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:
Nobody wanna watch this liberal junk.
"We truly believe that we have a very vigorous enforcement program." -SEC Chairwoman
L.O.L.
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.
Eddie I suggest u spend more time reading zerohedge and less on pony shows
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.
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.
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
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.
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?"
Thoughtful.
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).
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.
I think France is turning you socialist. Get out now!
When's the last time a politician didn't have skeletons in their closets?
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.
"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
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-case-is-likely-in-lo…
"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.
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.
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.
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.
http://www.levin.senate.gov/imo/media/doc/supporting/2011/PSI_WallStree…
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.
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.
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.
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.
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 €500. 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.)
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?
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."
NorthSide, you are a god among men.
+1 Northsider
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.
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.
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.
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!
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.
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/fulds-perjury/
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.
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.
I understand that you are, I'm not saying that you weren't. How is Glass-Steagall relevant to the 2008 crisis?
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.
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?
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.
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.
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.
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/Wallisondissent.pdf
Wallison eloquently describes the point I have been trying to make here:
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.
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.
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.
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!
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?
This thread has become unreadable.
There is more text in this thread than a Harry Potter novel.
Came in expecting a political shit fight....I called it.
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:
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.
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.
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.
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.
Banks going bankrupt didn't bring the country into a recession, the collapse of the mortgage market did.
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.
Really? You think that the financial services industry was deregulated in 2008?? Regulation had nothing to do with this collapse. Inflated home prices 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.
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."
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.
How do you guys not get tired of shouting the same shit back and forth to each other on marginally different topics.
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.
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.
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.
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.
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
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.
FWIW, I'm honestly not trying to misconstrue your arguments or be dense here. We just disagree, and I'm trying to explain why, just as you are.
EDIT: Also, I'm hardly a financial industry apologist either. I do find myself on the minority sides of most of these trials in the court of public opinion. Maybe I just enjoy rooting for the underdog, but I firmly believe that the quality of media analysis devolves very quickly as public sentiment turns sharply against a particular person / group of people. That's what happened to the financial industry. It's become a convenient scapegoat for economic woes.
Northsider is a god. I fucking love this.
The following quote from Lanny Breuer in an interview from the New York Times is particularly lucid:
Q. When you joined the Justice Department, the nation was reeling and people wanted Wall Street to pay. Back then, didn’t you expect to mount charges against bank executives?
A. I understand and share the public’s outrage about the financial crisis. Of course we want to make these cases. I can tell you that I assigned the top, most talented lawyers to investigate them, and I know that U.S. attorneys’ offices across the country assigned aggressive prosecutors to these cases as well. I assigned people from my fraud section and my own front office to look at them. And I approached these cases exactly the same way I approached BP, the same way I approached Libor, the same way I approach every case. If there had been a case to make, we would have brought it. I would have wanted nothing more, but it doesn’t work that way.
http://thehill.com/blogs/on-the-money/banking-financial-institutions/28…
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