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I'm not sure I get the hate on bankers. I don't like the bailouts - those could've been handled better - but people seem to be angry about the fact that they of

I'm not sure I get the hate on bankers. I don't like the bailouts - those could've been handled better - but people seem to be angry about the fact that they offered loans that they shouldn't have. That is, non-bankers were given money that they shouldn't have been given, and the claim is that we should be more selective about offering capital and opportunities to non-bankers and the underprivileged poor. If somebody offered me a billion dollars at a 3% interest rate or whatever it is right now, I would seriously consider accepting it knowing that I don't have the capacity to pay them back. There are a lot of things in the world that pay better than 3% interest and that are relatively safe. Similarly, a bank that gave out loans whenever you asked(up to the 10 loan limit, maybe) would be a great opportunity even for people who couldn't pay it back out of income. You could buy an empty plot of land and put a small apartment complex on it. You could buy a 4-plex and apply any number of forced appreciation techniques(put in a coin-operated laundry, redo the piping to reduce the amount spent on plumbers, plant some flowers outside to increase the attractivity, etc.). Of course, just betting on general appreciation of single-family homes is bad money. Basically, I was too young to really experience the effects of the 2008 and I'm feeling envy rather than anger about these people's ability to cheaply obtain capital. So I don't empathize with these news reports about punishing bankers. Can someone explain why I should feel anger instead?

jacquesm 11y ago
It's typically not the people that were offered the loans that are angry with the banks, it is the people that ended up paying for the bail-outs without having seen any of the benefits. On another note, plenty of people that were offered those loans are still paying them off today, so it is was a portion of the debt that went bad, not all of it.
- MichaelBurge 11y ago
  Ah, that makes sense. In that case, I agree - don't force me to pay a high tax rate and then use the money to bail out people who make bad deals. That's just rude: I can feel the anger swelling already. The executives would be personally liable for bad decisions that lost their shareholders money, so I could see letting the banks fail and then having people sue the executives to reclaim some portion of their money.(I'm assuming the banks are public companies) Why the cries to have them jailed or criminally punished, though? The article mentions fraud and market manipulation, but that's pretty vague. (I'm assuming people are angry at Icelandic bankers for the same reason they were angry at US bankers)
Retric 11y ago
Bankers are managing other peoples money not there own. Which is why banks get bailed out and people have such hate for bankers.
dbond 11y ago
Bankers created the sub-prime market by offering mortgages to people they knew couldn't afford the repayments, they then packaged these bad debts with a few good quality debts on top and passed the resulting package off as good. They then sold these packages off to other banks or investment groups to make a profit and export their exposure. Banks which gained exposure to the bad debt employed bankers who were either negligent in investigating the contents of the debt they were acquiring and invested their depositors money without due care and attention, or knew the risks of what they were doing and continued to gamble with their depositors money while skimming large amount off as their own. These banks had then lost their depositors money and demanded that the public bail them out, while still taking large salaries and bonuses. There will of course be other factors in something like a global financial "collapse" but this is my understanding of the sub-prime situation and why you should be angry. Somewhere along the line the actions of some of the bankers should be criminal.
- tyfon 11y ago
  It didn't help that the rating agencies rated these securities as AAA (investment grade quality). This is in a nutshell what happened. http://www.slideshare.net/roguemonk/the-subprime-crisis-primer http://www.slideshare.net/roguemonk/the-subprime-crisis-prim...
  - MichaelBurge 11y ago
    What in there was actually a crime though? The people who try to sell you timeshares with high-pressure sales tactics are also pretty scummy, but we don't throw them in jail for selling bad investments. The slideshare mentions they couldn't sell them to 'windows and orphans': I'm assuming these needed to be sold to accredited investors. Accredited investors get pitched bad investments all the time; many people here may work for startups that are one of them. Some startups get growth using scummy marketing techniques just to offload the company to investors like Google before it implodes. Some of those investors may be VCs managing, e.g., the Northwest Plumbers' Pension Fund or the Kansas School Board. None of those VCs should go to jail, even if they are mismanaging the money in some cases(I'm not making a claim that they are, overall). The depositors at the banks should be covered by the FDIC, so they aren't really at risk. The FDIC threaten to recover some of their money from the executives and accountants, and agencies tend to follow up on this sort of thing. What exactly is so wrong with selling bad investments to other companies that we should throw them in jail? That the investments were AAA ratings should be irrelevant: they are just rankings from private companies, so they should carry as much legal weight as asking your bartender for advice on the stock market. (edit) My assumption that AAA ratings carry no legal weight is false. I found this, which has a good overview: http://www.sec.gov/news/studies/credratingreport0103.pdf http://www.sec.gov/news/studies/credratingreport0103.pdf This is a mess: You can't use private companies to set regulations, even if it appears to work some of the time. It's just as bad as making laws that require me to only use my bartender's highest-rated stocks when investing the local college's endowment fund. They need to either scrap it from the law or set up a separate government agency that does nothing but evaluate creditworthiness of securities. Still though - where is the actual crime? Private companies scumming each other for money is to be expected, and would only be a problem if they actually lied on a contract(rather than merely neglecting to do due diligence). Was the suggestion to send the thousands of people who made fraudulent loan applications - after being egged on by salespeople - to jail(possibly with the salespeople)? That's plausible, but not a crime of the bankers.
steveax 11y ago
The "bankers" (and by that I mean the entire mortgage chain, from issuing to securitizing) were engaged in fraud. Mortgage officers directed applicants to lie on their applications (and in some cases falsified numbers themselves) [1][2], falsified appraisals [3], misrepresented the quality of the loans that made up the RMBS they were selling to others [4][5] and then falsified mortgage documents for foreclosure purposes [6]. What's not to hate? Episode 365 of This American Life, The Giant Pool of Money [7] is a good place to start for more context of the hate. [1]: http://www.businessinsider.com/only-lying-lenders-made-liars-loans-2011-3 http://www.businessinsider.com/only-lying-lenders-made-liars... [2]: http://www.nytimes.com/2015/02/13/upshot/how-mortgage-fraud-made-the-financial-crisis-worse.html http://www.nytimes.com/2015/02/13/upshot/how-mortgage-fraud-... [3]: http://www.bergermontague.com/blog/index.php/countrywide-whistleblower-receives-14-5-million-in-mortgage-fraud-case/ http://www.bergermontague.com/blog/index.php/countrywide-whi... [4]: https://www.washingtonpost.com/business/economy/bank-of-america-ordered-to-pay-damages-of-127-billion-for-countrywide-fraud/2014/07/30/d62faa0c-1813-11e4-9349-84d4a85be981_story.html https://www.washingtonpost.com/business/economy/bank-of-amer... [5]: http://www.justice.gov/opa/pr/bank-america-pay-1665-billion-historic-justice-department-settlement-financial-fraud-leading http://www.justice.gov/opa/pr/bank-america-pay-1665-billion-... [6]: http://www.nolo.com/legal-encyclopedia/false-affidavits-foreclosures-what-robo-34185.html http://www.nolo.com/legal-encyclopedia/false-affidavits-fore... [7]: http://www.thisamericanlife.org/radio-archives/episode/355/the-giant-pool-of-money http://www.thisamericanlife.org/radio-archives/episode/355/t...
- MichaelBurge 11y ago
  It's clear fraud to lie on an application. I could see charging every single such applicant with fraud. I could also see charging many of the mortgage officers with fraud for falsifying related documents. It's not clear that the appraisers are doing any criminal activity. I read this: "In the lawsuit, the couples claim prospective home buyers were presented with false or misleading data on previously sold homes in order to justify higher asking prices on new purchases." If that's all they were doing, that's not really fraud. HUD should be encouraged to run its own appraisal process on 1% of the received appraisals in order to refine its process. It's harder to charge the managers in charge of the officers with fraud: They could easily have taken steps to ensure that they weren't aware of any specific fraud on any specific application, even if they generally knew what was going on. I'm sure the prosecutors could find a way, though. However, it ceases to be fraud for anyone except for the companies immediately processing the mortgage: If they sold the note to a bank, parent company, or to investors, that bank or investor should be off the hook. So I don't yet see any crimes for the people who profited the most(the banks who outsourced mortgage processing to smaller companies).
branchless 11y ago
They put pressure on everyone by issuing too much credit against land. Once it's available someone will take it and outbid you for a home. Then you must either join them or pay rent which is also increasing due to more people in your situation. It's an age old trick. You flood with credit then you clean up.
crdoconnor 11y ago
>I'm not sure I get the hate on bankers. Because they're parasites on the real economy? You effectively have to pay taxes to the banking system to engage in the real economy. Taxes which get spent on gold watches and sports cars. >Can someone explain why I should feel anger instead? Depends. Do you believe that fraud should be a crime? It's currently not being prosecuted as a crime on Wall Street.
- MichaelBurge 11y ago
  You don't need to use big banks to participate in the financial system. It's easy to get federal assistance to set up your very own credit union. The members of the union often pay $1 to buy a single share of the credit union, so its owned by its own members, with everyone having equal representation. They offer checking and savings accounts, along with personal loans and mortgages. You do need investment banks to e.g. IPO your company or issue corporate bonds. Let's ignore that issue, since the typical person doesn't 'have to' IPO their company or get multiple billions of dollars in bonds issued. For the fraud, let's pick on a specific company: Goldman Sachs. Everyone hates Goldman Sachs. I hate Goldman Sachs. Their CEO at the time was Lloyd Blankfein. What did Lloyd Blankfein do that was considered fraud and that should land him in jail? I don't believe that Goldman directly loans money for mortgages, so he should be immune to criticisms of mortgage fraud on any specific application. If you were going to prosecute him, which event would you focus on?
  - Retric 11y ago
    Insider trading and undisclosed conflict of interest is the primary issues with GS. How much of that is the CEO's fault is a little up in the air. But, you could likely get him for a whole lot of conspiracy to commit X crimes. However, we don't know because he is not being investigated. So, the dude might be squeaky clean.
    - MichaelBurge 11y ago
      Thanks - I was able to find this. I think it's relevant because someone else in the thread mentioned a CDO: https://www.sec.gov/news/press/2010/2010-59.htm https://www.sec.gov/news/press/2010/2010-59.htm Is that press release representative of the crimes and their magnitude that people would attribute to Goldman Sachs? It says investors lost $1 billion, and GS later settled for $550 million(presumably GS didn't profit the entire $1 billion).
newman314 11y ago
Because the bailouts were not offered to everyone? Banks should not get special treatment because they are "too big to fail". Additionally, banks do not actually generate anything tangible of value. They literally use money from others to enrich themselves. The banking industry is also what was pushed the Bankruptcy Abuse Prevention and Consumer Protection Act into play which is what makes it almost impossible to discharge your student loans. https://en.wikipedia.org/wiki/Bankruptcy_Abuse_Prevention_and_Consumer_Protection_Act https://en.wikipedia.org/wiki/Bankruptcy_Abuse_Prevention_an... So yeah, between what I mentioned above and LIBOR manipulation, there's plenty to hate upon banks.
- bboreham 11y ago
  Many people find it valuable to be able to buy a home right away, rather than saving up for 20 years. Much of the modern world is impossible without financial instruments that let corporations borrow hundreds of millions of dollars. Airlines, for instance. So I do not think bankers do nothing of value.
- icebraining 11y ago
  They literally use money from others to enrich themselves. From what I understand, they literally create money from thin air: http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf http://www.bankofengland.co.uk/publications/Documents/quarte...
belorn 11y ago
The "loans" of the last crisis was just ponzi schemes disguised as normal bank operations, and most nation outlaws it because it directly hurt people and nations. The bailouts was issued to lower the damage when the scheme collapsed, but it would be very unfair to the victims to let the people who organized and profited from it go free.

jacquesm 11y ago

It's typically not the people that were offered the loans that are angry with the banks, it is the people that ended up paying for the bail-outs without having seen any of the benefits. On another note, plenty of people that were offered those loans are still paying them off today, so it is was a portion of the debt that went bad, not all of it.

MichaelBurge 11y ago
Ah, that makes sense. In that case, I agree - don't force me to pay a high tax rate and then use the money to bail out people who make bad deals. That's just rude: I can feel the anger swelling already. The executives would be personally liable for bad decisions that lost their shareholders money, so I could see letting the banks fail and then having people sue the executives to reclaim some portion of their money.(I'm assuming the banks are public companies) Why the cries to have them jailed or criminally punished, though? The article mentions fraud and market manipulation, but that's pretty vague. (I'm assuming people are angry at Icelandic bankers for the same reason they were angry at US bankers)

Retric 11y ago

Bankers are managing other peoples money not there own. Which is why banks get bailed out and people have such hate for bankers.

dbond 11y ago

Bankers created the sub-prime market by offering mortgages to people they knew couldn't afford the repayments, they then packaged these bad debts with a few good quality debts on top and passed the resulting package off as good. They then sold these packages off to other banks or investment groups to make a profit and export their exposure. Banks which gained exposure to the bad debt employed bankers who were either negligent in investigating the contents of the debt they were acquiring and invested their depositors money without due care and attention, or knew the risks of what they were doing and continued to gamble with their depositors money while skimming large amount off as their own. These banks had then lost their depositors money and demanded that the public bail them out, while still taking large salaries and bonuses. There will of course be other factors in something like a global financial "collapse" but this is my understanding of the sub-prime situation and why you should be angry. Somewhere along the line the actions of some of the bankers should be criminal.

tyfon 11y ago
It didn't help that the rating agencies rated these securities as AAA (investment grade quality). This is in a nutshell what happened. http://www.slideshare.net/roguemonk/the-subprime-crisis-primer http://www.slideshare.net/roguemonk/the-subprime-crisis-prim...
- MichaelBurge 11y ago
  What in there was actually a crime though? The people who try to sell you timeshares with high-pressure sales tactics are also pretty scummy, but we don't throw them in jail for selling bad investments. The slideshare mentions they couldn't sell them to 'windows and orphans': I'm assuming these needed to be sold to accredited investors. Accredited investors get pitched bad investments all the time; many people here may work for startups that are one of them. Some startups get growth using scummy marketing techniques just to offload the company to investors like Google before it implodes. Some of those investors may be VCs managing, e.g., the Northwest Plumbers' Pension Fund or the Kansas School Board. None of those VCs should go to jail, even if they are mismanaging the money in some cases(I'm not making a claim that they are, overall). The depositors at the banks should be covered by the FDIC, so they aren't really at risk. The FDIC threaten to recover some of their money from the executives and accountants, and agencies tend to follow up on this sort of thing. What exactly is so wrong with selling bad investments to other companies that we should throw them in jail? That the investments were AAA ratings should be irrelevant: they are just rankings from private companies, so they should carry as much legal weight as asking your bartender for advice on the stock market. (edit) My assumption that AAA ratings carry no legal weight is false. I found this, which has a good overview: http://www.sec.gov/news/studies/credratingreport0103.pdf http://www.sec.gov/news/studies/credratingreport0103.pdf This is a mess: You can't use private companies to set regulations, even if it appears to work some of the time. It's just as bad as making laws that require me to only use my bartender's highest-rated stocks when investing the local college's endowment fund. They need to either scrap it from the law or set up a separate government agency that does nothing but evaluate creditworthiness of securities. Still though - where is the actual crime? Private companies scumming each other for money is to be expected, and would only be a problem if they actually lied on a contract(rather than merely neglecting to do due diligence). Was the suggestion to send the thousands of people who made fraudulent loan applications - after being egged on by salespeople - to jail(possibly with the salespeople)? That's plausible, but not a crime of the bankers.

steveax 11y ago

The "bankers" (and by that I mean the entire mortgage chain, from issuing to securitizing) were engaged in fraud. Mortgage officers directed applicants to lie on their applications (and in some cases falsified numbers themselves) [1][2], falsified appraisals [3], misrepresented the quality of the loans that made up the RMBS they were selling to others [4][5] and then falsified mortgage documents for foreclosure purposes [6]. What's not to hate? Episode 365 of This American Life, The Giant Pool of Money [7] is a good place to start for more context of the hate. [1]: http://www.businessinsider.com/only-lying-lenders-made-liars-loans-2011-3 http://www.businessinsider.com/only-lying-lenders-made-liars... [2]: http://www.nytimes.com/2015/02/13/upshot/how-mortgage-fraud-made-the-financial-crisis-worse.html http://www.nytimes.com/2015/02/13/upshot/how-mortgage-fraud-... [3]: http://www.bergermontague.com/blog/index.php/countrywide-whistleblower-receives-14-5-million-in-mortgage-fraud-case/ http://www.bergermontague.com/blog/index.php/countrywide-whi... [4]: https://www.washingtonpost.com/business/economy/bank-of-america-ordered-to-pay-damages-of-127-billion-for-countrywide-fraud/2014/07/30/d62faa0c-1813-11e4-9349-84d4a85be981_story.html https://www.washingtonpost.com/business/economy/bank-of-amer... [5]: http://www.justice.gov/opa/pr/bank-america-pay-1665-billion-historic-justice-department-settlement-financial-fraud-leading http://www.justice.gov/opa/pr/bank-america-pay-1665-billion-... [6]: http://www.nolo.com/legal-encyclopedia/false-affidavits-foreclosures-what-robo-34185.html http://www.nolo.com/legal-encyclopedia/false-affidavits-fore... [7]: http://www.thisamericanlife.org/radio-archives/episode/355/the-giant-pool-of-money http://www.thisamericanlife.org/radio-archives/episode/355/t...

MichaelBurge 11y ago
It's clear fraud to lie on an application. I could see charging every single such applicant with fraud. I could also see charging many of the mortgage officers with fraud for falsifying related documents. It's not clear that the appraisers are doing any criminal activity. I read this: "In the lawsuit, the couples claim prospective home buyers were presented with false or misleading data on previously sold homes in order to justify higher asking prices on new purchases." If that's all they were doing, that's not really fraud. HUD should be encouraged to run its own appraisal process on 1% of the received appraisals in order to refine its process. It's harder to charge the managers in charge of the officers with fraud: They could easily have taken steps to ensure that they weren't aware of any specific fraud on any specific application, even if they generally knew what was going on. I'm sure the prosecutors could find a way, though. However, it ceases to be fraud for anyone except for the companies immediately processing the mortgage: If they sold the note to a bank, parent company, or to investors, that bank or investor should be off the hook. So I don't yet see any crimes for the people who profited the most(the banks who outsourced mortgage processing to smaller companies).

branchless 11y ago

They put pressure on everyone by issuing too much credit against land. Once it's available someone will take it and outbid you for a home. Then you must either join them or pay rent which is also increasing due to more people in your situation. It's an age old trick. You flood with credit then you clean up.

crdoconnor 11y ago

>I'm not sure I get the hate on bankers. Because they're parasites on the real economy? You effectively have to pay taxes to the banking system to engage in the real economy. Taxes which get spent on gold watches and sports cars. >Can someone explain why I should feel anger instead? Depends. Do you believe that fraud should be a crime? It's currently not being prosecuted as a crime on Wall Street.

MichaelBurge 11y ago
You don't need to use big banks to participate in the financial system. It's easy to get federal assistance to set up your very own credit union. The members of the union often pay $1 to buy a single share of the credit union, so its owned by its own members, with everyone having equal representation. They offer checking and savings accounts, along with personal loans and mortgages. You do need investment banks to e.g. IPO your company or issue corporate bonds. Let's ignore that issue, since the typical person doesn't 'have to' IPO their company or get multiple billions of dollars in bonds issued. For the fraud, let's pick on a specific company: Goldman Sachs. Everyone hates Goldman Sachs. I hate Goldman Sachs. Their CEO at the time was Lloyd Blankfein. What did Lloyd Blankfein do that was considered fraud and that should land him in jail? I don't believe that Goldman directly loans money for mortgages, so he should be immune to criticisms of mortgage fraud on any specific application. If you were going to prosecute him, which event would you focus on?
- Retric 11y ago
  Insider trading and undisclosed conflict of interest is the primary issues with GS. How much of that is the CEO's fault is a little up in the air. But, you could likely get him for a whole lot of conspiracy to commit X crimes. However, we don't know because he is not being investigated. So, the dude might be squeaky clean.
  - MichaelBurge 11y ago
    Thanks - I was able to find this. I think it's relevant because someone else in the thread mentioned a CDO: https://www.sec.gov/news/press/2010/2010-59.htm https://www.sec.gov/news/press/2010/2010-59.htm Is that press release representative of the crimes and their magnitude that people would attribute to Goldman Sachs? It says investors lost $1 billion, and GS later settled for $550 million(presumably GS didn't profit the entire $1 billion).

newman314 11y ago

Because the bailouts were not offered to everyone? Banks should not get special treatment because they are "too big to fail". Additionally, banks do not actually generate anything tangible of value. They literally use money from others to enrich themselves. The banking industry is also what was pushed the Bankruptcy Abuse Prevention and Consumer Protection Act into play which is what makes it almost impossible to discharge your student loans. https://en.wikipedia.org/wiki/Bankruptcy_Abuse_Prevention_and_Consumer_Protection_Act https://en.wikipedia.org/wiki/Bankruptcy_Abuse_Prevention_an... So yeah, between what I mentioned above and LIBOR manipulation, there's plenty to hate upon banks.

bboreham 11y ago
Many people find it valuable to be able to buy a home right away, rather than saving up for 20 years. Much of the modern world is impossible without financial instruments that let corporations borrow hundreds of millions of dollars. Airlines, for instance. So I do not think bankers do nothing of value.
icebraining 11y ago
They literally use money from others to enrich themselves. From what I understand, they literally create money from thin air: http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf http://www.bankofengland.co.uk/publications/Documents/quarte...

belorn 11y ago

The "loans" of the last crisis was just ponzi schemes disguised as normal bank operations, and most nation outlaws it because it directly hurt people and nations. The bailouts was issued to lower the damage when the scheme collapsed, but it would be very unfair to the victims to let the people who organized and profited from it go free.