....it's irresponsible. Instead of lawsuits, they got bailed out, and now I want to see heads on a fucking pole. Stop drinking the GOP koolade for a few minutes and realize that the government wasn't enforcing its own laws because the people in office at the time were on the side of the people breaking them.

Now it's time to pay the fucking piper, and well they should. If I'm going to build a career on honesty, I'd prefer to have it not work against me. I'd prefer to not be robbed. I'd prefer to think that I'd stand a chance in court if I was. Otherwise, what's stopping me from being a criminal too, aside from my own concience? What's stopping me from taking someone outside and breaking their fucking neck like I did when I was a bartender? (or having someone 'handle it' for me). The laws can be changed, but until they are the regulators are supposed to enforce it instead of merely giving the impression they do: I'm under the impression that anyone who disagrees is crooked as well.

Not sure why this is seen as negotiable / arguable in any way.

Christ, I know this bitch hates us, and just because of our jobs. She's never generated revenue in her life and simply has no concept of it, so all she sees is "OMGZ greedy business devils". So fuck her. Frankly, I don't think I'd like her at all if we were to be aquainted, she seems like a bitter jilted bitch who's chosen career over her personal life all the way and now regrets it and wants to make it someone else's fault (I'd bet money on that too).

But if she's getting the government to do its fucking job, I don't care about that. I want to see the rules either 1) enforced or 2) made reasonable. I think that's not too much to ask for in the self proclaimed "greatest nation on earth". If not, America, hand over your title you fucking has been.

Get busy living

In reply to duffmt6
2/20/13

duffmt6:
TNA:
In the USA it is innocent until proven guilty. The onus is those who think there is guilt to prove it. While I have no doubt the players in the financial crisis hold a lot of the blame for what happened, that doesn't mean they were committing a crime.
http://dealbook.nytimes.com/2012/08/15/no-criminal...

"After 10 months of stitching together evidence on the firm's demise, criminal investigators are concluding that chaos and porous risk controls at the firm, rather than fraud, allowed the money to disappear, according to people involved in the case.

The hurdles to building a criminal case were always high with MF Global, which filed for bankruptcy in October after a huge bet on European debt unnerved the market. But a lack of charges in the largest Wall Street blowup since 2008 is likely to fuel frustration with the government's struggle to charge financial executives. Just a few individuals -- none of them top Wall Street players -- have been prosecuted for the risky acts that led to recent failures and billions of dollars in losses."

"...concluding that chaos and porous risk controls at the firm, rather than fraud, allowed the money to disappear..."

"...The hurdles to building a criminal case were always high with MF Global..."

Hey, fuck it. Because your family members knew that you shouldn't accept an offer at Bear or Lehman then everyone knew Fuld was committing crimes. Makes perfect sense. Let me know where to send my payment for the 1-800 Lawyer services people are offering here.

And she is a liberal, which means she supports more government, more taxes and less freedom. I ignore Nazi's and racists because I know the shit that will come out of their mouths. Same with liberals. Every problem in the world can be solved with more government and more taxation. Yeah, I don't need to pay attention to that Anti-American bullshit.

As far as I'm concerned the MF Global situation simply highlights how weak US regulators are. You're telling me that overseeing a multi billion dollar brokerage firm with "porous risk controls" isn't worthy of a criminal conviction?

1) Regulators are incompetent. More regulators = more incompetence.

2) Do I think Corzine should be drawn and quartered? Sure. I support this.

But we live in a civilized society with rules and laws. Laws which can be manipulated. Manipulations which piss people off until then benefit from them. Just like how people hate banks until they realized that mortgage contracts were robosigned and could be fought. Now you have people living in homes for 3 plus years without paying for them.

Law. It sucks, but it is the best thing we've got. We start lynching Corzine, Fuld, etc and the slope gets real slippery.

Do I think he should pay? Yeah. Can I prove it? No. And this is the point. We throw around words like criminal and go to jail real casually, but the reality is a lot different. It is hard to prove criminal negligence which is why civil is the easier route.

And for all the hate the bankers get, how about the government that failed in their job and now blames everyone else. How about we point the finger and the cops who were sleeping instead of policing? Those are the real criminals.

In reply to BTbanker
2/20/13

BTbanker:
If you knew what was going on at the time, you'd be retired on a fucking beach right now. Anybody can talk shit about knowing something AFTER it happens, but the fact is that you were too much of a pussy to do anything about it.

LOL I didn't care about this stuff at the time broski, I just knew that some bank was in trouble, just like I knew the mayor was cheating on his wife and didn't care to be involved with that mess in any way. After seeing shit go down, well yeah I got interested, who the hell thought the entire global banking system would implode. FYI, that family member made a literal fucking killing between then and now, so, shut the fuck up. I have no reason to bullshit you, I'm just speaking my mind. If you don't like it, that's too bad for you.

But at least offer some type of valid point, I'm not interested in an exchange with retarded folks today.

Get busy living

In reply to UFOinsider
2/20/13

UFOinsider:
TNA:
In the USA it is innocent until proven guilty. The onus is those who think there is guilt to prove it

I learned this in kindergarten too, congrats buddy.

If no one's ever being taken to trial then that's a pretty easy way to redefine the rules in favor of those pulling the strings, yes? They're just throwing money out for a settlement with "no admission of guilt", and I'd fault the regulators like Warren is. Settling is probably a better idea in small cases, but these guys wrecked the global system....and by system, I don't mean some abstraction, I mean people. A world full of people that were adversely affected by this, and nothing happened to the people with the most power and responsibility. Talk about irresponsible: if one idiot takes out too much mortage and loses his home, he's irresponsible. If a bank takes the wealth of a nation and levers it 40x on stuff they themselves call horseshit....it's irresponsible. Instead of lawsuits, they got bailed out, and now I want to see heads on a fucking pole. Stop drinking the GOP koolade for a few minutes and realize that the government wasn't enforcing its own laws because the people in office at the time were on the side of the people breaking them.

Now it's time to pay the fucking piper, and well they should. If I'm going to build a career on honesty, I'd prefer to have it not work against me. I'd prefer to not be robbed. I'd prefer to think that I'd stand a chance in court if I was. Otherwise, what's stopping me from being a criminal too, aside from my own concience? What's stopping me from taking someone outside and breaking their fucking neck like I did when I was a bartender? (or having someone 'handle it' for me). The laws can be changed, but until they are the regulators are supposed to enforce it instead of merely giving the impression they do: I'm under the impression that anyone who disagrees is crooked as well.

Not sure why this is seen as negotiable / arguable in any way.

Christ, I know this bitch hates us, and just because of our jobs. She's never generated revenue in her life and simply has no concept of it, so all she sees is "OMGZ greedy business devils". So fuck her. Frankly, I don't think I'd like her at all if we were to be aquainted, she seems like a bitter jilted bitch who's chosen career over her personal life all the way and now regrets it and wants to make it someone else's fault (I'd bet money on that too).

But if she's getting the government to do its fucking job, I don't care about that. I want to see the rules either 1) enforced or 2) made reasonable. I think that's not too much to ask for in the self proclaimed "greatest nation on earth". If not, America, hand over your title you fucking has been.

Lying on a credit application is also criminal. When the bankers go to jail I hope to see homeowners sitting with them.

Taking a fine is easier then going to court for a criminal case. Where you are simply trying to prove criminal negligence, a much higher standard. And who is going to go to jail? Fuld? His second in command? A VP on the MBS desk?

Warren is a politician pushing populace bullshit. And if banks hold too much power it is because government gives it to them. Reduce government and you reduce their power.

In reply to BTbanker
2/20/13

BTbanker:
UFOinsider:
TNA:
She is a liberal and a liar, which is synonymous. And why hasn't a bank been brought to trial? Plenty of individuals in finance have been arrested and tried. Just because a bank fails or had poor controls doesn't mean the CEO has committed a crime.

But sure, if the sheep want it, why not imprison everyone who works at Citi. I mean that would be throwing a bank in jail and I am sure the morons would cheer for it.

Government creates a problem, then creates more government to solve the problem it created. The SEC is and was incompetent and now we have an elected official who is trying to increase government to solve the problem.

Fail ^3

Nothing was fucked? ....uhm, everything was fucked, and everyone knew about it. At the time, I was fucking bartender....IF I KNEW THAT, THEY DEFINTELY KNEW ABOUT IT.

LOL. If you knew what was going on at the time, you'd be retired on a fucking beach right now. Anybody can talk shit about knowing something AFTER it happens, but the fact is that you were too much of a pussy to do anything about it. That's why Fuld, Corzine, and every other CEO who's bank went under is unemployed, and why Cramer was recommending a stock days before it collapsed. Nobody, including the employees knew the scale of the situation. They were only speculating, and that's how Paulson made $4B that year. He figured he might as well make the best out of the situation for his investors, and there was no going back at that point. It's not like he was hoping America would fail, which is how every idiot perceives short sellers.

People make mistakes, were human, and you can't predict the future. I'm sure Fuld didn't wake up everyday and think, "hmm, how can I bankrupt a 100 year old investment bank, lose my job, and make the entire human population hate me?"

No, he woke up everyday with a raging hard on for Goldman Sachs saying how much leverage do I need and how much risk do I need to take to be just like them. That's not a mistake as much as it is rampant greed and insecurity driving someone to encourage a culture of rampant risk taking. It is naive to think that people inside wall street didn't know how it was going to end. Of course they did. Did they think they were going to be the ones stupid enough to be left holding the bag? Of course not. And therein lies the problem. As with everything it was just a question of timing and whether you could either get out first or insure yourself enough against the losses to stay afloat. We were asking for higher returns, Houses for everyone and money for free. We desperately wanted the growth and spending ability to fuel the American dream and Wall Street facilitates and always will facilitate that.

2/20/13

Look folks, here's what we need to do:

--Either allow banks to fail when they blow themselves (and the global economy) up

or

--If the banks are considered "Too Big to Fail," then we need to either properly regulate them or make them smaller so that they can be allowed to fail like any other type of business on Earth

Lastly, to anyone who has any doubts about the wrongdoing and illegal activities that went on in the lead-up to the crisis, I highly recommend you read the Levin-Coburn Report on the Financial Crisis that came out back in 2011. It's available for free online in a PDF form. It's a great summary along with an insane amount of primary sources (emails, testimony, etc.) I read it back when it came out and it's pretty mind blowing. To act like no one did anything illegal is insane. At the very least, there are several people, including Dick Fuld and Angelo Mozillo, that could have been brought to trial.

In reply to TNA
2/20/13

TNA:
But we live in a civilized society with rules and laws. Laws which can be manipulated.

Do you have a point? The whole focus of this discussion is how the laws were manipulated and how someone is trying to deal with it. Yeah Warren is a liberal, but I don't fucking care if they're getting shit done.

The guy who wrote the Pledge of Allegiance was a socialist, but that whole thing worked out well, yes? Christ, can you put reality ahead of your politics for one second? Seriously, I grew up around Irish, Catholic, Conservative, Repulican, Marines who weren't as toolishly brainwashed as you. It's impossible to explore any ethic topic here without you forcing people to either 1) write huge detailed exigesis or 2) adopting equally one sided rhetoric. Is this how you go through life?

Or do you just argue to do it?

What's your deal?

Get busy living

2/20/13

http://www.levin.senate.gov/imo/media/doc/supporti...

That's a direct link to the report. And, FYI, it was co-authored by Tom Coburn, one of the most conservative Republicans in the Senate. I especially recommend it to some of the younger folks on here that didn't work through the crisis.

In reply to duffmt6
2/20/13

duffmt6:

Negligence is a crime. If you are supervising employees who are laundering money for terrorist organizations (HSBC) you are breaking the law.


In this case, negligence is a tort that has to be proven with preponderance of the evidence. It doesn't involve criminal law.
In reply to Addinator
2/20/13

Addinator:
It is naive to think that people inside wall street didn't know how it was going to end. Of course they did. Did they think they were going to be the ones stupid enough to be left holding the bag? Of course not. And therein lies the problem. As with everything it was just a question of timing and whether you could either get out first or insure yourself enough against the losses to stay afloat.

Exactly.

Get busy living

In reply to TNA
2/20/13

TNA:
duffmt6:
TNA:
In the USA it is innocent until proven guilty. The onus is those who think there is guilt to prove it. While I have no doubt the players in the financial crisis hold a lot of the blame for what happened, that doesn't mean they were committing a crime.
http://dealbook.nytimes.com/2012/08/15/no-criminal...

"After 10 months of stitching together evidence on the firm's demise, criminal investigators are concluding that chaos and porous risk controls at the firm, rather than fraud, allowed the money to disappear, according to people involved in the case.

The hurdles to building a criminal case were always high with MF Global, which filed for bankruptcy in October after a huge bet on European debt unnerved the market. But a lack of charges in the largest Wall Street blowup since 2008 is likely to fuel frustration with the government's struggle to charge financial executives. Just a few individuals -- none of them top Wall Street players -- have been prosecuted for the risky acts that led to recent failures and billions of dollars in losses."

"...concluding that chaos and porous risk controls at the firm, rather than fraud, allowed the money to disappear..."

"...The hurdles to building a criminal case were always high with MF Global..."

Hey, fuck it. Because your family members knew that you shouldn't accept an offer at Bear or Lehman then everyone knew Fuld was committing crimes. Makes perfect sense. Let me know where to send my payment for the 1-800 Lawyer services people are offering here.

And she is a liberal, which means she supports more government, more taxes and less freedom. I ignore Nazi's and racists because I know the shit that will come out of their mouths. Same with liberals. Every problem in the world can be solved with more government and more taxation. Yeah, I don't need to pay attention to that Anti-American bullshit.

As far as I'm concerned the MF Global situation simply highlights how weak US regulators are. You're telling me that overseeing a multi billion dollar brokerage firm with "porous risk controls" isn't worthy of a criminal conviction?

And for all the hate the bankers get, how about the government that failed in their job and now blames everyone else. How about we point the finger and the cops who were sleeping instead of policing? Those are the real criminals.

I think this is precisely what Warren is getting at.

"For I am a sinner in the hands of an angry God. Bloody Mary full of vodka, blessed are you among cocktails. Pray for me now and at the hour of my death, which I hope is soon. Amen."

In reply to UFOinsider
2/20/13

UFOinsider:
But at least offer some type of valid point, I'm not interested in an exchange with retarded folks today.

Monkey shit instead of counterpoint. Way to go. Don't you know I'll just jack more free SB's from WSO?

Fucking frustrating when someone plays unfairly, isn't it.

Now you know how it feels, jackass.

Get busy living

In reply to BTbanker
2/20/13

BTbanker:
duffmt6:

Negligence is a crime. If you are supervising employees who are laundering money for terrorist organizations (HSBC) you are breaking the law.


In this case, negligence is a tort that has to be proven with preponderance of the evidence. It doesn't involve criminal law.

I'm no lawyer because I like having a job, but I think the criminal nature is more a matter of opinion - if HSBC execs were deliberately skirting anti money laundering rules to profit (which I believe they were), then that would constitute a criminal offense. Correct me if I'm wrong.


It's a case that has everything -- everything accept an arrest. That struck some as odd, because in 80 pages of court documents, the bank admits to almost going out of its way to act as a financial clearing house for international pariahs and drug dealers.


Notre Dame professor Jimmy Gurule, who investigated money-laundering cases for the Treasury Department, said: "We're not talking about mere negligence. We're talking about a criminal scheme that was adopted as a policy of HSBC that involved looking the other way in regard to suspicious transactions involving money laundering."

http://www.cbsnews.com/8301-18563_162-57558618/dru...

"For I am a sinner in the hands of an angry God. Bloody Mary full of vodka, blessed are you among cocktails. Pray for me now and at the hour of my death, which I hope is soon. Amen."

In reply to UFOinsider
2/20/13

UFOinsider:
BTbanker:
If you knew what was going on at the time, you'd be retired on a fucking beach right now. Anybody can talk shit about knowing something AFTER it happens, but the fact is that you were too much of a pussy to do anything about it.

LOL I didn't care about this stuff at the time broski, I just knew that some bank was in trouble, just like I knew the mayor was cheating on his wife and didn't care to be involved with that mess in any way. After seeing shit go down, well yeah I got interested, who the hell thought the entire global banking system would implode. FYI, that family member made a literal fucking killing between then and now, so, shut the fuck up. I have no reason to bullshit you, I'm just speaking my mind. If you don't like it, that's too bad for you.

But at least offer some type of valid point, I'm not interested in an exchange with retarded folks today.


Ah, so you're the "Why Did Bankers Destroy The World? Also, Are You Hiring?" kind of guys... I guess being unoriginal is one way to go.
In reply to duffmt6
2/20/13

duffmt6:
BTbanker:
duffmt6:

Negligence is a crime. If you are supervising employees who are laundering money for terrorist organizations (HSBC) you are breaking the law.


In this case, negligence is a tort that has to be proven with preponderance of the evidence. It doesn't involve criminal law.

I'm no lawyer because I like having a job, but I think the criminal nature is more a matter of opinion - if HSBC execs were deliberately skirting anti money laundering rules to profit (which I believe they were), then that would constitute a criminal offense. Correct me if I'm wrong.


It's a case that has everything -- everything accept an arrest. That struck some as odd, because in 80 pages of court documents, the bank admits to almost going out of its way to act as a financial clearing house for international pariahs and drug dealers.


Notre Dame professor Jimmy Gurule, who investigated money-laundering cases for the Treasury Department, said: "We're not talking about mere negligence. We're talking about a criminal scheme that was adopted as a policy of HSBC that involved looking the other way in regard to suspicious transactions involving money laundering."

http://www.cbsnews.com/8301-18563_162-57558618/dru...

Yeah, you might be right.

In reply to BTbanker
2/20/13

BTbanker:
UFOinsider:
BTbanker:
If you knew what was going on at the time, you'd be retired on a fucking beach right now. Anybody can talk shit about knowing something AFTER it happens, but the fact is that you were too much of a pussy to do anything about it.

LOL I didn't care about this stuff at the time broski, I just knew that some bank was in trouble, just like I knew the mayor was cheating on his wife and didn't care to be involved with that mess in any way. After seeing shit go down, well yeah I got interested, who the hell thought the entire global banking system would implode. FYI, that family member made a literal fucking killing between then and now, so, shut the fuck up. I have no reason to bullshit you, I'm just speaking my mind. If you don't like it, that's too bad for you.

But at least offer some type of valid point, I'm not interested in an exchange with retarded folks today.


Ah, so you're the "Why Did Bankers Destroy The World? Also, Are You Hiring?" kind of guys... I guess being unoriginal is one way to go.

You sound, unfortunately, like someone who hasn't really examined the facts or read deeply about the crisis. I really recommend you at least give a skim-through of the Coburn-Levin Report. It's game changing stuff and goes deeper than anything else out there and uses primary sources. Yes, it's thick as hell, but it's worth reading if you want to understand what happened at the banks, the lenders, Fannie & Freddie, the rating agencies, etc. The chapter on the sub-prime lenders alone is mind blowing. There was fraud on outrageous levels.

2/20/13

Regulation is kind of fucked, to be honest.

(1) There aren't very many regulators, but the companies they are monitoring are massive. It would be like if a KPMG audit team for a F500 client was 5 people.

(2) They aren't very smart. They pay less than the banks and offer slower promotion, so of course they aren't going to attract the same caliber of applicant.

(3) There is no accountability. What happens to a regulator if they are wrong? or they miss the next Madoff? Nothing.

(4) Most of these people haven't actually worked in banks. So we get regulation that completely misses the point. Think about the Global Settlement. Was anybody really under the impression research was unbiased? It actually made the problem worse - research now has to be "unbiased". Of course it is...that's why half the market is "buy" and the other half is "hold".

As for prosecution:

There were so many causes of the crisis, I personally do not believe it is realistic to punish individuals. How do you disentangle predatory lending from the incentives to lend to the poor? The hawking of MBS from the near-universal belief that housing prices would always increase? It is almost impossible to point to individuals and say, "this is your fault".

Even Lehman didn't necessarily have to fail. Liquidity was very, very tight...but they might have been able to make it through had the government not effectively closed the capital markets for banks by imposing a haircut on WaMu bondholders.

There are a few cases where an individual can be faulted. For instance, the London Whale incident. Not sure jail would be appropriate. But revocation of securities licenses, fines, wage garnishment, etc. would be reasonable.

Some Fannie/Freddie execs could also be brought up on charges. It would be hard to prove, but it seems quite clear that somebody deliberately misclassified subprime loans as Alt-A. This polluted the information pool for banks, ratings agencies, everybody.

In reply to TheKing
2/20/13

TheKing:
BTbanker:
UFOinsider:
BTbanker:
If you knew what was going on at the time, you'd be retired on a fucking beach right now. Anybody can talk shit about knowing something AFTER it happens, but the fact is that you were too much of a pussy to do anything about it.

LOL I didn't care about this stuff at the time broski, I just knew that some bank was in trouble, just like I knew the mayor was cheating on his wife and didn't care to be involved with that mess in any way. After seeing shit go down, well yeah I got interested, who the hell thought the entire global banking system would implode. FYI, that family member made a literal fucking killing between then and now, so, shut the fuck up. I have no reason to bullshit you, I'm just speaking my mind. If you don't like it, that's too bad for you.

But at least offer some type of valid point, I'm not interested in an exchange with retarded folks today.


Ah, so you're the "Why Did Bankers Destroy The World? Also, Are You Hiring?" kind of guys... I guess being unoriginal is one way to go.

You sound, unfortunately, like someone who hasn't really examined the facts or read deeply about the crisis. I really recommend you at least give a skim-through of the Coburn-Levin Report. It's game changing stuff and goes deeper than anything else out there and uses primary sources. Yes, it's thick as hell, but it's worth reading if you want to understand what happened at the banks, the lenders, Fannie & Freddie, the rating agencies, etc. The chapter on the sub-prime lenders alone is mind blowing. There was fraud on outrageous levels.


Listen, I know that people were knowingly selling worthless assets, but as you guys stated, "everyone on Wall Street knew what was going on," so there was no conflict of interest there. Both parties made the trade for profit in mind, and when the market no longer saw value in those assets, they decreased in value. That's just how it works. As far as the ratings agencies go, those ratings were merely opinions, the banks basically paid for them, and nobody could possibly take those seriously. They were essentially redundant, and you can't even blame them.

It's like me selling you a broken iPhone, and you know it's broken, but you found a buyer who is willing to pay more, and so on. There is no issue here, and that's why nobody has been charged.

If I'm missing anything big, please shortly summarize.

In reply to West Coast rainmaker
2/20/13

West Coast rainmaker:
Regulation is kind of fucked, to be honest.

(1) There aren't very many regulators, but the companies they are monitoring are massive. It would be like if a KPMG audit team for a F500 client was 5 people.

(2) They aren't very smart. They pay less than the banks and offer slower promotion, so of course they aren't going to attract the same caliber of applicant.

(3) There is no accountability. What happens to a regulator if they are wrong? or they miss the next Madoff? Nothing.

(4) Most of these people haven't actually worked in banks. So we get regulation that completely misses the point. Think about the Global Settlement. Was anybody really under the impression research was unbiased? It actually made the problem worse - research now has to be "unbiased". Of course it is...that's why half the market is "buy" and the other half is "hold".

As for prosecution:

There were so many causes of the crisis, I personally do not believe it is realistic to punish individuals. How do you disentangle predatory lending from the incentives to lend to the poor? The hawking of MBS from the near-universal belief that housing prices would always increase? It is almost impossible to point to individuals and say, "this is your fault".

Even Lehman didn't necessarily have to fail. Liquidity was very, very tight...but they might have been able to make it through had the government not effectively closed the capital markets for banks by imposing a haircut on WaMu bondholders.

There are a few cases where an individual can be faulted. For instance, the London Whale incident. Not sure jail would be appropriate. But revocation of securities licenses, fines, wage garnishment, etc. would be reasonable.

Some Fannie/Freddie execs could also be brought up on charges. It would be hard to prove, but it seems quite clear that somebody deliberately misclassified subprime loans as Alt-A. This polluted the information pool for banks, ratings agencies, everybody.

Dude, the shit that went down at the sub-prime lenders is completely insane and has nothing to do with forced lending to poor people. Outright fraud was institutionalized. Literally firmwide mandates at places like WaMu to make as many loans as humanly possible no matter what so they could pass them onto banks for securitization. The banks needed them to fuel the CDO machine. And the CDO machine could only function because the crap it pumped out was rated (at times) AAA, but had a much higher yield than Treasuries. So, institutional investors that have requirements for holding a certain amount of top-grade paper sucked in CDOs like they were going out of style and because they were marketed as safe.

People at the banks knew what was up. People at the rating agencies knew what was up. People at the lending houses knew what was up.

Even if you don't want to prosecute, we need to have a system in which institutions can be allowed to fail. If a retail company goes bankrupt, the world keeps moving along. We need to have the same system for banks...which we had for 70 years, btw via Glass Steagall (and pre-the commodities futures modernization Act of 2000)

In reply to BTbanker
2/20/13

BTbanker:
TheKing:
BTbanker:
UFOinsider:
BTbanker:
If you knew what was going on at the time, you'd be retired on a fucking beach right now. Anybody can talk shit about knowing something AFTER it happens, but the fact is that you were too much of a pussy to do anything about it.

LOL I didn't care about this stuff at the time broski, I just knew that some bank was in trouble, just like I knew the mayor was cheating on his wife and didn't care to be involved with that mess in any way. After seeing shit go down, well yeah I got interested, who the hell thought the entire global banking system would implode. FYI, that family member made a literal fucking killing between then and now, so, shut the fuck up. I have no reason to bullshit you, I'm just speaking my mind. If you don't like it, that's too bad for you.

But at least offer some type of valid point, I'm not interested in an exchange with retarded folks today.


Ah, so you're the "Why Did Bankers Destroy The World? Also, Are You Hiring?" kind of guys... I guess being unoriginal is one way to go.

You sound, unfortunately, like someone who hasn't really examined the facts or read deeply about the crisis. I really recommend you at least give a skim-through of the Coburn-Levin Report. It's game changing stuff and goes deeper than anything else out there and uses primary sources. Yes, it's thick as hell, but it's worth reading if you want to understand what happened at the banks, the lenders, Fannie & Freddie, the rating agencies, etc. The chapter on the sub-prime lenders alone is mind blowing. There was fraud on outrageous levels.


Listen, I know that people were knowingly selling worthless assets, but as you guys stated, "everyone on Wall Street knew what was going on," so there was no conflict of interest there. Both parties made the trade for profit in mind, and when the market no longer saw value in those assets, they decreased in value. That's just how it works. As far as the ratings agencies go, those ratings were merely opinions, the banks basically paid for them, and nobody could possibly take those seriously. They were essentially redundant, and you can't even blame them.

It's like me selling you a broken iPhone, and you know it's broken, but you found a buyer who is willing to pay more, and so on. There is no issue here, and that's why nobody has been charged.

If I'm missing anything big, please shortly summarize.

"Please shortly summarize." smh

This shit can't be shortly summarized. You need to be willing to do some reading and learn the facts. If not, you can continue saying what you like, just know that it's based on your wishful thinking rather than anything concrete.

Again, it isn't like the info isn't out there. Check out the PDF. I know you're probably afraid of having your worldview shifted a bit, but that might be a healthy thing.

Finally, it isn't like acknowledging this stuff means that you can't work in finance or like finance. We aren't talking about sports teams here. I will never understand people that treat this sort of shit with such a tribal mindset. I'll root for my NY Giants until the day I die, but I'm not going to do mental gymnastics to defend immoral and illegal shit that some assholes did to help fuck up our industry.

In reply to BTbanker
2/20/13

BTbanker:
Ah, so you're the "Why Did Bankers Destroy The World? Also, Are You Hiring?" kind of guys... I guess being unoriginal is one way to go.

I saw people fuck up, I wonder why nothing happens to them. I saw first hand, friends of mine, who lost their jobs because of it. I was nice to those folks, and they encouraged me to go into industry, just not be a crook.

I WANT to see dishonest people go to prison because I'm honest and it offends me. This whole concept of this industry is that you're a "trusted advisor" whether to individuals or institutions. That people don't trust the financial sector is really fucking bad dude, and it makes your and my jobs harder. The crooks cashed out and peaced out, now we're stuck cleaning up the mess. Don't you see: this works to our advantage in the long run.

If you're on the loan sharking side of the business, it's different, but I'm honestly bewildered that there are still voices that proclaim the irresponibility of those in positions of trust is somehow justified. Have they not learned their lesson? Have not the last few years sucked enough? Are you not fucking annoyed that they made a bloody fortune, partially at your expense, and that the industry may not recover in your lifetime? What do you get out of agreeing with their side of the argument?

Seriously, enlighten me.

Does some preachy liberal harpie dyke annoy me? Well yes, yes it does. Is she doing the right thing? Yes again. So I don't care what her personal motive is. If I'm going to work here, I want to know that the gov't is keeping its end of the deal up and that I don't have to run my business like a mafia operation to turn a buck and keep from getting robbed. If not, what the fuck am I paying the police and judges with my taxes for? Word up from Warren to the regulators: do your fucking job. I'm all for it.

I'm massively sleep deprived and highly caffeinated, so I think my manic, hostile tone is a turnoff....but I seriously fail to see why anyone is going to disagree with this unless they're a crook.

Get busy living

In reply to TheKing
2/20/13

TheKing:
West Coast rainmaker:
Regulation is kind of fucked, to be honest.

(1) There aren't very many regulators, but the companies they are monitoring are massive. It would be like if a KPMG audit team for a F500 client was 5 people.

(2) They aren't very smart. They pay less than the banks and offer slower promotion, so of course they aren't going to attract the same caliber of applicant.

(3) There is no accountability. What happens to a regulator if they are wrong? or they miss the next Madoff? Nothing.

(4) Most of these people haven't actually worked in banks. So we get regulation that completely misses the point. Think about the Global Settlement. Was anybody really under the impression research was unbiased? It actually made the problem worse - research now has to be "unbiased". Of course it is...that's why half the market is "buy" and the other half is "hold".

As for prosecution:

There were so many causes of the crisis, I personally do not believe it is realistic to punish individuals. How do you disentangle predatory lending from the incentives to lend to the poor? The hawking of MBS from the near-universal belief that housing prices would always increase? It is almost impossible to point to individuals and say, "this is your fault".

Even Lehman didn't necessarily have to fail. Liquidity was very, very tight...but they might have been able to make it through had the government not effectively closed the capital markets for banks by imposing a haircut on WaMu bondholders.

There are a few cases where an individual can be faulted. For instance, the London Whale incident. Not sure jail would be appropriate. But revocation of securities licenses, fines, wage garnishment, etc. would be reasonable.

Some Fannie/Freddie execs could also be brought up on charges. It would be hard to prove, but it seems quite clear that somebody deliberately misclassified subprime loans as Alt-A. This polluted the information pool for banks, ratings agencies, everybody.

Dude, the shit that went down at the sub-prime lenders is completely insane and has nothing to do with forced lending to poor people. Outright fraud was institutionalized. Literally firmwide mandates at places like WaMu to make as many loans as humanly possible no matter what so they could pass them onto banks for securitization. The banks needed them to fuel the CDO machine. And the CDO machine could only function because the crap it pumped out was rated (at times) AAA, but had a much higher yield than Treasuries. So, institutional investors that have requirements for holding a certain amount of top-grade paper sucked in CDOs like they were going out of style and because they were marketed as safe.

People at the banks knew what was up. People at the rating agencies knew what was up. People at the lending houses knew what was up.

Even if you don't want to prosecute, we need to have a system in which institutions can be allowed to fail. If a retail company goes bankrupt, the world keeps moving along. We need to have the same system for banks...which we had for 70 years, btw via Glass Steagall (and pre-the commodities futures modernization Act of 2000)

I agree. Reinstating Glass-Steagall would have been the easy solution. Hell, if regulators didn't want to cause that much turmoil, they could have just required that banks and investment banks be legally distinct entities, such that one could fail without bringing down the other.

Instead we have this new system with a lot more red tape and a lot higher compliance costs. If anything, this web of regulation makes the regulators less accountable - there is always another regulator to pass the buck to.

As for the sub-prime lenders- yeah, absolutely they were institutionalizing fraud. "All the devils are here" gave a great account of it. But I don't even know how you begin to prosecute that.

TBTF causes unmanageable amounts of moral hazard. You still could have gotten a crisis-like situation with retail-only banks buying up bad CDOs...but the impact would have been mitigated.

In reply to West Coast rainmaker
2/20/13

West Coast rainmaker:

I agree. Reinstating Glass-Steagall would have been the easy solution. Hell, if regulators didn't want to cause that much turmoil, they could have just required that banks and investment banks be legally distinct entities, such that one could fail without bringing down the other.

Instead we have this new system with a lot more red tape and a lot higher compliance costs. If anything, this web of regulation makes the regulators less accountable - there is always another regulator to pass the buck to.

As for the sub-prime lenders- yeah, absolutely they were institutionalizing fraud. "All the devils are here" gave a great account of it. But I don't even know how you begin to prosecute that.

TBTF causes unmanageable amounts of moral hazard. You still could have gotten a crisis-like situation with retail-only banks buying up bad CDOs...but the impact would have been mitigated.

Yeah dude. I agree with you on Dodd-Frank. I argue that it's better than nothing, but it's a disgrace considering that everyone knows what the best solution is to the problem (Glass Steagall, getting rid of the Modernization Act of 2000).

But, let's be honest. The reason why we have Dodd-Frank instead of a better and more elegant solution is because of the insane amount of lobbying done by the industry and the incestuousness of Capitol Hill. Throw in the amount of money in politics and the influence it buys from our disgraceful politicians and you see very clearly why we end up with worthless solutions and zero prosecutions.

Makes me want to projectile vomit.

In reply to UFOinsider
2/20/13

UFOinsider:
TNA:
But we live in a civilized society with rules and laws. Laws which can be manipulated.

Do you have a point? The whole focus of this discussion is how the laws were manipulated and how someone is trying to deal with it. Yeah Warren is a liberal, but I don't fucking care if they're getting shit done.

The guy who wrote the Pledge of Allegiance was a socialist, but that whole thing worked out well, yes? Christ, can you put reality ahead of your politics for one second? Seriously, I grew up around Irish, Catholic, Conservative, Repulican, Marines who weren't as toolishly brainwashed as you. It's impossible to explore any ethic topic here without you forcing people to either 1) write huge detailed exigesis or 2) adopting equally one sided rhetoric. Is this how you go through life?

Or do you just argue to do it?

What's your deal?

1) Warren is grandstanding and looking to increase government. This will not deal with anything, it will only increase the problem.

2) Throwing the word "criminal" around is a lot easier than going into court and proving a case. This is my point in a nutshell.

3) How about you make a point that makes any sense, let alone simply common sense.

It isn't what you know, it is what you can prove. AG's have every incentive in the world to press criminal charges against bankers, financiers, etc. They don't prosecute. Why? Because criminal negligence is fucking hard to prove.

How can people not see this. This is like prosecuting the Joint Chiefs for something a Sgt. did in Iraq.

Civil =/= Criminal.

Oh, and I love the insults. Because I don't agree with your casual understanding of law means I am brainwashed. Just because you've watched every episode of Judge Judy doesn't mean you could convict Fuld or anyone else. And if crimes are being ignored it is because government is ignoring it, which Warren is part of.

2/20/13

I'd also support reinstating GS. Then you have less issue when they fail.

OMG. I am blindly brainwashed by politics. Bill Clinton repealed it. OOOHHHH NOOOOO. A DEMOCRAT DID SOMETHING TO SUPPORT BANKERS AND ULTIMATELY HELPED CAUSE THIS.

In reply to TNA
2/20/13

TNA:
UFOinsider:
TNA:
But we live in a civilized society with rules and laws. Laws which can be manipulated.

Do you have a point? The whole focus of this discussion is how the laws were manipulated and how someone is trying to deal with it. Yeah Warren is a liberal, but I don't fucking care if they're getting shit done.

The guy who wrote the Pledge of Allegiance was a socialist, but that whole thing worked out well, yes? Christ, can you put reality ahead of your politics for one second? Seriously, I grew up around Irish, Catholic, Conservative, Repulican, Marines who weren't as toolishly brainwashed as you. It's impossible to explore any ethic topic here without you forcing people to either 1) write huge detailed exigesis or 2) adopting equally one sided rhetoric. Is this how you go through life?

Or do you just argue to do it?

What's your deal?


1) Warren is grandstanding and looking to increase government. This will not deal with anything, it will only increase the problem.

I'm not sure this is the case. I don't think Warren is asking to grow the scope of the regulatory agencies in the video - I think she is asking them to grow some balls and stop being such a pacifist when it comes to prosecuting banks and bankers using laws already on the books.

"For I am a sinner in the hands of an angry God. Bloody Mary full of vodka, blessed are you among cocktails. Pray for me now and at the hour of my death, which I hope is soon. Amen."

2/20/13

I don't want to get in the political and philosophical discussion/argument, but I think you guys are missing a very important point. The idea is about leverage for settling. If they never take banks to trial they have the weaker hand and banks know it. So banks will pay less and less in settlements and they can't really negotiate because they both know that regulators are not going to go to trial. Until you get to the point of the utterly ridiculous fines and settlements banks get now, which are probably cheaper than actually doing it right in the first place. Whereas if every now and then they went to trial they would be able to negotiate settlements that actually hurt and therefore give banks an incentive to follow the law and supervise themselves better. Hell, they don't even have to win, specially this days banks have a lot to lose in terms of public image if they are taken to a trial that lasts for months/years. Settlements get published in the 37th page in the paper and everyone forgets about it 2 days later.

2/20/13

One point I think some of you might be missing is the necessity of taking these banks to trial. Not because you would ever get a criminal conviction; the burden of proof is way too high (as it should be) to ever be able to prove intent in 90%+ of the cases.

So why go to trial instead of settling when you know you can't win? I'll tell you why. A beautiful little thing called DISCOVERY. Warren even mentions it in her testimony. You think Jon Corzine loses a moment's sleep over the prospect of going to jail? Of course not, because he knows it'll never happen. You wanna know what keeps Corzine awake at night? The thought of his private emails being on display publicly, the internal communications where the top guys joke about "ripping a client's face off", all the filthy, dirty shit that goes on every single day at the upper echelons of these banks being on public display for all to see.

The process of discovery in most of these cases would absolutely lead to shareholder revolts and top guys being summarily fired if for no other reason than their boards just can't take the heat from bank clients and the general public. The bad press would force the issue and, while it's not jail, it's still justice.

Because you know what these fucking pricks fear most? Watching the biscuit wheels fall off their gravy trains. Knowing that they can't get a foursome at their country club because there aren't three other people on the fucking planet who want to be seen with them. Knowing that their kids probably aren't going to get into the Ivy League because the schools won't risk the bad press. You can't put them in jail, but you can turn them into average, everyday shitheels, and for most of their type that's a fate worse than death.

We need to take a page out of Ireland's playbook when it comes to dealing with these guys. Look what they did to Sean Fitzpatrick, former CEO of Anglo Irish Bank. This guy can't even show his face on the street anymore. All of his assets have been seized, he was forced into bankruptcy, and now he has to get government approval for any personal loan over EU500. His life is over, and he's a complete laughingstock. That's how you bring justice to a Too Big To Jail bank CEO.

And you get the ball rolling by bringing these guys to trial and opening up discovery, not by getting them to write a check and be on their merry way.

In reply to duffmt6
2/20/13

duffmt6:
TNA:
UFOinsider:
TNA:
But we live in a civilized society with rules and laws. Laws which can be manipulated.

Do you have a point? The whole focus of this discussion is how the laws were manipulated and how someone is trying to deal with it. Yeah Warren is a liberal, but I don't fucking care if they're getting shit done.

The guy who wrote the Pledge of Allegiance was a socialist, but that whole thing worked out well, yes? Christ, can you put reality ahead of your politics for one second? Seriously, I grew up around Irish, Catholic, Conservative, Repulican, Marines who weren't as toolishly brainwashed as you. It's impossible to explore any ethic topic here without you forcing people to either 1) write huge detailed exigesis or 2) adopting equally one sided rhetoric. Is this how you go through life?

Or do you just argue to do it?

What's your deal?


1) Warren is grandstanding and looking to increase government. This will not deal with anything, it will only increase the problem.

I'm not sure this is the case. I don't think Warren is asking to grow the scope of the regulatory agencies in the video - I think she is asking them to grow some balls and stop being such a pacifist when it comes to prosecuting banks and bankers using laws already on the books.

But I'd argue that's the implication and the reason she continuously asks the same simple question over and over again. It is pounding the point home that they are incompetent and as such something needs to be done. Her solutions will inevitably focus on either more money into the agencies, expanding the head count in the agencies, adding tighter and stricter regulations or just adding more agencies with more specialized functions to try and deal with it.

2/20/13

There's too much here to try to jump into the conversation, but here are some thoughts. I think everyone is right to a certain extent. Definitely, large banks behaving irresponsibly and getting bailed out by the taxpayer is an unacceptable standard to set. However, it doesn't solve the problem to try to legislate / regulate it out of existence... you just end up creating more paperwork and rules that bankers and their lawyers will get around. And you might create more complexity or perverse incentives that will cause another crisis.

The way I see it, I take this view. Option #1: you need to let the banks deal with the consequences of their choices on their own; or Option #2: you need to fully nationalize the banks (for the record I am not in favor of this one). Do you guys think there is a middle path?

"It doesn't matter where you are or where you came from: it's about where you're going."

2/20/13

No one is asking for more regulations for the sake of having more regulations. Smart people, including Warren, are asking for smart regulations to be actually enforced.

And, again, to beat the shit out of a dead horse, unless we have a system in which banks will be allowed to fail, we are going to have regulations to deal with. So, either make it so they can fail, or deal with "more government."

In reply to TheKing
2/20/13

TheKing:
Finally, it isn't like acknowledging this stuff means that you can't work in finance or like finance. We aren't talking about sports teams here. I will never understand people that treat this sort of shit with such a tribal mindset. I'll root for my NY Giants until the day I die, but I'm not going to do mental gymnastics to defend immoral and illegal shit that some assholes did to help fuck up our industry.

Is that what this is? I see it in the bar business too, so I guess that makes sense: the family is always right. Thing is, by advocating for a one sided approach to everything, Wall Street grew progressively more out of touch with reality, fucked itself, and is now coming to terms with their own mistakes. Now we wait around for who knows how long until it picks up, if it does at all before we get fucking old. By taking too much of a myopic viewpoint, it works against us.

Yeah it sucks that the liberal assholes get their chance to "stick it to the man" but they are right and if the regulators do what they're supposed to then it mitigates substatial amount of pain on our end. Arguing this just to toe the line of loyalty just speaks to slavish, 2nd rate intelligence to me. We're on the banks' side, Christ, we work for them....but they're just businesses and we're here to get OURS.

Get busy living

In reply to Edmundo Braverman
2/20/13

Edmundo Braverman:
One point I think some of you might be missing is the necessity of taking these banks to trial. Not because you would ever get a criminal conviction; the burden of proof is way too high (as it should be) to ever be able to prove intent in 90%+ of the cases.

So why go to trial instead of settling when you know you can't win? I'll tell you why. A beautiful little thing called DISCOVERY. Warren even mentions it in her testimony. You think Jon Corzine loses a moment's sleep over the prospect of going to jail? Of course not, because he knows it'll never happen. You wanna know what keeps Corzine awake at night? The thought of his private emails being on display publicly, the internal communications where the top guys joke about "ripping a client's face off", all the filthy, dirty shit that goes on every single day at the upper echelons of these banks being on public display for all to see.

The process of discovery in most of these cases would absolutely lead to shareholder revolts and top guys being summarily fired if for no other reason than their boards just can't take the heat from bank clients and the general public. The bad press would force the issue and, while it's not jail, it's still justice.

Because you know what these fucking pricks fear most? Watching the biscuit wheels fall off their gravy trains. Knowing that they can't get a foursome at their country club because there aren't three other people on the fucking planet who want to be seen with them. Knowing that their kids probably aren't going to get into the Ivy League because the schools won't risk the bad press. You can't put them in jail, but you can turn them into average, everyday shitheels, and for most of their type that's a fate worse than death.

We need to take a page out of Ireland's playbook when it comes to dealing with these guys. Look what they did to Sean Fitzpatrick, former CEO of Anglo Irish Bank. This guy can't even show his face on the street anymore. All of his assets have been seized, he was forced into bankruptcy, and now he has to get government approval for any personal loan over EU500. His life is over, and he's a complete laughingstock. That's how you bring justice to a Too Big To Jail bank CEO.

And you get the ball rolling by bringing these guys to trial and opening up discovery, not by getting them to write a check and be on their merry way.

Great post and great point. Only thing I'd disagree with you about is that I think there's a reasonable chance you'd get some convictions. People wrote some truly insane things in their emails that would help to prove intent. That, and prosecutors could get people to flip and testify about things they saw and took part in as part of plea agreements. Same kind of shit that happens in any number of cases.

And, to your point, just because a case might not be a sure thing, that doesn't mean it shouldn't be tried. Beyond Discovery, the sheer fact that these cases don't get tried sends a clear message that it's ok to do wrong, you'll just have to pay a fine (aka the cost of doing business.)

In reply to ozymandias
2/20/13

ozymandias:
Option #1: you need to let the banks deal with the consequences of their choices on their own; or Option #2: you need to fully nationalize the banks (for the record I am not in favor of this one). Do you guys think there is a middle path?

Yeah, what's actually been happening up until this point.

Get busy living

In reply to Addinator
2/20/13

While I refuse to get deeply involved in this conversation, I have a few broad thoughts that I think capture my reaction to this stort of discussion:

1) Re-read some of these posts, pick up a pile of stories on financial firms from NYT or WSJ - the words "greed" and "culture of risk taking" and "rampant corruption" are penned more often than pronouns. By this point, they have all but completely lost their meaning. Anyone calling a broad cross-section of the population collectively greedy is bound to lose their credibility. There are thousands of people on Wall Street. Almost every last one of them would have to be a greedy, good-for-nothing, corrupt loser if you want to take these stories seriously. Thousands of people didn't wake up every morning thinking, "I wonder how I can screw the world over today!" And to the extent that the entire industry was wrong-headed, it's extremely difficult to disentange the "criminals" from the culture. How can you call someone a criminal for operating your organization in the same way as 30+ peer companies are? Did they really do something uniquely awful that is unconcionable before the eyes of the law?

2) It's amazing how fast the eyes turn to CEOs when problems in a business arise. Especially when we have absolutely no understanding of what went wrong or how the business operates, we all know what the letters C.E.O. stand for, and he's the easiest guy to blame. Just because you happen to be the most senior officer at a company when it goes bust doesn't mean that you are a corrupt schmuck. It means you were the CEO of a bad business. In this case, as in many others, the business model was (in retrospect) doomed to collapse many years prior. When you have a Fortune 500 business, you have a CEO. Logic dictates, then, that there will be a CEO if/when the company collapses. Fuld, et al just happened to be the guys at the helms when the industry went belly-up. It's an extremely narrow view of the world that dramatically overstates the influence of a CEO to believe that Dick Fuld played an integral part in the collapse of Lehman Brothers. 2008 must have been an incredible coincidence! We had 20+ corrupt CEOs all (apparently consciously) making the same mistakes and the same time. Most of them didn't fail in quite as dramatic of a fashion because they were bailed out or bought by a more stable institution, but that doesn't make these executives any less "guilty". Blaming CEOs is a serious cop-out.

3) The logical punishment for running a bad business is the personal loss that is accompanied with bankruptcy. I think what peeves the public is not the fact that there are people making lots of money on Wall Street, it's the fact that many people received paychecks they didn't earn. We bailed out this industry, and that was a critical mistake. Now we're left in the awkward spot of wanting to punish the people that we chose to save. You can't have your cake and eat it too.

4) I think the biggest problem I have with Warren is that she proposes to solve a problem by having more trouble-makers involved. Bureaucracy is precisely the reason why we have such massive, siloed financial institutions that we consider "too big to fail". Government was primary catalyst for sub-prime lending. Regulators proved their complete inability to police an incredibly complex industry (who can blame them?). The solution to this problem is clearly not more government. Limiting governmental involvement will reduce the barriers to entry in banking and the regulatory moat that maintains the primacy of legacy institutions. It will reduce the potential for asset bubbles in the future. It will eliminate the issue of having bailed out an entire industry.

5) I don't care what anyone says, nobody saw this coming. The people who were recruiting for summer analyst positions at banks are probably the least likely people to predict a collapse. Your uncle - regardless of what a killing he made on the collapse - didn't predict anything. None of the now-celebrity hedge fund managers that made money on the collapse knew anything. The market is full of people taking long and short positions. Tons of people are constantly betting that firms are on their way to bankruptcy or worse (Bill Ackman, anyone?), most of whom you'll never hear about, whether they are successful or not. In this case, the winners are particularly visible. Books have been written about them, billions invested in them, and TV shows interviewed them. This is not evidence that "everyone knew" that the system was flawed. Rather, it is evidence that the marketplace is a big place that is composed of winners and losers. Everyone loves to tell their story about how "they knew there was something wrong with the system", and then they give you some unconvincing anecdote about so-and-so getting a loan from their bank. People were convinced this was the new normal. And as with any bubble, there were few who sensed a problem.

"For all the tribulations in our lives, for all the troubles that remain in the world, the decline of violence is an accomplishment we can savor, and an impetus to cherish the forces of civilization and enlightenment that made it possible."

In reply to UFOinsider
2/20/13

UFOinsider:
BTbanker:
Ah, so you're the "Why Did Bankers Destroy The World? Also, Are You Hiring?" kind of guys... I guess being unoriginal is one way to go.

I saw people fuck up, I wonder why nothing happens to them. I saw first hand, friends of mine, who lost their jobs because of it. I was nice to those folks, and they encouraged me to go into industry, just not be a crook.

I WANT to see dishonest people go to prison because I'm honest and it offends me. This whole concept of this industry is that you're a "trusted advisor" whether to individuals or institutions. That people don't trust the financial sector is really fucking bad dude, and it makes your and my jobs harder. The crooks cashed out and peaced out, now we're stuck cleaning up the mess. Don't you see: this works to our advantage in the long run.

If you're on the loan sharking side of the business, it's different, but I'm honestly bewildered that there are still voices that proclaim the irresponibility of those in positions of trust is somehow justified. Have they not learned their lesson? Have not the last few years sucked enough? Are you not fucking annoyed that they made a bloody fortune, partially at your expense, and that the industry may not recover in your lifetime? What do you get out of agreeing with their side of the argument?

Seriously, enlighten me.

Does some preachy liberal harpie dyke annoy me? Well yes, yes it does. Is she doing the right thing? Yes again. So I don't care what her personal motive is. If I'm going to work here, I want to know that the gov't is keeping its end of the deal up and that I don't have to run my business like a mafia operation to turn a buck and keep from getting robbed. If not, what the fuck am I paying the police and judges with my taxes for? Word up from Warren to the regulators: do your fucking job. I'm all for it.

I'm massively sleep deprived and highly caffeinated, so I think my manic, hostile tone is a turnoff....but I seriously fail to see why anyone is going to disagree with this unless they're a crook.

I will just add that it's always so interesting to hear people in finance talk about all the "dishonest, bad guys who were consciously screwing everyone" that they used to work with. But, of course, they were always the "honest, faithful, do-good fiduciary" that just wants to make the industry a better place.

Never heard anyone come forward saying, "Hey, I was the guy that consciously screwed everyone. I knew I was corrupt, and I didn't care," which is surprising, because apparently there should be thousands of these people in existence.

"For all the tribulations in our lives, for all the troubles that remain in the world, the decline of violence is an accomplishment we can savor, and an impetus to cherish the forces of civilization and enlightenment that made it possible."

In reply to NorthSider
2/20/13

NorthSider:
I will just add that it's always so interesting to hear people in finance talk about all the "dishonest, bad guys who were consciously screwing everyone" that they used to work with. But, of course, they were always the "honest, faithful, do-good fiduciary" that just wants to make the industry a better place.

Never heard anyone come forward saying, "Hey, I was the guy that consciously screwed everyone. I knew I was corrupt, and I didn't care," which is surprising, because apparently there should be thousands of these people in existence.


I started right after the crisis hit. Given my boss was canned a few months in due to non-compliance, I will literally choke anyone in my group to death if they put us at risk. Seriously, I spent the first year doing my job and cleaning up someone else's mess (including my predecessor) and for significantly less than what they were paid. I'll be damned if I go through that again.

Hell yeah we and everyone on earth colors outside the lines here and there, but if someone blows us up or lands us in court, I'll cut their fucking head off.

Holy hell I'm tired and grumpy, I'm taking a walk.

Peace.

Get busy living

2/20/13
In reply to NorthSider
2/20/13

NorthSider:
While I refuse to get deeply involved in this conversation, I have a few broad thoughts that I think capture my reaction to this stort of discussion:

1) Re-read some of these posts, pick up a pile of stories on financial firms from NYT or WSJ - the words "greed" and "culture of risk taking" and "rampant corruption" are penned more often than pronouns. By this point, they have all but completely lost their meaning. Anyone calling a broad cross-section of the population collectively greedy is bound to lose their credibility. There are thousands of people on Wall Street. Almost every last one of them would have to be a greedy, good-for-nothing, corrupt loser if you want to take these stories seriously. Thousands of people didn't wake up every morning thinking, "I wonder how I can screw the world over today!" And to the extent that the entire industry was wrong-headed, it's extremely difficult to disentange the "criminals" from the culture. How can you call someone a criminal for operating your organization in the same way as 30+ peer companies are? Did they really do something uniquely awful that is unconcionable before the eyes of the law?

This isn't really saying anything. Lots of people write lots of crap, it doesn't mean that there weren't lots of people doing immoral and / or illegal things.

NorthSider:
2) It's amazing how fast the eyes turn to CEOs when problems in a business arise. Especially when we have absolutely no understanding of what went wrong or how the business operates, we all know what the letters C.E.O. stand for, and he's the easiest guy to blame. Just because you happen to be the most senior officer at a company when it goes bust doesn't mean that you are a corrupt schmuck. It means you were the CEO of a bad business. In this case, as in many others, the business model was (in retrospect) doomed to collapse many years prior. When you have a Fortune 500 business, you have a CEO. Logic dictates, then, that there will be a CEO if/when the company collapses. Fuld, et al just happened to be the guys at the helms when the industry went belly-up. It's an extremely narrow view of the world that dramatically overstates the influence of a CEO to believe that Dick Fuld played an integral part in the collapse of Lehman Brothers. 2008 must have been an incredible coincidence! We had 20+ corrupt CEOs all (apparently consciously) making the same mistakes and the same time. Most of them didn't fail in quite as dramatic of a fashion because they were bailed out or bought by a more stable institution, but that doesn't make these executives any less "guilty". Blaming CEOs is a serious cop-out.

1 - CEOs shouldn't take the brunt of the blame? Then perhaps they shouldn't take the majority of the credit for when things are going really well, either. If you get paid the big bucks in good times, then you're setting yourself up to take the blame in the bad times. Or are we simply over-rewarding incompetence?

2 - If you lead an organization, you can't simply say "well guys, I just didn't know what was going on in my own company" when shit hits the fan. Guys like John Mack literally stopped having an understanding of the biggest driver of his business during the lead-up to the crisis. Now, to be clear, I don't know that John Mack did anything illegal by any stretch. Someone like Dick Fuld, however, was involved in fraudulent Repo 105 transactions to make Lehman's balance sheet look much stronger than it was (http://dealbook.nytimes.com/2010/04/20/lehman-exam...repo-105/). Let's not act like there isn't evidence against people at a multitude of ranks.

3 - Again, it bears repeating. If CEOs take the credit in good times (both financial compensation and good press), then they have to take some responsibility in bad times. This doesn't necessarily mean jail time, but if their firm has to be bailed out, maybe they should be forced to step down.

NorthSider:
3) The logical punishment for running a bad business is the personal loss that is accompanied with bankruptcy. I think what peeves the public is not the fact that there are people making lots of money on Wall Street, it's the fact that many people received paychecks they didn't earn. We bailed out this industry, and that was a critical mistake. Now we're left in the awkward spot of wanting to punish the people that we chose to save. You can't have your cake and eat it too.

You write this as though the bailouts were massively popular among the general public. They barely passed and were deeply hated by the public. People are mad because we bailed out the banks with no strings attached (and it goes way deeper than TARP) while people are still suffering. You don't need to understand that many of the so-called profits of the banks in the run-up to the crisis were paper profits based on a CDO fantasy, but your average joe doesn't need to understand all the details for the whole thing to leave a bad taste in his mouth.

NorthSider:
4) I think the biggest problem I have with Warren is that she proposes to solve a problem by having more trouble-makers involved. Bureaucracy is precisely the reason why we have such massive, siloed financial institutions that we consider "too big to fail". Government was primary catalyst for sub-prime lending. Regulators proved their complete inability to police an incredibly complex industry (who can blame them?). The solution to this problem is clearly not more government. Limiting governmental involvement will reduce the barriers to entry in banking and the regulatory moat that maintains the primacy of legacy institutions. It will reduce the potential for asset bubbles in the future. It will eliminate the issue of having bailed out an entire industry.

Government was not the primary catalyst for sub-prime lending. You can assert this all you like, but it's not true. And, let's be clear. Even if you want to say "well, the Fed kept rates so damn low that it enabled lenders and banks to do the things they did" this doesn't expunge them of their actions.

If I give you a box of matches and a can of lighter fluid and you subsequently burn down your entire neighborhood, you can't point your finger at me and say "see! It's his fault! He gave me the matches in the first place!"

Now, if you want to de-regulate, fine. But, we can only do this if we allow banks and other financial institutions to fail. If we don't allow them to fail, then break up the banks so they are small enough to fail without destroying the global economy via systemic issues.

NorthSider:
5) I don't care what anyone says, nobody saw this coming. The people who were recruiting for summer analyst positions at banks are probably the least likely people to predict a collapse. Your uncle - regardless of what a killing he made on the collapse - didn't predict anything. None of the now-celebrity hedge fund managers that made money on the collapse knew anything. The market is full of people taking long and short positions. Tons of people are constantly betting that firms are on their way to bankruptcy or worse (Bill Ackman, anyone?), most of whom you'll never hear about, whether they are successful or not. In this case, the winners are particularly visible. Books have been written about them, billions invested in them, and TV shows interviewed them. This is not evidence that "everyone knew" that the system was flawed. Rather, it is evidence that the marketplace is a big place that is composed of winners and losers. Everyone loves to tell their story about how "they knew there was something wrong with the system", and then they give you some unconvincing anecdote about so-and-so getting a loan from their bank. People were convinced this was the new normal. And as with any bubble, there were few who sensed a problem.

Who is saying that "everyone" saw it coming? Obviously that's not the case. But, there is direct evidence that people at lending houses and banks and ratings agencies knew that they were doing immoral / illegal things (not always both at the same time).

And, there are definitely people that did see it coming. Michael Burry, for one. Plenty of people knew they were going on a ride that was going to come to a stop and tried to get what they could before the music stopped. Now, plenty of these people didn't break any laws, but let's not sit here and say "well, it was a crazy time, let's just forgive and forget."

Last thing. Seriously, spend some time with the Coburn - Levin Report. Just read a little bit, it'll change your whole way of thinking.

2/20/13
In reply to NorthSider
2/20/13

NorthSider:

2) It's amazing how fast the eyes turn to CEOs when problems in a business arise. Especially when we have absolutely no understanding of what went wrong or how the business operates, we all know what the letters C.E.O. stand for, and he's the easiest guy to blame. Just because you happen to be the most senior officer at a company when it goes bust doesn't mean that you are a corrupt schmuck. It means you were the CEO of a bad business. In this case, as in many others, the business model was (in retrospect) doomed to collapse many years prior. When you have a Fortune 500 business, you have a CEO. Logic dictates, then, that there will be a CEO if/when the company collapses. Fuld, et al just happened to be the guys at the helms when the industry went belly-up. It's an extremely narrow view of the world that dramatically overstates the influence of a CEO to believe that Dick Fuld played an integral part in the collapse of Lehman Brothers. 2008 must have been an incredible coincidence! We had 20+ corrupt CEOs all (apparently consciously) making the same mistakes and the same time. Most of them didn't fail in quite as dramatic of a fashion because they were bailed out or bought by a more stable institution, but that doesn't make these executives any less "guilty". Blaming CEOs is a serious cop-out.

I think if there is documented proof of someone having knowledge of criminal activities going on within their organization they should be held responsible. That could range from a mid-level manager to the CEO. For large scale fraud, like what we saw during the financial crisis, if the CEO isn't intimately aware of what was going on it means they weren't doing their job properly. If it can be proven they were at arms length from any transgressions then fine, they shouldn't be prosecuted, they should just be fired.

Just because a shitload of fraud was going on leading up to the collapse doesn't mean CEO's who had a hand in it should be absolved of their responsibility on account of "everyone else was doing it too".

When you have a Fortune 500 business, you have a CEO. When that Fortune 500 business is earning huge profits illegally, the CEO is responsible for putting an end to it. If, without the illegal business, the Fortune 500 business has a "bad business model", it's time to shift strategies or liquidate and return money to shareholders.

Edit: I realize this feeds into your next point about the bailouts, but I fundamentally disagree with the assertion that executives shouldn't be the first ones held accountable for large scale fraud.

"For I am a sinner in the hands of an angry God. Bloody Mary full of vodka, blessed are you among cocktails. Pray for me now and at the hour of my death, which I hope is soon. Amen."

2/20/13

No one says CEO's shouldn't take the blame or get fired. But taking the blame =/= going to jail.

And how about the people who lied about their income on their mortgage application.
http://en.wikipedia.org/wiki/Mortgage_fraud

I would like to see Warren go after criminal how buyers who misrepresented their income to obtain a mortgage far beyond their means.

Oh wait, that isn't going to happen. Because populace bullshit only works when you demonize a bank and not demonize the actual crimes that homeowners engaged in. I forgot, bankers kidnapped children and forced people to misrepresent their income.

In reply to TNA
2/20/13

TNA:
No one says CEO's shouldn't take the blame or get fired. But taking the blame =/= going to jail.

And how about the people who lied about their income on their mortgage application.
http://en.wikipedia.org/wiki/Mortgage_fraud

I would like to see Warren go after criminal how buyers who misrepresented their income to obtain a mortgage far beyond their means.

Oh wait, that isn't going to happen. Because populace bullshit only works when you demonize a bank and not demonize the actual crimes that homeowners engaged in. I forgot, bankers kidnapped children and forced people to misrepresent their income.

1.) I agree that CEOs shouldn't go to jail unless they broke a law. That's why I take the stance that someone like Dick Fuld could be tried for things that he signed off on (Repo 105) while guys like John Mack were simply incompetent.

2.) Even if you're not going to prosecute anyone, you can't give a bailout with no strings attached and then tell the public "shut up, stop complaining."

3.) Sure, go after people who committed fraud on their applications. Just don't act like lenders weren't encouraged to lie to get people loans. There was plenty of fraud on both sides. Unlike some people in this thread, I'm not rooting for one side or the other based on an ideology. I just want our shitbag system fixed.

4.) Let's be clear, though. Yes, you can punish people who lied to get a mortgage. But, without the CDO machine, there would have been no demand for the extreme excess lending. Without the CDO machine, there would have been far less systemic risk, and thus, a smaller crisis.

End of the day, I just want us to go back to what we had before 2000. It wasn't perfect, but it was a helluva lot better than what we have now.

2/20/13

No lending house would make the kinds of loans en masse that the WaMus of the world were making in the run-up to the crisis if they didn't have a way to get it off their books.

The sheer size of the bubble was due to top-down demand. The institutional investors craved yield in the form of super-"safe" CDO products, the banks wanted to grow their revenues and profits by pumping out more CDOs, they felt safe doing it because they could buy protection in the form of credit default swaps from AIG, and lending houses knew they could make shitbag loans because they had somewhere to pass them along to. And, why were these securities considered so safe? Because the private ratings agencies were pushing for growth and what better way to grow than to give better ratings to the innumerable CDOs that the banks were pumping out?

It was a gigantic negative feedback loop that fed itself until everything exploded.

2/20/13

I have no issue with going back to GS and allowing banks to fail. The government also pulled a lot of strings. If someone committed a crime that can be proven, sure, jail their ass. My entire stance is that calling someone a criminal is harder than proving it. Just because a CEO failed in their duties doesn't mean they were engaged hiding loses or committing a crime.

Just look at Enron, Tyco, Maddoff, etc. When you can prove criminal charges a case is brought. Just because bankers are villains doesn't mean a case will hold water.

In reply to TNA
2/20/13

TNA:
No one says CEO's shouldn't take the blame or get fired. But taking the blame =/= going to jail.

Agree with this. I found it laughable when there were calls for Dimon to be prosecuted for the Whale's loss...uhm, no, that's not happening. As for the parties involved, I'm thinking the people who borrowed too much and ended up losing their home kind of already are punished. But learning that the SEC was too busy watching porn to do what it is they're hired to do, it's refreshing to see someone in gov't cracking the whip....even if it's mostly rhetoric.

Get busy living

In reply to TNA
2/20/13

TNA:
I have no issue with going back to GS and allowing banks to fail. The government also pulled a lot of strings. If someone committed a crime that can be proven, sure, jail their ass. My entire stance is that calling someone a criminal is harder than proving it. Just because a CEO failed in their duties doesn't mean they were engaged hiding loses or committing a crime.

Just look at Enron, Tyco, Maddoff, etc. When you can prove criminal charges a case is brought. Just because bankers are villains doesn't mean a case will hold water.

Right, but the fact that nothing is even attempted is insanity. And, I'm pretty sure that the reason why cases are never tried has more to do with money in politics and the influence the banking lobby has than it does a lack of evidence. It also doesn't help when high level gov't positions are consistently filled with ex-banking executives (and high-level banking positions are often filled with ex-gov't officials.)

Weee hooooo revolving door!

2/20/13

Yeah and also, when you have government investing in banks there is a conflict of interest. Prosecuting a CEO would tank a bank. If the government has money involved it is in their best interest to look the other way.

In reply to TheKing
2/20/13

TheKing:
1.) I agree that CEOs shouldn't go to jail unless they broke a law. That's why I take the stance that someone like Dick Fuld could be tried for things that he signed off on (Repo 105) while guys like John Mack were simply incompetent.

2.) Even if you're not going to prosecute anyone, you can't give a bailout with no strings attached and then tell the public "shut up, stop complaining."

3.) Sure, go after people who committed fraud on their applications. Just don't act like lenders weren't encouraged to lie to get people loans. There was plenty of fraud on both sides. Unlike some people in this thread, I'm not rooting for one side or the other based on an ideology. I just want our shitbag system fixed.

4.) Let's be clear, though. Yes, you can punish people who lied to get a mortgage. But, without the CDO machine, there would have been no demand for the extreme excess lending. Without the CDO machine, there would have been far less systemic risk, and thus, a smaller crisis.

End of the day, I just want us to go back to what we had before 2000. It wasn't perfect, but it was a helluva lot better than what we have now.

The "CDO machine" that you're referring to was peddled by GSEs and three-administration-long agenda to have the federal government help ensure that "anyone can own a home". Without the hundreds of billions of liquidity in sub-prime lending that was provided by GSEs, there's no way this bubble inflates.

"For all the tribulations in our lives, for all the troubles that remain in the world, the decline of violence is an accomplishment we can savor, and an impetus to cherish the forces of civilization and enlightenment that made it possible."

In reply to NorthSider
2/20/13

NorthSider:
The "CDO machine" that you're referring to was peddled by GSEs and three-administration-long agenda to have the federal government help ensure that "anyone can own a home". Without the hundreds of billions of liquidity in sub-prime lending that was provided by GSEs, there's no way this bubble inflates.

This part is beyond dispute. What up for grabs is who took advantage of it.

Some places were incompetent if not corrupt, and they are at fault for getting caught up in the bubble. The banks largely fall in this category.

Others pushed things far more than was innocent, such as Countrywide, Magnetar, or those who built portfolios to bet against and then sold them: in these cases, it's pretty disingenuous to chalk it all up to poor internal controls or say that the counterparties were at fault for not figuring this out. BTW, the buyside is just as guilty as anyone but they've managed to mostly let the banks take all the heat for them, which I guess is understandable?

Get busy living

In reply to NorthSider
2/20/13

NorthSider:
TheKing:
1.) I agree that CEOs shouldn't go to jail unless they broke a law. That's why I take the stance that someone like Dick Fuld could be tried for things that he signed off on (Repo 105) while guys like John Mack were simply incompetent.

2.) Even if you're not going to prosecute anyone, you can't give a bailout with no strings attached and then tell the public "shut up, stop complaining."

3.) Sure, go after people who committed fraud on their applications. Just don't act like lenders weren't encouraged to lie to get people loans. There was plenty of fraud on both sides. Unlike some people in this thread, I'm not rooting for one side or the other based on an ideology. I just want our shitbag system fixed.

4.) Let's be clear, though. Yes, you can punish people who lied to get a mortgage. But, without the CDO machine, there would have been no demand for the extreme excess lending. Without the CDO machine, there would have been far less systemic risk, and thus, a smaller crisis.

End of the day, I just want us to go back to what we had before 2000. It wasn't perfect, but it was a helluva lot better than what we have now.

The "CDO machine" that you're referring to was peddled by GSEs and three-administration-long agenda to have the federal government help ensure that "anyone can own a home". Without the hundreds of billions of liquidity in sub-prime lending that was provided by GSEs, there's no way this bubble inflates.

See the comment below yours. Yes, the GSEs played a role, I do not deny this at all. But, it was not the sole driving force or even the main driving force. There is blame to go around to everyone.

To be clear, I hate the entire idea of the "ownership society." Government, on both the left and the right, has been pushing home ownership for decades. It's a disgrace. Frankly, I won't even buy a home unless I can buy it in cash.

Michael Burry gave an amazing speech on the entire crisis at Vanderbilt, it's worth a watch because he crushes everyone involved:

And, lastly. Yes, GSEs played a role, but no one put a gun to the head of the banks to lever themselves up the ass while they rode the wave. My greatest point is that many people are at fault, the public and the private sector. But, I cannot stand it when someone fights for one ideology or the other simply because they want to like that ideology.

2/20/13

Also, lets mention this. Home ownership was at record highs. Who wants to be the politician to come out against that, regardless of if you know what is best. You'd lose re-election in a landslide.

In reply to TheKing
2/20/13

TheKing:
This isn't really saying anything. Lots of people write lots of crap, it doesn't mean that there weren't lots of people doing immoral and / or illegal things.

Look, you're not going to like this, but when thousands of people are "bending the rules" in the same way without anyone taking issue, it reduces the gravity of those acts. Thousands of people break the speed limit every day or jaywalk in Manhattan. No doubt that these practices increase the danger of driving and walking, but no one is up-in-arms about this. The problem is that the grandeur of the reactions of Warren, et. al. are not commensurate with the weight of the wrong-doings. It reduces their credibility.

There aren't thousands of evil people who all happen to work at the same companies. MBS practices were very well understood, the dynamics of the industry were very transparent, people made bad bets. Big calamities don't always necessitate big conspiratory explanations.

1 - CEOs shouldn't take the brunt of the blame? Then perhaps they shouldn't take the majority of the credit for when things are going really well, either. If you get paid the big bucks in good times, then you're setting yourself up to take the blame in the bad times. Or are we simply over-rewarding incompetence?

First off, I agree with you in both cases. CEOs are rarely to be credited for massive business successes (that's usually the result of a creative founder), and they are rarely to be blamed for the demise of their business. There are exceptions to this, and I'm sure some of those exceptions apply in this scenario. However, there is a wide gap between laying some blame on a CEO for poorly managing his business and throwing him in jail.

2 - If you lead an organization, you can't simply say "well guys, I just didn't know what was going on in my own company" when shit hits the fan. Guys like John Mack literally stopped having an understanding of the biggest driver of his business during the lead-up to the crisis.

When you run a global organization that sells hundreds of different products, of course you can't possibly understand how they all work! Do you think the CEO of Exxon knows how to drill for oil? Does he know how to successfully engineer a frack? Does he understand the chemistry of the refinery process? Of course not! That's also why Mills Dillard wasn't to blame for the Exxon Valdez oil spill, although plenty of people called for his resignation at the time!

Now, to be clear, I don't know that John Mack did anything illegal by any stretch. Someone like Dick Fuld, however, was involved in fraudulent Repo 105 transactions to make Lehman's balance sheet look much stronger than it was (http://dealbook.nytimes.com/2010/04/20/lehman-exam...repo-105/). Let's not act like there isn't evidence against people at a multitude of ranks.

Umm... Repo 105 was legal at the time? Ernst and Young knew that Fuld was implementing that practice, and they gave clean opinions on its financial statements. You're a really long way from having a strong criminal case, I hope you realize.

3 - Again, it bears repeating. If CEOs take the credit in good times (both financial compensation and good press), then they have to take some responsibility in bad times. This doesn't necessarily mean jail time, but if their firm has to be bailed out, maybe they should be forced to step down.

No!! How can you think this way? Firms shouldn't be bailed out in the first place!!! CEOs don't need to step down, they can much more easily by fired by investors when the company collapses.

For what it's worth, just as the public lays too much of the blame on CEOs in bad times, they lay too much praise on the CEO in good times. We people are very petty, we love to have easy answers: if something is going right, it must be because there is some genius working there! You don't have to look far for examples. People laud Mark Zuckerberg as if he were some internet deity. But I doubt that he is that exceptional at computer programming. I'm sure there are dozens of people out there that are far better than he that will never be recognized. He was in the right place at the right time. Dick Fuld was in the wrong place at the wrong time.

You write this as though the bailouts were massively popular among the general public. They barely passed and were deeply hated by the public.

No, I don't! I can't believe anyone would think the bailouts were a good idea! I couldn't care less about how popular they were, they were a complete and utter mistake, and that's why we're still having this conversation.

People are mad because we bailed out the banks with no strings attached (and it goes way deeper than TARP) while people are still suffering. You don't need to understand that many of the so-called profits of the banks in the run-up to the crisis were paper profits based on a CDO fantasy, but your average joe doesn't need to understand all the details for the whole thing to leave a bad taste in his mouth

This CDO fantasy was peddled by the very government we are reaching to for solutions today.

Government was not the primary catalyst for sub-prime lending. You can assert this all you like, but it's not true. And, let's be clear. Even if you want to say "well, the Fed kept rates so damn low that it enabled lenders and banks to do the things they did" this doesn't expunge them of their actions.

Between swinging interest rates from all-time lows to normalized levels and providing billions in liquidity to GSEs, which were involved 50%+ of the sub-prime lending market, I will continue to blame the government. I don't see how you can think otherwise. Collateralization and securitization helped extend the bubble, but they didn't start it.

Now, if you want to de-regulate, fine. But, we can only do this if we allow banks and other financial institutions to fail. If we don't allow them to fail, then break up the banks so they are small enough to fail without destroying the global economy via systemic issues.

Did you miss my point where I said that they should absolutely have failed??

Who is saying that "everyone" saw it coming? Obviously that's not the case. But, there is direct evidence that people at lending houses and banks and ratings agencies knew that they were doing immoral / illegal things (not always both at the same time).

Oh come on. What's this "evidence"? Some vague email exchanges that sound like office banter that we all hear every day? If these guys all knew it was coming, they certainly did an awful job of positioning themselves to survive when it happened!!!

And, there are definitely people that did see it coming. Michael Burry, for one. Plenty of people knew they were going on a ride that was going to come to a stop and tried to get what they could before the music stopped. Now, plenty of these people didn't break any laws, but let's not sit here and say "well, it was a crazy time, let's just forgive and forget."

This might be very convenient for Burry, but he didn't predict anything. He made a bet and it paid off. There are plenty of others who were "predicting" that home prices would travel even further, and if they had, I'm sure you'd be here heralding the names of those hedge fund managers as well.

The fact that there are both longs and shorts in the market guarantees that at the end of the day, someone will be claiming to be the new Oracle of Wall Street. Then, inevitably, they somehow lose their crystal ball and their returns come back down to earth (see Paulson).

The bottom line is this: stop believing these fairy tales that the media tells you every day! The hedge fund manager who was on the winning side of the crisis bet didn't "predict the crisis" anymore than the guy who invested at Apple at $50 predicted the iPhone. Tons of people claim that they "knew something" in retrospect, very few of them (unless they had inside information) actually knew anything that wasn't already common knowledge. Winners and losers are chosed by the tides of the market, not by fantastic financial genius. The CEO of [insert Wall Street bank here] didn't sit idly by, knowing the whole time that the mortgage market was doomed to collapse, and let his firm go bust! It just doesn't make any sense!

"For all the tribulations in our lives, for all the troubles that remain in the world, the decline of violence is an accomplishment we can savor, and an impetus to cherish the forces of civilization and enlightenment that made it possible."

In reply to TheKing
2/20/13

TheKing:
Right, but the fact that nothing is even attempted is insanity. And, I'm pretty sure that the reason why cases are never tried has more to do with money in politics and the influence the banking lobby has than it does a lack of evidence. It also doesn't help when high level gov't positions are consistently filled with ex-banking executives (and high-level banking positions are often filled with ex-gov't officials.)

This is armchair speculation at best. I doubt that you (or I) have any unique insight into why a case was or wasn't tried. Given the amount of exposure any lawyer who put a case against a Wall Street CEO would receive, I find it extremely hard to believe that prosecuting Wall Street would be a bad political move.

"For all the tribulations in our lives, for all the troubles that remain in the world, the decline of violence is an accomplishment we can savor, and an impetus to cherish the forces of civilization and enlightenment that made it possible."

In reply to TNA
2/20/13

TNA:
Yeah and also, when you have government investing in banks there is a conflict of interest. Prosecuting a CEO would tank a bank. If the government has money involved it is in their best interest to look the other way.

Exactly. This is why you don't bail out companies!

Also, FWIW, I doubt that any congressmen are looking the other way. If they could implicate Dick Fuld in a criminal investigation, they would instantly be the most popular government official in history.

"For all the tribulations in our lives, for all the troubles that remain in the world, the decline of violence is an accomplishment we can savor, and an impetus to cherish the forces of civilization and enlightenment that made it possible."

2/20/13

Look dude, I'm anti-bailout also. My point is that even if you and I are against bailouts, the politicians who were / are in office don't have the guts to let a bank go under. Hence, why I am asking for Glass-Steagall and pre-2000 laws to be put back in place. I hate TBTF with all of my heart.

Let's be clear, no the CEO of Exxon might not know how to do everything involved in drilling oil, I am not an idiot. That said, Dick Fuld came up as a trader. Trading was driving the company's explosive revenue and profit growth. But, again, I'm not even saying that he did anything illegal. I'm saying that he has to take some level of responsibility when shit hits the fan.

How did Burry not predict anything? He read the source docs for the loans, realized that the CDO products were filled with complete garbage, and then made bets against them. Had he been wrong, I wouldn't be heralding some other fund manager. Why? Because if he had been wrong, we wouldn't have had a financial crisis in the first place. What are you even arguing here?

As I see it, we are both anti-bailout, but you want to put all of the blame on government and wipe your hands clean. I, on the other hand, can recognize that government played a role, but that doesn't expunge everyone else of blame. You are literally making sweeping assertions that there is no proof of wrong doing so we should move on. "It's just office banter, nothing to see here, folks."

Read the Coburn-Levin report. It's there for anyone to view, for free. It has a mountain of evidence for you to review. And it's even got a section on the GSEs, plenty of blame to go around.

2/20/13

re: Burry. He wasn't simply throwing darts on a board. In his own words, he was more or less the only person on Earth who actually read through the MBS / CDO documents and realized what complete shit they were filled with. While almost everyone else was blindly assuming that housing prices would go up forever, he actually studied the securities and made his bets accordingly. And to even be able to do it, he had to buy bespoke securities. It isn't like he could just call up his TD Ameritrade guy and say "let's short 100 shares of the Carson City, Nevada CDO," this took insane balls and conviction to make the trades happen and then to stick with them while his impatient LPs were revolting.

In reply to TheKing
2/20/13

TheKing:
Look dude, I'm anti-bailout also. My point is that even if you and I are against bailouts, the politicians who were / are in office don't have the guts to let a bank go under. Hence, why I am asking for Glass-Steagall and pre-2000 laws to be put back in place. I hate TBTF with all of my heart.

I understand that you are, I'm not saying that you weren't. How is Glass-Steagall relevant to the 2008 crisis?

Let's be clear, no the CEO of Exxon might not know how to do everything involved in drilling oil, I am not an idiot. That said, Dick Fuld came up as a trader. Trading was driving the company's explosive revenue and profit growth. But, again, I'm not even saying that he did anything illegal. I'm saying that he has to take some level of responsibility when shit hits the fan.

I'm not saying that he deserves no level of responsibility, I'm saying that the amount of responsibility the media places on him (because of his convenient leadership title) is absurd. I'm also saying that the amount of blame falls short of the "criminal" category.

How did Burry not predict anything? He read the source docs for the loans, realized that the CDO products were filled with complete garbage, and then made bets against them.

What about the sophisticated investor that looked at those same source docs and thought they were shooting to the moon? He's just a moron and Burry's a genius? Simple as that?

Had he been wrong, I wouldn't be heralding some other fund manager. Why? Because if he had been wrong, we wouldn't have had a financial crisis in the first place. What are you even arguing here?

I doubt that. If the financial crisis didn't happen, and real estate was up another 50%, you could just insert a different name in the sentence, and say that he/she "predicted" some different series of events. No matter what happens to the markets, there will always be someone out there who we can say "predicted" it. Curiously, that person has trouble predicting other events in the market when the next big bubble/crisis happens. Then we change the names, and we have new prophets! Trust me, in 20 years, you won't even remember these guys' names.

As I see it, we are both anti-bailout, but you want to put all of the blame on government and wipe your hands clean.

Hardly. I'm just being a contrarian to the populist rhetoric that Warren and pretty much everyone else is spewing. There are tons of people to blame. We are all, collectively, to blame. It's the people who try to pin the tail on this-or-that Wall Street donkey that are being obtuse.

I, on the other hand, can recognize that government played a role, but that doesn't expunge everyone else of blame. You are literally making sweeping assertions that there is no proof of wrong doing so we should move on. "It's just office banter, nothing to see here, folks."

No I'm not!! I'm saying that the evidence against Wall Street CEOs is being absurdly overstated. Then, when no criminal case is brought against them, people start peddling conspiracy theories that the banks are paying off regulators not to prosecute them, rather than admitting that the reason no criminal cases were brought to trial is because there isn't evidence of a crime. You are making me a straw man here.

I subscribe the the belief that: if it's too good to be true, it probably isn't true. I think most people feel the same way. Yet, they refuse to accept the natural opposite: if it's too bad to be true, it probably isn't true. You're kidding yourself if you think a group of thousands of sinister people banded together to form a bunch of companies with the sole purpose of screwing everyone. That's the kind of rhetoric that's being thrown around, and that's what I'm against. Elizabeth Warren has become the poster child for this.

"For all the tribulations in our lives, for all the troubles that remain in the world, the decline of violence is an accomplishment we can savor, and an impetus to cherish the forces of civilization and enlightenment that made it possible."

In reply to TheKing
2/20/13

TheKing:
re: Burry. He wasn't simply throwing darts on a board. In his own words, he was more or less the only person on Earth who actually read through the MBS / CDO documents and realized what complete shit they were filled with. While almost everyone else was blindly assuming that housing prices would go up forever, he actually studied the securities and made his bets accordingly. And to even be able to do it, he had to buy bespoke securities. It isn't like he could just call up his TD Ameritrade guy and say "let's short 100 shares of the Carson City, Nevada CDO," this took insane balls and conviction to make the trades happen and then to stick with them while his impatient LPs were revolting.

Look, it takes balls to make any bet that doesn't immediately pay off. That is irrelevant.

You are free to accept this kind of story: that Burry was a hard-working genius among lazy idots in finance. You can accept the corollary as well: that if you work hard and stay sharp, you too could predict the next financial disaster and make hundreds of millions. This is truly the stuff of the American Dream! It sells papers, it sells books, it increases TV ratings.

But these finance prophets are a dime a dozen. The faces inexplicably change every ten years or so. There are so very few "oracles" that repeat the same feat multiple times. I choose to believe that the vast majority of these guys are just in the right spot at the right time, and have the ingenuity to put their thoughts into action.

Mark Zuckerberg isn't a genius among idiots. He was a guy that happened upon a good idea, who executed some basic programming and had a website that took off. He has done very little that is truly extraordinary.

More importantly, you're missing the point here. Burry likes (for good reason) to make it sound as if he was the only guy who knew that many super-sub-prime candidates were getting mortgages. This was common knowledge, not some unique insight that could only be gleaned by reading MBS documents (FWIW, I seriously doubt he is the only one who read them). The belief was that home prices would continue to rise, in which case it didn't matter that some sub-prime candidates might not be able to make payments - the underlying asset was valuable, and they would be able to sell the house to someone else. It all boils down to bullish/bearish bets on housing prices. He was one of the few bears - big deal.

"For all the tribulations in our lives, for all the troubles that remain in the world, the decline of violence is an accomplishment we can savor, and an impetus to cherish the forces of civilization and enlightenment that made it possible."

In reply to NorthSider
2/20/13

NorthSider:
TNA:
Yeah and also, when you have government investing in banks there is a conflict of interest. Prosecuting a CEO would tank a bank. If the government has money involved it is in their best interest to look the other way.

Exactly. This is why you don't bail out companies!

Also, FWIW, I doubt that any congressmen are looking the other way. If they could implicate Dick Fuld in a criminal investigation, they would instantly be the most popular government official in history.

Actually, this isn't true at all. If any Congressman wanted to charge Fuld with perjury, they'd have him dead to rights:
http://blogs.reuters.com/felix-salmon/2010/04/29/f...

In reply to NorthSider
2/20/13

NorthSider:
Mark Zuckerberg isn't a genius among idiots. He was a guy that happened upon a good idea, who executed some basic programming and had a website that took off. He has done very little that is truly extraordinary.

I hope that one day I do something as mundane and commonplace as Zuckerberg. Just start my own average, run of the mill, multi-billion dollar enterprise.

2/20/13

I don't really get some of the arguments you are making. It's almost as though you're circling around this argument that no one is ever really responsible for anything, good or bad. People get things right some of the time, and wrong some of the time. So, why ever give credit for anything anyone does, good or bad.

And, in the case of Burry. The fact remains that he is one of a select few that made the right bet. We aren't talking about going short Apple two months ago, we're talking about making the ultimate contrarian bet. He's not some Peter Schiff type who is always a doomsayer. What is even your point here? Further, you go from saying earlier that "no one could have predicted this" to dismissing someone who DID predict it through some hand waving.

I'm honestly not even sure what your end game is. You're anti-bailout, but you recognize that our worthless government won't let a bank go under. When someone like Elizabeth Warren wants to actually make regulators do their job, you complain about it. What would you have her do instead?

In reply to TheKing
2/20/13

TheKing:
Read the Coburn-Levin report. It's there for anyone to view, for free. It has a mountain of evidence for you to review. And it's even got a section on the GSEs, plenty of blame to go around.

The report makes "big-sounding" accusations against big banks for what were (in retrospect) bad lending practices. Where they fail to tie the knot is by including only a couple pages on the biggest players in the mortgage markets: GSEs. There was plenty of risk that was underpriced in hindsight, lending practices that look borderline insane in retrospect; so the question is: how could this possibly have been profitable? And the answer is that there was so much liquidity in the securitized mortgage market, and banks holding MBSs only had to hold 2% capital against their positions (as opposed to much higher levels for even the most secure assets).

Read Wallison's Dissent, it provides a much more lucid analysis of the crisis:
http://www.aei.org/files/2011/01/26/Wallisondissen...

Wallison eloquently describes the point I have been trying to make here:

Claims that there was a general failure of risk management in financial institutions or excessive leverage or risk taking are part of what might be called a "hindsight narrative." With hindsight, it is easy to condemn managers for failing to see the dangers of the housing bubble or the underpricing of risk that now looks so clear. However, the FCIC interviewed hundreds of financial experts, including senior officials of major banks, bank regulators, and investors. It is not clear that any of them--including the redoubtable Warren Buffett--was sufficiently confident about an impending crisis to put real money behind his or her judgment. Human beings have a tendency to believe that things will continue to go in the direction they are going, and are good at explaining why this must be so. Blaming the crisis on the failure to foresee it is facile and of little value for policymakers, who cannot legislate prescience. The fact that virtually all participants in the financial system failed to foresee this crisis--as they failed to foresee every other crisis--does not tell us anything about why this crisis occurred or what we should do to prevent the next one.

"For all the tribulations in our lives, for all the troubles that remain in the world, the decline of violence is an accomplishment we can savor, and an impetus to cherish the forces of civilization and enlightenment that made it possible."

In reply to NorthSider
2/20/13

NorthSider:

You are free to accept this kind of story: that Burry was a hard-working genius among lazy idots in finance. You can accept the corollary as well: that if you work hard and stay sharp, you too could predict the next financial disaster and make hundreds of millions. This is truly the stuff of the American Dream! It sells papers, it sells books, it increases TV ratings.

lolwut? What are you even talking about? You said that no one could have predicted what would happen, and I gave you a great example of someone who:

--Predicted it (and profited from it)
--Does a great job outlining all of the causes of the crisis (gov't and private sector) in a way that everyone can learn from

Your entire point of view allows you to more or less dismiss the good work anyone does ever because, hey, people get things right sometimes. Big deal!

2/20/13

This thread has become unreadable.

In reply to Edmundo Braverman
2/20/13

Edmundo Braverman:
NorthSider:
TNA:
Yeah and also, when you have government investing in banks there is a conflict of interest. Prosecuting a CEO would tank a bank. If the government has money involved it is in their best interest to look the other way.

Exactly. This is why you don't bail out companies!

Also, FWIW, I doubt that any congressmen are looking the other way. If they could implicate Dick Fuld in a criminal investigation, they would instantly be the most popular government official in history.

Actually, this isn't true at all. If any Congressman wanted to charge Fuld with perjury, they'd have him dead to rights:
http://blogs.reuters.com/felix-salmon/2010/04/29/f...

Oh my goodness!! It can't be true! Dick Fuld underestimated his paychecks by 25%? Unbelievable, throw this guy in jail!

My favorite part about this article is that the "whistleblower" used public filings to contradict Fuld's estimate. Such a sleuth, that Fuld guy!

Come up with a spur-of-the-moment answer to the question: how much money did you earn in total from 2000 - 2007. I'd be surprised if the answer you give is within 10% of the actual number. Now add layers and layers of variable compensation, stock-based awards, RSUs, benefits, salaries, etc. that CEOs receive and imagine doing the same calculation.

This is completely irrelevant to this discussion. Jailing Fuld for underestimating his paychecks is just about the biggest non-sequitur that I can imagine.

"For all the tribulations in our lives, for all the troubles that remain in the world, the decline of violence is an accomplishment we can savor, and an impetus to cherish the forces of civilization and enlightenment that made it possible."

In reply to NorthSider
2/20/13

NorthSider:
TheKing:
Read the Coburn-Levin report. It's there for anyone to view, for free. It has a mountain of evidence for you to review. And it's even got a section on the GSEs, plenty of blame to go around.

The report makes "big-sounding" accusations against big banks for what were (in retrospect) bad lending practices. Where they fail to tie the knot is by including only a couple pages on the biggest players in the mortgage markets: GSEs. There was plenty of risk that was underpriced in hindsight, lending practices that look borderline insane in retrospect; so the question is: how could this possibly have been profitable? And the answer is that there was so much liquidity in the securitized mortgage market, and banks holding MBSs only had to hold 2% capital against their positions (as opposed to much higher levels for even the most secure assets).

Read Wallison's Dissent, it provides a much more lucid analysis of the crisis:
http://www.aei.org/files/2011/01/26/Wallisondissen...

Wallison eloquently describes the point I have been trying to make here:

Claims that there was a general failure of risk management in financial institutions or excessive leverage or risk taking are part of what might be called a "hindsight narrative." With hindsight, it is easy to condemn managers for failing to see the dangers of the housing bubble or the underpricing of risk that now looks so clear. However, the FCIC interviewed hundreds of financial experts, including senior officials of major banks, bank regulators, and investors. It is not clear that any of them--including the redoubtable Warren Buffett--was sufficiently confident about an impending crisis to put real money behind his or her judgment. Human beings have a tendency to believe that things will continue to go in the direction they are going, and are good at explaining why this must be so. Blaming the crisis on the failure to foresee it is facile and of little value for policymakers, who cannot legislate prescience. The fact that virtually all participants in the financial system failed to foresee this crisis--as they failed to foresee every other crisis--does not tell us anything about why this crisis occurred or what we should do to prevent the next one.

You write this as though I don't put any of the blame on misguided government policies. The issue I have is that guys like Wallison and the (obviously unbiased AEI) put the blame on gov't. Full stop. In their view, it is the fault of the gov't for enabling the private sector to blow up the housing bubble. It's also humorous to say that it's unfair to blame risk controls at the banks and lenders in hindsight while blaming gov't for unintended consequences of policies in hindsight. You can either blame people for their actions or not, you can't pick and choose when you do because of an ideology.

And, again. Just because the gov't played a role, it doesn't mean you can dismiss all of the evidence of the insanity that went on in the private sector out of hand. "Coburn-Levin? Whatever, it didn't blame the government enough!" That's basically what you are saying here.

What solutions are you offering? Seriously.

In reply to TheKing
2/20/13

TheKing:
NorthSider:
Mark Zuckerberg isn't a genius among idiots. He was a guy that happened upon a good idea, who executed some basic programming and had a website that took off. He has done very little that is truly extraordinary.

I hope that one day I do something as mundane and commonplace as Zuckerberg. Just start my own average, run of the mill, multi-billion dollar enterprise.

Come on, man. You're not even making an effort to understand my argument.

People program websites far more complex than Facebook.com every day. They don't start billion dollar enterprises. My point is that Zuckerberg isn't that extraordinarily talented or gifted. His payoff from Facebook isn't based on some meritocracy where the most talented programmers take the biggest paychecks, it's because he was a good programmer in the right place at the right time. Read Outliers by Malcolm Gladwell.

"For all the tribulations in our lives, for all the troubles that remain in the world, the decline of violence is an accomplishment we can savor, and an impetus to cherish the forces of civilization and enlightenment that made it possible."

In reply to BTbanker
2/20/13

BTbanker:
This thread has become unreadable.

Yeah, I give up. Massive caffeine rush wore off too. God, I think I'm more of a dick while heavily caffeinated than when I'm drunk.

Get busy living

In reply to TheKing
2/20/13

TheKing:
lolwut? What are you even talking about? You said that no one could have predicted what would happen, and I gave you a great example of someone who:

--Predicted it (and profited from it)
--Does a great job outlining all of the causes of the crisis (gov't and private sector) in a way that everyone can learn from

Your entire point of view allows you to more or less dismiss the good work anyone does ever because, hey, people get things right sometimes. Big deal!

That's exactly what I'm saying!

I don't think you understand the point I am making. This may come as a shock to you, but people aren't that extraordinary. Even the richest, most successful ones.

There are literally millions of people "predicting" events in markets every day. No matter what happens, no matter how extraordinary, if you look hard enough, you'll find someone who "predicted" it. That's not some incredible revelation, that's statistics.

And when extraordinarily good/bad events happen in the markets, journalists spend weeks seeking out the few people who "predicted" it. The fact that they exist shouldn't surprise anyone. Burry may have made a good bet on the housing crisis, but I would be only marginally more likely to listen to his advice going forward. See John Paulson: billionaire hedge fund manager who "predicted" the global financial meltdown, but somehow manages to lose 40% of his fund value in one of the biggest equity bull markets in recent history. What happened to his crystal ball??

"For all the tribulations in our lives, for all the troubles that remain in the world, the decline of violence is an accomplishment we can savor, and an impetus to cherish the forces of civilization and enlightenment that made it possible."

In reply to NorthSider
2/20/13

NorthSider:
TheKing:
NorthSider:
Mark Zuckerberg isn't a genius among idiots. He was a guy that happened upon a good idea, who executed some basic programming and had a website that took off. He has done very little that is truly extraordinary.

I hope that one day I do something as mundane and commonplace as Zuckerberg. Just start my own average, run of the mill, multi-billion dollar enterprise.

Come on, man. You're not even making an effort to understand my argument.

People program websites far more complex than Facebook.com every day. They don't start billion dollar enterprises. My point is that Zuckerberg isn't that extraordinarily talented or gifted. His payoff from Facebook isn't based on some meritocracy where the most talented programmers take the biggest paychecks, it's because he was a good programmer in the right place at the right time. Read Outliers by Malcolm Gladwell.

You are making a weak argument here. Starting and leading a company that grows to the size of Facebook is extraordinary. Who cares if he isn't the "best programmer" in the world, how is that even remotely relevant? He started and grew and continues to run an incredibly successful and profitable business. Sure, you can say he was in the "right place at the right time," but so were plenty of others. He didn't fall into it. You don't luck your want into founding and running a billion dollar enterprise. It's a combination of smarts, luck, and hard work.

And, you're right. His success isn't based on some sort of meritocracy where the best programmer takes home the biggest paycheck. His success is based upon the free market. He created a product that people want to use and scaled it.

Are you seriously using Outliers by Malcolm Gladwell as the crux of this argument? Hilarious.

In reply to NorthSider
2/20/13

NorthSider:
TheKing:
Your entire point of view allows you to more or less dismiss the good work anyone does ever because, hey, people get things right sometimes. Big deal!

That's exactly what I'm saying!

I think this conversation is over. What's even the point. You might agree, you might not. Sometimes you will, sometimes you won't. Who cares.

Why do anything ever?

I'm off to found a multi-billion dollar business. You know...just a run of the mill Wednesday!

In reply to TheKing
2/20/13

TheKing:
You write this as though I don't put any of the blame on misguided government policies. The issue I have is that guys like Wallison and the (obviously unbiased AEI) put the blame on gov't. Full stop. In their view, it is the fault of the gov't for enabling the private sector to blow up the housing bubble. It's also humorous to say that it's unfair to blame risk controls at the banks and lenders in hindsight while blaming gov't for unintended consequences of policies in hindsight. You can either blame people for their actions or not, you can't pick and choose when you do because of an ideology.

And, obviously, the government report is entirely unbiased in its conclusion that the private sector is to blame. Toss in a few pages about GSEs, 640 pages about the private sector and we have a nice balance! Wallison's report is as biased as any.

But you don't need someone else's report to realize that lending to super-sub-prime recipients shouldn't have been a profitable endeavor. In any other market, these practices were kept in check and never inflated a bubble. Then, strangely, these huge GSEs start providing incredible levels of liquidity to the market and *flash* a bubble happens.

Read my words: ***everyone is to blame*** (I've tried bolding this statement, I've tried italicizing it, now I'll try surrounding it in asterisks). Banks made terrible mortgages, brokerages were overlevered, ratings agencies made (what now are obviously) inflated ratings. All worthy of blame. But none of this would have been possible without a strong market for these products, and that was provided by GSEs and poor regulations that incented banks to hold MBSs on their balance sheets so they could increase leverage.

And, again. Just because the gov't played a role, it doesn't mean you can dismiss all of the evidence of the insanity that went on in the private sector out of hand. "Coburn-Levin? Whatever, it didn't blame the government enough!" That's basically what you are saying here.

What solutions are you offering? Seriously.

I'm the only one offering a solution here! While Warren, et. al. believe the solution is throwing bankers in jail (which will accomplish nothing productive), I propose a much simpler one:

Get the government out of these industries. Stop curtailing our liberties (both social and economic). Stop bailing out failing companies. Stop trying to pile thousands of pages of regulation on industries that no one body can effectively oversee.

"For all the tribulations in our lives, for all the troubles that remain in the world, the decline of violence is an accomplishment we can savor, and an impetus to cherish the forces of civilization and enlightenment that made it possible."

In reply to NorthSider
2/20/13

NorthSider:
Edmundo Braverman:
NorthSider:
TNA:
Yeah and also, when you have government investing in banks there is a conflict of interest. Prosecuting a CEO would tank a bank. If the government has money involved it is in their best interest to look the other way.

Exactly. This is why you don't bail out companies!

Also, FWIW, I doubt that any congressmen are looking the other way. If they could implicate Dick Fuld in a criminal investigation, they would instantly be the most popular government official in history.

Actually, this isn't true at all. If any Congressman wanted to charge Fuld with perjury, they'd have him dead to rights:
http://blogs.reuters.com/felix-salmon/2010/04/29/f...

Oh my goodness!! It can't be true! Dick Fuld underestimated his paychecks by 25%? Unbelievable, throw this guy in jail!

My favorite part about this article is that the "whistleblower" used public filings to contradict Fuld's estimate. Such a sleuth, that Fuld guy!

Come up with a spur-of-the-moment answer to the question: how much money did you earn in total from 2000 - 2007. I'd be surprised if the answer you give is within 10% of the actual number. Now add layers and layers of variable compensation, stock-based awards, RSUs, benefits, salaries, etc. that CEOs receive and imagine doing the same calculation.

This is completely irrelevant to this discussion. Jailing Fuld for underestimating his paychecks is just about the biggest non-sequitur that I can imagine.

When you're appearing before Congress and you know ahead of time that that's one of the questions they're going to ask you, you'd either have to be a liar or a dullard to underestimate your earnings by 25%. And the fact of the matter is his RSUs ended up being worth a lot more than 25% more than he said. I'm not sure what the statute of limitations is on perjury (might already be expired, don't know), but it would sure be worth it in my view to charge him and get him on the stand and see what come up. Repo 105, for example.

In reply to TheKing
2/20/13

TheKing:
You are making a weak argument here. Starting and leading a company that grows to the size of Facebook is extraordinary. Who cares if he isn't the "best programmer" in the world, how is that even remotely relevant? He started and grew and continues to run an incredibly successful and profitable business.

All of this is so retrospective! You're victim to an incredible selection bias. Zuckerberg's success was ancillary to his skills. If you met Mark Zuckerberg in 2003, you wouldn't have said, "This guy is a genius, I bet he will start a billion dollar company!" That's my point.

There is ZERO predictive power in analyzing Mark Zuckerberg. Observing the success of Facebook tells us absolutely nothing about the success of future businesses. Likewise, analyzing Burry, asking him questions, listening to his advice - none of this has any predictive power. It is meaningless in the context of this debate.

The fact that there exist people who "predicted" the financial crisis adds ZERO value to this discussion.

"For all the tribulations in our lives, for all the troubles that remain in the world, the decline of violence is an accomplishment we can savor, and an impetus to cherish the forces of civilization and enlightenment that made it possible."

In reply to NorthSider
2/20/13

NorthSider:
TheKing:
You are making a weak argument here. Starting and leading a company that grows to the size of Facebook is extraordinary. Who cares if he isn't the "best programmer" in the world, how is that even remotely relevant? He started and grew and continues to run an incredibly successful and profitable business.

All of this is so retrospective! You're victim to an incredible selection bias. Zuckerberg's success was ancillary to his skills. If you met Mark Zuckerberg in 2003, you wouldn't have said, "This guy is a genius, I bet he will start a billion dollar company!" That's my point.

I didn't say you could predict anything if you had met Zuckerberg back in 2003. I said that he's done something extraordinary. And I only said that because you said he hasn't done anything that's even really noteworthy.

Success comes from people in all sorts of backgrounds. What the fuck is your point? You're tiring me out.

In reply to Edmundo Braverman
2/20/13

Edmundo Braverman:
When you're appearing before Congress and you know ahead of time that that's one of the questions they're going to ask you, you'd either have to be a liar or a dullard to underestimate your earnings by 25%. And the fact of the matter is his RSUs ended up being worth a lot more than 25% more than he said. I'm not sure what the statute of limitations is on perjury (might already be expired, don't know), but it would sure be worth it in my view to charge him and get him on the stand and see what come up. Repo 105, for example.

Repo 105 has nothing to do with Dick Fuld estimating his compensation from 2000 - 2007. That would never come up in a perjury trial. And if it did, the next thing you'd hear is, "Objection: Inflammatory".

"For all the tribulations in our lives, for all the troubles that remain in the world, the decline of violence is an accomplishment we can savor, and an impetus to cherish the forces of civilization and enlightenment that made it possible."

In reply to TheKing
2/20/13

TheKing:
I didn't say you could predict anything if you had met Zuckerberg back in 2003. I said that he's done something extraordinary. And I only said that because you said he hasn't done anything that's even really noteworthy.

Success comes from people in all sorts of backgrounds. What the fuck is your point? You're tiring me out.

My point is the same one I made initially: no one knew that this was going to happen. Not even Burry. Burry is just the guy that happened to have a conviction short bet on the market at the time. Burry is not a prophet, he did not have some unique insight on the mortgage market. He is not a remarkably skilled investor. He was the guy who happened to make a bet and have it payoff. That's the same guy that Mark Zuckerberg is.

Predicting macro-events is tantamount to throwing darts at a board. In this case, there were millions of darts thrown at one dartboard. Then, after the fact, we went up to the dartboard and we were *shocked*!!! Someone hit the bull's eye!

EDIT: This discussion is so off-course. Do you have any response to the other points in that long reply I left?

"For all the tribulations in our lives, for all the troubles that remain in the world, the decline of violence is an accomplishment we can savor, and an impetus to cherish the forces of civilization and enlightenment that made it possible."

2/20/13

There is more text in this thread than a Harry Potter novel.

2/20/13

Came in expecting a political shit fight....I called it.

adapt or die:
What would P.T. Barnum say about you?

MY BLOG

In reply to BTbanker
2/20/13

BTbanker:
There is more text in this thread than a Harry Potter novel.

Yeah dude, I kept up at first, ran out of caffiene and took a nap, then came back all "WTF is even going on and how am I on this side of the debate???????"

Get busy living

2/20/13

Here's an interesting post I stumbled on from 2009. I think it's probably more relevant than 90% of the rhetorical bickering on this thread. I highlighted the most relevant statements:

R_Danneskjold:
http://scienceblogs.com/cortex/2009/03/aig_and_ine...

AIG and inequality

Posted on: March 18, 2009 1:51 PM, by Jonah Lehrer

I know, I know: everybody is sick of hearing about those AIG bonuses. But bear with me for one more blog post, because I think the swell of populist anger can actually illuminate something interesting about the human response to inequality.

Consider the ultimatum game, that simple economic task where one person (the proposer) is given ten dollars and told to share it with another person (the responder). The proposer can divide the money however they like, but if the responder rejects the offer then both players end up with nothing.

Classical economic theory makes two predictions about the outcome of the ultimatum game: the offers will always be unfair, and the unfair offers will always be accepted. Since both players are rational, they understand that a small amount of money is still better than no money at all. Reason and greed should trump ethical notions of fairness.

But that isn't what happens. Experiment after experiment has demonstrated that most proposers offer about $4, which is rather fair and utterly irrational. Why do proposers engage in such generosity? Because they are able to imagine how the responder will feel if they make an unfair offer.
Proposers know that a lowball proposal will make the responder angry, which will lead them to reject the offer, which will leave everybody with nothing. So the proposers suppress their greed, and equitably split the ten dollars. They understand that maintaining the appearance of fairness is better for everybody.

However, there's one easy way to change the behavior of people during the ultimatum game. When people are given a test before the money is distributed - and it doesn't matter what the test is - and then the "high scorers" are given the $10 to distribute, responders are willing to accept unfair offers. In other words, people are willing to tolerate inequality when they think it's deserved. This is why people weren't outraged when Wall Street handed out obscene bonuses last year [2008] - they assumed the executives deserved the payout. But now we know better.

When this sense of fairness breaks down, bad things start to happen. One of the more powerful examples of this behavior comes from Franz de Waals and Sarah Brosnan, who trained brown capuchin monkeys to give them pebbles in exchange for cucumbers. Almost overnight, a capuchin economy developed, with hungry monkeys harvesting small stones. But the marketplace was disrupted when the scientists got mischievous: instead of giving every monkey a cucumber in exchange for pebbles, they started giving some monkeys a tasty grape instead. (Monkeys prefer grapes to cucumbers.) After witnessing this injustice, the monkeys earning cucumbers went on strike.
Some started throwing their cucumbers at the scientists; the vast majority just stopped collecting pebbles. The capuchin economy ground to a halt. The monkeys were willing to forfeit cheap food simply to register their anger at the arbitrary pay scale.

This labor unrest among monkeys illuminates our innate sense of fairness.
It's not that the primates demanded equality - some capuchins collected many more pebbles than others, and that never created a problem - it's that they couldn't stand when the inequality was a result of injustice. Humans act the same way. When proposers do something to deserve their riches, nobody complains. But when they get rewarded for no reason and then refuse to fairly distribute their reward, people get furious. They begin doubting the integrity of the system, and become more sensitive to perceived inequalities. They reject the very premise of the game.


Life IS unfair, but when that attitude becomes institutionalized into a so called justice system, civilization basically breaks down. This isn't a liberal/GOP thing, it's basic to all civilizations of history. I actually did a paper in college setting up a thesis for a PhD (that I may pursue someday) outlining how if it had to be narrowed down to one reason why the Roman Empire collapsed, it was because the basis of the labor force was slavery, ie: an institution where institutionalized unfairness undermined the very foundation of the entire way of life.

Somthing to think about.

Get busy living

In reply to UFOinsider
2/20/13

UFOinsider:
Life IS unfair, but when that attitude becomes institutionalized into a so called justice system, civilization basically breaks down. This isn't a liberal/GOP thing, it's basic to all civilizations of history. I actually did a paper in college setting up a thesis for a PhD (that I may pursue someday) outlining how if it had to be narrowed down to one reason why the Roman Empire collapsed, it was because the basis of the labor force was slavery, ie: an institution where institutionalized unfairness undermined the very foundation of the entire way of life.

Somthing to think about.

True, but are we really saying that Wall Street banks are institutionalizing unfairness? I just don't see it.

Also, most of these points were brought up during this discussion, the most prominent being that most people are just upset that people received bonuses they didn't earn. And that only happened because of government bailouts. If you're going to bail out the banks, you're going to be paying precisely the people that were around when the bubble inflated - that's something you have to live with. That's why we never should have bailed them out in the first place.

"For all the tribulations in our lives, for all the troubles that remain in the world, the decline of violence is an accomplishment we can savor, and an impetus to cherish the forces of civilization and enlightenment that made it possible."

In reply to NorthSider
2/20/13

NorthSider:
UFOinsider:
Life IS unfair, but when that attitude becomes institutionalized into a so called justice system, civilization basically breaks down. This isn't a liberal/GOP thing, it's basic to all civilizations of history. I actually did a paper in college setting up a thesis for a PhD (that I may pursue someday) outlining how if it had to be narrowed down to one reason why the Roman Empire collapsed, it was because the basis of the labor force was slavery, ie: an institution where institutionalized unfairness undermined the very foundation of the entire way of life.

Somthing to think about.

True, but are we really saying that Wall Street banks are institutionalizing unfairness? I just don't see it.

Also, most of these points were brought up during this discussion, the most prominent being that most people are just upset that people received bonuses they didn't earn. And that only happened because of government bailouts. If you're going to bail out the banks, you're going to be paying precisely the people that were around when the bubble inflated - that's something you have to live with. That's why we never should have bailed them out in the first place.


Point is that they were, and given the clusterfuck the gov't is stepping up its game. Personally, I think there needs to be a LOT less rules for us to follow, but the rules that remain have to be strictly enforced. Fraud is at the root of what happened...at this basic level the voluntary nature of participation and entering into contract are violated at a fundamental level leaving only two options: 1. exit, where people stop participating and 2. retaliation, where people don't even care what the payoff is. Neither is desireable, but we're already beyond that: unemployment is up as well as crime, and the social nets and jails will run out of funding quickly at this pace.

The solution? Good governance. I'm not sure when in American history good governance meant more or less government, it meant .....doing a good job at governing! :D Start restoring credibility to the system we live in. If it's the government's fault, in the big picture, that the crash happened, then it's the government's job to do better. I'm not one of these idiot "libertarian" fools that thinks that if we dismantle the justice system that there will be justice. I'm definitely not a fan of more nosybody rules and agencies that don't accomplish anything. Why not simply address the fact that the current administrators weren't /aren't doing what it is our tax money pays them to do? In my mind, Warren basically making a fool of the regulators is a good move.

Get busy living

2/20/13

Anyone who is saying CEOs cannot be held responsible for the actions of their business because there's no way they could have known something went on is kinda proving the whole too big to fail thing...

In reply to whatwhatwhat
2/20/13

whatwhatwhat:
Anyone who is saying CEOs cannot be held responsible for the actions of their business because there's no way they could have known something went on is kinda proving the whole too big to fail thing...

Are you saying that we should disallow any companies larger than, say, 150 employees? Because beyond that point, there's just no way that one person can keep track of everything that's going on.

"For all the tribulations in our lives, for all the troubles that remain in the world, the decline of violence is an accomplishment we can savor, and an impetus to cherish the forces of civilization and enlightenment that made it possible."

In reply to UFOinsider
2/20/13

UFOinsider:
Point is that they were, and given the clusterfuck the gov't is stepping up its game. Personally, I think there needs to be a LOT less rules for us to follow, but the rules that remain have to be strictly enforced. Fraud is at the root of what happened...at this basic level the voluntary nature of participation and entering into contract are violated at a fundamental level leaving only two options: 1. exit, where people stop participating and 2. retaliation, where people don't even care what the payoff is. Neither is desireable, but we're already beyond that: unemployment is up as well as crime, and the social nets and jails will run out of funding quickly at this pace.

The solution? Good governance. I'm not sure when in American history good governance meant more or less government, it meant .....doing a good job at governing! :D Start restoring credibility to the system we live in. If it's the government's fault, in the big picture, that the crash happened, then it's the government's job to do better. I'm not one of these idiot "libertarian" fools that thinks that if we dismantle the justice system that there will be justice. I'm definitely not a fan of more nosybody rules and agencies that don't accomplish anything. Why not simply address the fact that the current administrators weren't /aren't doing what it is our tax money pays them to do? In my mind, Warren basically making a fool of the regulators is a good move.

It would be, except Warren just wants to replace those regulators with even more esoteric regulators that she hand picks. When those people fail at their jobs, Warren 2.0 will come along to replace them - and so on.

No body can effectively police entire industries. That's the market's duty. The false sense of security that the government gives us, whether through the idea that regulations are weeding out "risky practices" or through GSEs or through bailouts, is one of the key contributors to the problems we face.

I'm not in favor of dismantling the justice system, but the executive branch has extended far beyond its reach. The regulatory burden on the financial industry is completely unwarranted and counter-productive. More than anything else, that's what keeps the legacy organizations in this industry afloat.

"For all the tribulations in our lives, for all the troubles that remain in the world, the decline of violence is an accomplishment we can savor, and an impetus to cherish the forces of civilization and enlightenment that made it possible."

In reply to UFOinsider
2/20/13

UFOinsider:
BTbanker:
There is more text in this thread than a Harry Potter novel.

Yeah dude, I kept up at first, ran out of caffiene and took a nap, then came back all "WTF is even going on and how am I on this side of the debate???????"

I just say the opposite of whatever "TheKing" says. It gets the people goin.
In reply to NorthSider
2/20/13

NorthSider:
whatwhatwhat:
Anyone who is saying CEOs cannot be held responsible for the actions of their business because there's no way they could have known something went on is kinda proving the whole too big to fail thing...

Are you saying that we should disallow any companies larger than, say, 150 employees? Because beyond that point, there's just no way that one person can keep track of everything that's going on.


I don't think I said that companies should be limited in any fashion and I don't think i said that any one person has to personally keep track of everything that is going on.
In reply to whatwhatwhat
2/20/13

whatwhatwhat:
NorthSider:
whatwhatwhat:
Anyone who is saying CEOs cannot be held responsible for the actions of their business because there's no way they could have known something went on is kinda proving the whole too big to fail thing...

Are you saying that we should disallow any companies larger than, say, 150 employees? Because beyond that point, there's just no way that one person can keep track of everything that's going on.


I don't think I said that companies should be limited in any fashion and I don't think i said that any one person has to personally keep track of everything that is going on.

Then what are you suggesting? And what link is there between CEOs not being able to know every aspect of their business and "too big to fail" (I hate that term, as there is nothing that's too big to fail).

"For all the tribulations in our lives, for all the troubles that remain in the world, the decline of violence is an accomplishment we can savor, and an impetus to cherish the forces of civilization and enlightenment that made it possible."

In reply to NorthSider
2/20/13

NorthSider:
whatwhatwhat:
NorthSider:
whatwhatwhat:
Anyone who is saying CEOs cannot be held responsible for the actions of their business because there's no way they could have known something went on is kinda proving the whole too big to fail thing...

Are you saying that we should disallow any companies larger than, say, 150 employees? Because beyond that point, there's just no way that one person can keep track of everything that's going on.


I don't think I said that companies should be limited in any fashion and I don't think i said that any one person has to personally keep track of everything that is going on.

Then what are you suggesting? And what link is there between CEOs not being able to know every aspect of their business and "too big to fail" (I hate that term, as there is nothing that's too big to fail).


Well, there definitely is too big to fail from the government's perspective and that's all that really matters since they're the ones doing the bailouts.

I agree with quite a bit of what you wrote in this thread (beyond that whole they just got lucky shit, idk wtf that was all about) and personally think that there should be no bailouts and let fuckers deal with their own shit. However, considering that we live in a world where that is not politically palatable, I suggest that management be held responsible, for you know, managing their company. Whether it be through civil or criminal court, I don't really care. Given earlier examples, someone like John Mack can be sued into oblivion by shareholders for being a clueless moron and accepting way more responsibility than they were capable of. Someone like Dick Fuld can be thrown the fuck in jail where some bro can always win with him.

I just want moral hazard eliminated from this sector altogether and have some sort of accountability. That's all.

In reply to whatwhatwhat
2/20/13

whatwhatwhat:
I just want moral hazard eliminated from this sector altogether and have some sort of accountability. That's all.

I just don't believe that you achieve this by throwing former bank CEOs whose reputations have already been tarnished into prison. Moral hazards is entirely the result of government involvement.

There is a big gap between poor management and criminal negligence. That gap has not been bridged. That's the point.

"For all the tribulations in our lives, for all the troubles that remain in the world, the decline of violence is an accomplishment we can savor, and an impetus to cherish the forces of civilization and enlightenment that made it possible."

In reply to BTbanker
2/20/13

BTbanker:
UFOinsider:
BTbanker:
There is more text in this thread than a Harry Potter novel.

Yeah dude, I kept up at first, ran out of caffiene and took a nap, then came back all "WTF is even going on and how am I on this side of the debate???????"

I just say the opposite of whatever "TheKing" says. It gets the people goin.

BWAHAHAHAHAHA

Get busy living

2/21/13

Actually, TheKing is spot on on his comments. I respect your comments in WSO, BTBanker, but you are wrong on this one. Of course there are lots of people on Wall Street, regional banks, rating agencies that should be put on trial. Even people who lied on their mortgage applications. All of them broke the law. But somehow there has not been a single conviction on this. And Wall Street put his lobbying machine to work and got what they wanted, business as usual. Dodd-Frank is not enough. In the USA, justice is bought with money.

The results of the 2008 financial crisis was a system with bigger banks than before. If we had "Too Big To Fail" before, I don't know what to call this. Banks should not be so big as to take the economy of a country into a depression when they go bankrupt. There's no bailout of Main Street business, there should not be one for Wall Street. In 2008, we did not have an option. The citizens of the US where screwed with or without the bailout. As a previous poster said, we need to break up the banks such that they are not TBTF, or regulate them more closely. You can not say that the solution is to let the free market regulate itself. That's what we had in 2008, and the markets failed at that. Alan Greenspan even conceded to that, and seemed to change his opinion on this Utopian "Free market" concept that he preached for so long. I can't fault him for believing in the free markets so strongly before. After all, nothing like 2008 had happened before. But at least he looked at the events and came to the conclusion that letting the markets regulate itself can actually fail. Some of you guys seemed to ignore what happened in 2008.

Another thing, why is she being a "liberal" even mentioned in some of your arguments. That is irrelevant to what is being presented. Attack the argument, not the person.

In reply to NorthSider
2/21/13

NorthSider:
TheKing:
I didn't say you could predict anything if you had met Zuckerberg back in 2003. I said that he's done something extraordinary. And I only said that because you said he hasn't done anything that's even really noteworthy.

Success comes from people in all sorts of backgrounds. What the fuck is your point? You're tiring me out.

My point is the same one I made initially: no one knew that this was going to happen. Not even Burry. Burry is just the guy that happened to have a conviction short bet on the market at the time. Burry is not a prophet, he did not have some unique insight on the mortgage market. He is not a remarkably skilled investor. He was the guy who happened to make a bet and have it payoff. That's the same guy that Mark Zuckerberg is.

Predicting macro-events is tantamount to throwing darts at a board. In this case, there were millions of darts thrown at one dartboard. Then, after the fact, we went up to the dartboard and we were *shocked*!!! Someone hit the bull's eye!

EDIT: This discussion is so off-course. Do you have any response to the other points in that long reply I left?

NorthSider,

After reading your conversation with TheKing, I can see your points. I won't go into details here. I just wanted to come to the defense of Mike Burry. He actually is a great investor. I would say he is better than Warren Buffet. He not only called the subprime crisis, and profited big from it. He has been making great investments since 1996, when he posted his calls on the internet. I read Michael Lewis "The Big Short" and in that book you read all about Michael Burry. During his hedge fund perios (2000-2008 if I'm correct) his fund returned 500%. The S&P500 had a 2% return. If that is not amazing, I don't know what is. Also, you can't just account that amazing % to his subprime bet. He made 55% on 2001, with the S&P500 down 12%. In 2002, he made 16% while the S&P500 was down 22%. In 2003, the market returned 23%, Burry made 50%. That is just amazing. This is a NY Times OpEd Burry wrote back in 2010 regarding how he came up with his prediction:
http://www.nytimes.com/2010/04/04/opinion/04burry....

Regarding John Paulson, the guy is a joke. I actually believe that he did not come up with the investment thesis in going short MBS. He probably got it from someone else, and came to the realization that it made SENSE. And he put money on the line, more than someone like Michael Burry could put. And made the biggest killing of them all.

In reply to andres17
2/21/13

andres17:
Regarding John Paulson

He's a run of the mill PM who made one big call, that's about it so far. If he can do it again (a la Soros making a billion yet again on the Yen) then he will be great. Otherwise, he's just a one trick pony, and good for him, he's got more $$$dolladollabling than most.
andres17:
Another thing, why is she being a "liberal" even mentioned in some of your arguments. That is irrelevant to what is being presented. Attack the argument, not the person.

Yes, this annoys me as well. Dems and GOP folks are so partisan that they're deaf to any good idea if it's not coming from either Roger Ailes or the Village Voice. The second you say something that doesn't easily fit into their worldview, they assume you're on the other side of their fight. It's like talking to Mormons or something, their interpretation of reality is so skewed in one direction that very little sinks in and you just end up in a shouting match: and given yesterday was a delerious espisode of exhaustion+stress+caffeine mega doses, I took the bait. But when it comes down to sifting through ideas, who cares who said it? If it works, just do it.

Get busy living

2/21/13

How do you guys not get tired of shouting the same shit back and forth to each other on marginally different topics.

If I had asked people what they wanted, they would have said faster horses - Henry Ford

In reply to happypantsmcgee
2/21/13

happypantsmcgee:
How do you guys not get tired of shouting the same shit back and forth to each other on marginally different topics.

Hey, how are ya? Where you been?

Get busy living

In reply to andres17
2/21/13

andres17:
The results of the 2008 financial crisis was a system with bigger banks than before. If we had "Too Big To Fail" before, I don't know what to call this. Banks should not be so big as to take the economy of a country into a depression when they go bankrupt.

Banks going bankrupt didn't bring the country into a recession, the collapse of the mortgage market did.

There's no bailout of Main Street business, there should not be one for Wall Street. In 2008, we did not have an option. The citizens of the US where screwed with or without the bailout. As a previous poster said, we need to break up the banks such that they are not TBTF, or regulate them more closely.

The primary reason that we have so many large banks is as a consequence of having so much regulation. If the financial services industry weren't so burdensomely regulated, I have no doubts that retail banking would be far more decentralized.

You can not say that the solution is to let the free market regulate itself. That's what we had in 2008, and the markets failed at that.

Really? You think that the financial services industry was deregulated in 2008?? Regulation had nothing to do with this collapse. Inflated home prices did.

"For all the tribulations in our lives, for all the troubles that remain in the world, the decline of violence is an accomplishment we can savor, and an impetus to cherish the forces of civilization and enlightenment that made it possible."

2/21/13

How is no one not blaming the Fed and the low rates for this?

2/21/13

No individual, organization, regulator, or regulatory agency during this entire financial crisis has been brought to trial for anything. The regulators don't even view themselves as accountable for participating in and allowing such failures of policy and oversight to happen. The government complaining about business is like another criminal blaming another criminal. Who cares really? How about taking the government to task for all their failures and the crimes they commit daily while hiding behind their flawed philosophies both on the left and on the right. Unfortunately, that day isn't coming anytime soon.

In reply to TNA
2/21/13

TNA:
How is no one not blaming the Fed and the low rates for this?

No one except Ron Paul ever brought up the Fed and centrally planned interest rates .. and now he's gone ... maybe his son Rand ... and Congressman Amash will move that forward ... hopefully.

2/21/13

It must feel very vindicating for everyone to be armchair preaching about who should go to jail and for what reasons. I find it borderline insane that people in this thread are just idly condemning people to prison sentences because, from their perfectly accurate retrospective viewpoint, they were bad at their jobs. Do you even understand what you're saying?

And where were your calls for retribution back in 2007? Don't give me this "I didn't realize what was going on" crap, we all saw home prices rising, we all participated in that bubble, and I knew strikingly few that ever mentioned "predatory lending" or "housing bubbles" at the time.

Nevertheless, just because the regulators, the people on Wall Street and the credit agencies apparently forgot to use their crystal balls and predict the collapse in mortgage pricing, they should all be thrown in prison? This is pure lunacy.

"For all the tribulations in our lives, for all the troubles that remain in the world, the decline of violence is an accomplishment we can savor, and an impetus to cherish the forces of civilization and enlightenment that made it possible."

In reply to NorthSider
2/21/13

NorthSider:
It must feel very vindicating for everyone to be armchair preaching about who should go to jail and for what reasons. I find it borderline insane that people in this thread are just idly condemning people to prison sentences because, from their perfectly accurate retrospective viewpoint, they were bad at their jobs. Do you even understand what you're saying?

And where were your calls for retribution back in 2007? Don't give me this "I didn't realize what was going on" crap, we all saw home prices rising, we all participated in that bubble, and I knew strikingly few that ever mentioned "predatory lending" or "housing bubbles" at the time.

Nevertheless, just because the regulators, the people on Wall Street and the credit agencies apparently forgot to use their crystal balls and predict the collapse in mortgage pricing, they should all be thrown in prison? This is pure lunacy.

Pure lunacy is having executives turn a blind eye to outright fraud in the name of profits. No one here is saying that every CEO whose company when to shit during the downturn should go to jail, just the ones who committed crimes, which is, as I'm sure you are aware, how the justice system in the U.S. works. You are arguing against points no one is making. Seeing the housing bubble and not taking appropriate risk measures isn't a crime. Committing fraud is a crime. Overseeing people who are committing fraud to fuel your business is a crime.

No one here seems to be preaching except you. In a rational world we should expect criminals to suffer consequences.

"For I am a sinner in the hands of an angry God. Bloody Mary full of vodka, blessed are you among cocktails. Pray for me now and at the hour of my death, which I hope is soon. Amen."

In reply to NorthSider
2/21/13

NorthSider:
andres17:
The results of the 2008 financial crisis was a system with bigger banks than before. If we had "Too Big To Fail" before, I don't know what to call this. Banks should not be so big as to take the economy of a country into a depression when they go bankrupt.

Banks going bankrupt didn't bring the country into a recession, the collapse of the mortgage market did.

You must interpret the events different from me, but I think you are wrong on this. Of course the trigger was the collapse of the real estate bubble. But ultimately, what caused the recession was the amount of BIG banks and institutions that were failing (Bear & Stearns, Lehman Brothers). At that point, almost all of Wall Street banks were going under. And at that point, banks stopped lending money to one another, even to businesses, creating a credit freeze. From Wikipedia: "The bursting of the U.S. housing bubble, which peaked in 2006,[6] caused the values of securities tied to U.S. real estate pricing to plummet, damaging financial institutions globally." So yes, the trigger was the bursting of the real estate market bubble. But the reason millions of citizens lost their jobs was because banks were going under thanks to their bad bets on real estate securities.

There's no bailout of Main Street business, there should not be one for Wall Street. In 2008, we did not have an option. The citizens of the US where screwed with or without the bailout. As a previous poster said, we need to break up the banks such that they are not TBTF, or regulate them more closely.

The primary reason that we have so many large banks is as a consequence of having so much regulation. If the financial services industry weren't so burdensomely regulated, I have no doubts that retail banking would be far more decentralized.

I have to disagree here too. The financial sector has been more and more deregulated as time has gone by, probably because each time a new deregulated law came into effect, the markets gained. And this in turn incentivated more deregulation. The thing is that this help created the 2008 crash. Again, from Wikipedia:

"The financial sector in the U.S. has evolved a great deal in recent decades, during which there have been some regulatory changes and the creation of new financial products such as the securitization of loan obligations of various sorts and credit default swaps. Among the most important of the regulatory changes was the Gramm-Leach-Bliley Act in 1999, which repealed the parts of the Glass-Steagall Act which had not already been repealed. This 1999 Act took down barriers to competition between traditional banks, investment banks, and insurance companies, in some cases allowing firms to participate in all three markets thus making distinctions between these categories less clear.

Some believe that this deregulation contributed to the U.S. financial crisis of 2007-2009 and the Global financial crisis of 2008-2009.[21] However, others dispute this assertion, and a lively debate on the causes of financial crisis is still under way as of August, 2009."

You can not say that the solution is to let the free market regulate itself. That's what we had in 2008, and the markets failed at that.

Really? You think that the financial services industry was deregulated in 2008?? Regulation had nothing to do with this collapse. Inflated home prices did.[/quote]

And how do you think home prices got inflated in the first place? There was big deregulation of the government on lending standards. The government gave the green light to banks to lend more. And banks went ahead and began lending money to someone willing to sign the papers, without even bothering to check if that person's income existed, or if it was sufficient for the loan given. Without this, a lot of those buyers back in the early 2000s would have not been able to participate in the real estate market, and the bubble might have been avoided.

In reply to andres17
2/21/13

andres17:
NorthSider:
The results of the 2008 financial crisis was a system with bigger banks than before. If we had "Too Big To Fail" before, I don't know what to call this. Banks should not be so big as to take the economy of a country into a depression when they go bankrupt.

Banks going bankrupt didn't bring the country into a recession, the collapse of the mortgage market did.

You must interpret the events different from me, but I think you are wrong on this. Of course the trigger was the collapse of the real estate bubble. But ultimately, what caused the recession was the amount of BIG banks and institutions that were failing (Bear & Stearns, Lehman Brothers). At that point, almost all of Wall Street banks were going under. And at that point, banks stopped lending money to one another, even to businesses, creating a credit freeze. From Wikipedia: "The bursting of the U.S. housing bubble, which peaked in 2006,[6] caused the values of securities tied to U.S. real estate pricing to plummet, damaging financial institutions globally." So yes, the trigger was the bursting of the real estate market bubble. But the reason millions of citizens lost their jobs was because banks were going under thanks to their bad bets on real estate securities.

andres17:
NorthSider:
There's no bailout of Main Street business, there should not be one for Wall Street. In 2008, we did not have an option. The citizens of the US where screwed with or without the bailout. As a previous poster said, we need to break up the banks such that they are not TBTF, or regulate them more closely.

The primary reason that we have so many large banks is as a consequence of having so much regulation. If the financial services industry weren't so burdensomely regulated, I have no doubts that retail banking would be far more decentralized.

I have to disagree here too. The financial sector has been more and more deregulated as time has gone by, probably because each time a new deregulated law came into effect, the markets gained. And this in turn incentivated more deregulation. The thing is that this help created the 2008 crash. Again, from Wikipedia:

"The financial sector in the U.S. has evolved a great deal in recent decades, during which there have been some regulatory changes and the creation of new financial products such as the securitization of loan obligations of various sorts and credit default swaps. Among the most important of the regulatory changes was the Gramm-Leach-Bliley Act in 1999, which repealed the parts of the Glass-Steagall Act which had not already been repealed. This 1999 Act took down barriers to competition between traditional banks, investment banks, and insurance companies, in some cases allowing firms to participate in all three markets thus making distinctions between these categories less clear.

Some believe that this deregulation contributed to the U.S. financial crisis of 2007-2009 and the Global financial crisis of 2008-2009.[21] However, others dispute this assertion, and a lively debate on the causes of financial crisis is still under way as of August, 2009."

andres17:
NorthSider:
You can not say that the solution is to let the free market regulate itself. That's what we had in 2008, and the markets failed at that.

Really? You think that the financial services industry was deregulated in 2008?? Regulation had nothing to do with this collapse. Inflated home prices did.

And how do you think home prices got inflated in the first place? There was big deregulation of the government on lending standards. The government gave the green light to banks to lend more. And banks went ahead and began lending money to someone willing to sign the papers, without even bothering to check if that person's income existed, or if it was sufficient for the loan given. Without this, a lot of those buyers back in the early 2000s would have not been able to participate in the real estate market, and the bubble might have been avoided.

In reply to duffmt6
2/21/13

duffmt6:
Pure lunacy is having executives turn a blind eye to outright fraud in the name of profits. No one here is saying that every CEO whose company when to shit during the downturn should go to jail, just the ones who committed crimes, which is, as I'm sure you are aware, how the justice system in the U.S. works. You are arguing against points no one is making. Seeing the housing bubble and not taking appropriate risk measures isn't a crime. Committing fraud is a crime. Overseeing people who are committing fraud to fuel your business is a crime.

No one here seems to be preaching except you. In a rational world we should expect criminals to suffer consequences.

What is the "fraud" to which you're referring? There is no criminal case against Wall Street executives, despite all the time and effort that has been put into building one.

"For all the tribulations in our lives, for all the troubles that remain in the world, the decline of violence is an accomplishment we can savor, and an impetus to cherish the forces of civilization and enlightenment that made it possible."

In reply to andres17
2/21/13

andres17:
You must interpret the events different from me, but I think you are wrong on this. Of course the trigger was the collapse of the real estate bubble. But ultimately, what caused the recession was the amount of BIG banks and institutions that were failing (Bear & Stearns, Lehman Brothers). At that point, almost all of Wall Street banks were going under. And at that point, banks stopped lending money to one another, even to businesses, creating a credit freeze. From Wikipedia: "The bursting of the U.S. housing bubble, which peaked in 2006,[6] caused the values of securities tied to U.S. real estate pricing to plummet, damaging financial institutions globally." So yes, the trigger was the bursting of the real estate market bubble. But the reason millions of citizens lost their jobs was because banks were going under thanks to their bad bets on real estate securities.

While having a fragmented banking industry might have made the financial collapse less dramatic, the bubble would have falled just as hard on hundreds of mid-sized banks as well. A string of bankruptcies would still have ensued. Investment banks were providing a product that was in high demand during the mortgage build up. If they weren't around to provide it, someone else would have been. Banks didn't cause millions of people to lose their jobs, unless you're implying that millions of jobs were reliant on large financial organizations existing, in which case they wouldn't have existed to be lost in the first place.

I have to disagree here too. The financial sector has been more and more deregulated as time has gone by, probably because each time a new deregulated law came into effect, the markets gained. And this in turn incentivated more deregulation. The thing is that this help created the 2008 crash. Again, from Wikipedia:

"The financial sector in the U.S. has evolved a great deal in recent decades, during which there have been some regulatory changes and the creation of new financial products such as the securitization of loan obligations of various sorts and credit default swaps. Among the most important of the regulatory changes was the Gramm-Leach-Bliley Act in 1999, which repealed the parts of the Glass-Steagall Act which had not already been repealed. This 1999 Act took down barriers to competition between traditional banks, investment banks, and insurance companies, in some cases allowing firms to participate in all three markets thus making distinctions between these categories less clear.

Some believe that this deregulation contributed to the U.S. financial crisis of 2007-2009 and the Global financial crisis of 2008-2009.[21] However, others dispute this assertion, and a lively debate on the causes of financial crisis is still under way as of August, 2009."

Explain to me what the repeal of Glass-Steagall had to do with the sub-prime meltdown? If anything, its repeal helped save several of the doomed investment banks when commercial institutions took them over.

And how do you think home prices got inflated in the first place? There was big deregulation of the government on lending standards. The government gave the green light to banks to lend more. And banks went ahead and began lending money to someone willing to sign the papers, without even bothering to check if that person's income existed, or if it was sufficient for the loan given. Without this, a lot of those buyers back in the early 2000s would have not been able to participate in the real estate market, and the bubble might have been avoided.

What are you talking about? Lending standards were never regulated at private banks, they were only restricted at GSEs. In that respect, you're correct, the federal government reduced the lending standards at its own government-sponsored enterprises, which provided a huge influx of liquidity into the sub-prime market. Wall Street banks accounted for less than 27% of private Mortgage Backed Security issuance. Fannie Mae and Freddie Mac were the biggest players in that market.

"For all the tribulations in our lives, for all the troubles that remain in the world, the decline of violence is an accomplishment we can savor, and an impetus to cherish the forces of civilization and enlightenment that made it possible."

In reply to NorthSider
2/22/13

NorthSider:
andres17:
You must interpret the events different from me, but I think you are wrong on this. Of course the trigger was the collapse of the real estate bubble. But ultimately, what caused the recession was the amount of BIG banks and institutions that were failing (Bear & Stearns, Lehman Brothers). At that point, almost all of Wall Street banks were going under. And at that point, banks stopped lending money to one another, even to businesses, creating a credit freeze. From Wikipedia: "The bursting of the U.S. housing bubble, which peaked in 2006,[6] caused the values of securities tied to U.S. real estate pricing to plummet, damaging financial institutions globally." So yes, the trigger was the bursting of the real estate market bubble. But the reason millions of citizens lost their jobs was because banks were going under thanks to their bad bets on real estate securities.

While having a fragmented banking industry might have made the financial collapse less dramatic, the bubble would have falled just as hard on hundreds of mid-sized banks as well. A string of bankruptcies would still have ensued. Investment banks were providing a product that was in high demand during the mortgage build up. If they weren't around to provide it, someone else would have been. Banks didn't cause millions of people to lose their jobs, unless you're implying that millions of jobs were reliant on large financial organizations existing, in which case they wouldn't have existed to be lost in the first place.

You missed what I was trying to say. This comment was in response of you saying that the reason the recession happened was because of the bursting of the real estate bubble. I was pointing out that yes, that was the first step. But what really caused people to lose jobs in industries not related in anything to real estate, in Main Street so to speak, was that the banks were in trouble. So much in trouble, that they did not know what they, or their conterparties, had on their balance sheet. And when there's no confidence, there is no lending. And that credit freeze is what caused people to lose their jobs left and right, and sank the economy in the worst recession since 1930s. Let me put it in a simpler way: had the Wall Street banks sold ALL of their MBS to pension funds before the cat was out of the bag, and everyone knew that those MBS were worth a lot less than they thought, we would not have had such a big recession. Banks would have not had a problem. The problem would have been contained to those who actually invested in these securities. Pension funds will be out of money, losing 90% of their investments. Rich private investors who bought them would be out of money. But Joe Sixpack out on the street would not be out of a job. Sure, people would have still lost their homes when their ARM set at a higher rate, but it would not have impacted the whole economy. It would be a real estate problem, not a global meltdown.

NorthSider:
andres17:
I have to disagree here too. The financial sector has been more and more deregulated as time has gone by, probably because each time a new deregulated law came into effect, the markets gained. And this in turn incentivated more deregulation. The thing is that this help created the 2008 crash. Again, from Wikipedia:

"The financial sector in the U.S. has evolved a great deal in recent decades, during which there have been some regulatory changes and the creation of new financial products such as the securitization of loan obligations of various sorts and credit default swaps. Among the most important of the regulatory changes was the Gramm-Leach-Bliley Act in 1999, which repealed the parts of the Glass-Steagall Act which had not already been repealed. This 1999 Act took down barriers to competition between traditional banks, investment banks, and insurance companies, in some cases allowing firms to participate in all three markets thus making distinctions between these categories less clear.

Some believe that this deregulation contributed to the U.S. financial crisis of 2007-2009 and the Global financial crisis of 2008-2009.[21] However, others dispute this assertion, and a lively debate on the causes of financial crisis is still under way as of August, 2009."

Explain to me what the repeal of Glass-Steagall had to do with the sub-prime meltdown? If anything, its repeal helped save several of the doomed investment banks when commercial institutions took them over.

Read the following article to see how it did:
http://www.forbes.com/sites/stevedenning/2011/11/2...

NorthSider:
andres17:
And how do you think home prices got inflated in the first place? There was big deregulation of the government on lending standards. The government gave the green light to banks to lend more. And banks went ahead and began lending money to someone willing to sign the papers, without even bothering to check if that person's income existed, or if it was sufficient for the loan given. Without this, a lot of those buyers back in the early 2000s would have not been able to participate in the real estate market, and the bubble might have been avoided.

What are you talking about? Lending standards were never regulated at private banks, they were only restricted at GSEs. In that respect, you're correct, the federal government reduced the lending standards at its own government-sponsored enterprises, which provided a huge influx of liquidity into the sub-prime market. Wall Street banks accounted for less than 27% of private Mortgage Backed Security issuance. Fannie Mae and Freddie Mac were the biggest players in that market.

Again, the previous article, as well as the Wikipedia article:
http://en.wikipedia.org/wiki/Subprime_mortgage_cri...

... and this report by McClatchy:
http://www.mcclatchydc.com/2008/10/12/53802/privat...

... clearly state that the bulk of subprime mortages created (about 83%) came from "private" institutions. And that Freedie Mac did not lower its lending standards as low as the private banks. And that should be obvious. Private banks did not care about the lending standards because as soon as they created the loans, they sold them to Wall Street who in turn sold them to investors. Freddie Mac did not have that luxury. Get your facts straight.

In reply to NorthSider
2/22/13

NorthSider:
duffmt6:
Pure lunacy is having executives turn a blind eye to outright fraud in the name of profits. No one here is saying that every CEO whose company when to shit during the downturn should go to jail, just the ones who committed crimes, which is, as I'm sure you are aware, how the justice system in the U.S. works. You are arguing against points no one is making. Seeing the housing bubble and not taking appropriate risk measures isn't a crime. Committing fraud is a crime. Overseeing people who are committing fraud to fuel your business is a crime.

No one here seems to be preaching except you. In a rational world we should expect criminals to suffer consequences.

What is the "fraud" to which you're referring? There is no criminal case against Wall Street executives, despite all the time and effort that has been put into building one.

What the fuck? What time and effort? Did you blackout the entire point of this thread?

Is the fraud question a serious one? Ratings agencies, mortgage issuers, securities marketing, etc. Huge fines have been doled out, but no criminal prosecutions.

"For I am a sinner in the hands of an angry God. Bloody Mary full of vodka, blessed are you among cocktails. Pray for me now and at the hour of my death, which I hope is soon. Amen."

In reply to andres17
2/22/13

andres17:
Let me put it in a simpler way: had the Wall Street banks sold ALL of their MBS to pension funds before the cat was out of the bag, and everyone knew that those MBS were worth a lot less than they thought, we would not have had such a big recession. Banks would have not had a problem. The problem would have been contained to those who actually invested in these securities. Pension funds will be out of money, losing 90% of their investments. Rich private investors who bought them would be out of money. But Joe Sixpack out on the street would not be out of a job. Sure, people would have still lost their homes when their ARM set at a higher rate, but it would not have impacted the whole economy. It would be a real estate problem, not a global meltdown.

So every major institutional investor would have lost 90% of its assets, and you think that the rest of the economy would somehow be insulated from this??

More importantly, your implication here is that if the large banks survived the collapse unscathed, then everyone would have kept their jobs, in which case you're saying that their jobs were reliant on the existence of large banks in the first place. Their jobs wouldn't have been around to lose without big banks.

This argument:

1) Is not true
2) Doesn't demonstrate your point

NorthSider:
Explain to me what the repeal of Glass-Steagall had to do with the sub-prime meltdown? If anything, its repeal helped save several of the doomed investment banks when commercial institutions took them over.

Read the following article to see how it did:
http://www.forbes.com/sites/stevedenning/2011/11/2...

So this is really your explanation?:

"In 1998, banks got the green light to gamble: The Glass-Steagall legislation, which separated regular banks and investment banks was repealed in 1998. This allowed banks, whose deposits were guaranteed by the FDIC, i.e. the government, to engage in highly risky business."

Please name for me the huge commercial + investment bank conglomerates that brought down the economy pre-2008. All of the major investment banks remained independent investment banks all the way up to the financial collapse, the repeal of Glass-Steagall didn't lead to any major commercial + investment bank mergers. This explanation just amounts to, "Oh, they were allowed to take risks!! This must have been the cause!" without any examples of banks "taking advantage" of this new freedom.

... clearly state that the bulk of subprime mortages created (about 83%) came from "private" institutions. And that Freedie Mac did not lower its lending standards as low as the private banks. And that should be obvious. Private banks did not care about the lending standards because as soon as they created the loans, they sold them to Wall Street who in turn sold them to investors. Freddie Mac did not have that luxury. Get your facts straight.

This is a serious misdirection. Of course the majority of subprime mortgages were originated by private lenders. But Fannie Mae and Freddie Mac provided that ability when it began guaranteeing the payments of subprime mortgages. Make no mistake about it: Fannie and Freddie were the biggest players in the sub-prime mortgage market. Without their existence, there wouldn't have been such a buoyant market into which Wall Street could so easily sell MBSs. And let's get this straight: less than 30% of all private MBSs were issued by Wall Street banks.

"For all the tribulations in our lives, for all the troubles that remain in the world, the decline of violence is an accomplishment we can savor, and an impetus to cherish the forces of civilization and enlightenment that made it possible."

In reply to duffmt6
2/22/13

duffmt6:
Is the fraud question a serious one? Ratings agencies, mortgage issuers, securities marketing, etc. Huge fines have been doled out, but no criminal prosecutions.

No, you're missing my question. Fines are civil penalties issued to large organizations for what turned out to be systematic problems (very easy to identify in retrospect).

What individual Wall Street executive are you accusing of criminal fraud, and on the basis of what evidence?

"For all the tribulations in our lives, for all the troubles that remain in the world, the decline of violence is an accomplishment we can savor, and an impetus to cherish the forces of civilization and enlightenment that made it possible."

In reply to NorthSider
2/22/13

NorthSider:
duffmt6:
Is the fraud question a serious one? Ratings agencies, mortgage issuers, securities marketing, etc. Huge fines have been doled out, but no criminal prosecutions.

No, you're missing my question. Fines are civil penalties issued to large organizations for what turned out to be systematic problems (very easy to identify in retrospect).

What individual Wall Street executive are you accusing of criminal fraud, and on the basis of what evidence?


http://www.reuters.com/article/2012/08/09/us-usa-g...

This is a losing battle. I can keep pulling up examples. It gets to the heart of what Warren is talking about - criminal activity is going on and regulators are settling for civil penalties.

"For I am a sinner in the hands of an angry God. Bloody Mary full of vodka, blessed are you among cocktails. Pray for me now and at the hour of my death, which I hope is soon. Amen."

In reply to duffmt6
2/22/13

duffmt6:
NorthSider:
duffmt6:
Is the fraud question a serious one? Ratings agencies, mortgage issuers, securities marketing, etc. Huge fines have been doled out, but no criminal prosecutions.

No, you're missing my question. Fines are civil penalties issued to large organizations for what turned out to be systematic problems (very easy to identify in retrospect).

What individual Wall Street executive are you accusing of criminal fraud, and on the basis of what evidence?


http://www.reuters.com/article/2012/08/09/us-usa-g...

This is a losing battle. I can keep pulling up examples. It gets to the heart of what Warren is talking about - criminal activity is going on and regulators are settling for civil penalties.


Right? I mean, these are some very detailed arguments (seriously, wow) but at the end of the day, they're pushing the agencies to do their jobs. This will translate into lawsuits as opposed to shut up and go away money.

Get busy living

2/22/13

LOL

Duff, from the article you linked to

"Justice Department investigators and prosecutors worked on their inquiry for "more than a year," the statement said."

"They "ultimately concluded that the burden of proof to bring a criminal case could not be met based on the law and facts as they exist at this time," the statement continued."

See, it is real easy to call someone a criminal, pretty hard to actually prove it in a court of law. The burden of proof for a civil case is much easier (taking away money is

So while you might THINK criminal activity went on, the US cannot PROVE that it did.

In reply to TNA
2/22/13

TNA:
So while you might THINK criminal activity went on, the US cannot PROVE that it did.

Madoff said the same thing. True story.

Get busy living

In reply to TNA
2/22/13

TNA:
LOL

So while you might THINK criminal activity went on, the US cannot PROVE that it did.

Not a "gotcha" at all, and actually this is pretty much a summation of my entire point about the financial regulatory authorities in the US. It would be ignorant to think that crimes aren't occurring - our regulators can't get their shit together enough to prosecute anyone. They only settle for layup civil penalties.

"For I am a sinner in the hands of an angry God. Bloody Mary full of vodka, blessed are you among cocktails. Pray for me now and at the hour of my death, which I hope is soon. Amen."