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"839 people convicted in the savings-and-loan scandals of the 1980s." "1 Wall Street executive convicted for actions during the recent financial crisis." http

"839 people convicted in the savings-and-loan scandals of the 1980s." "1 Wall Street executive convicted for actions during the recent financial crisis." http://www.nytimes.com/2014/05/04/magazine/only-one-top-banker-jail-financial-crisis.html http://www.nytimes.com/2014/05/04/magazine/only-one-top-bank...

dopamean 11y ago
From this it seems that what financial executives learned from their buddies going to jail was that they need to lobby the correct people so that when the shit hits the fan (and it's their fault) no one will prosecute them. Every prosecutor who had the ability to investigate and eventually bring charges and did not should be ashamed of themselves.
- rayiner 11y ago
  Contrary to popular belief, there are no lucrative private practice jobs/political appointments waiting for unsuccessful prosecutors. Successfully prosecuting a major bank executive would have been a career-making win for an ambitious attorney in the DOJ. Indeed, shortly after Bear Stearns collapsed, the government brought criminal cases against two Bear Stearns executives: http://www.npr.org/templates/story/story.php?storyId=91899047 http://www.npr.org/templates/story/story.php?storyId=9189904.... Both men were acquitted at trial: http://www.wsj.com/articles/SB125788421912541971 http://www.wsj.com/articles/SB125788421912541971. That was a humiliating result, given the DOJ's white collar division boasts a 90%+ conviction rate. People ignore the relevant differences between the S&L crisis and the mortgage crisis. The former took place during a time of heavy regulation, and involved thousands of smaller banks and relatively unsophisticated individuals. The latter took place at the tail of a long period of deregulation, and involved large, legally-sophisticated banks. At a big bank like Goldman, a routine part of a banker's or trader's job is running things by the in-house lawyers. By and large that wasn't true for the savings and loans that failed decades ago. And while legal oversight doesn't prevent excessive risk-taking, or buying loans with bad underwriting, it does tend to prevent activities that can be easily prosecuted as criminally fraudulent. It's notable that there were virtually no prosecutions in the aftermath of the Great Depression either. It's worth considering what similarities and differences there are between the Great Depression, the Savings and Loan crisis, and the 2008 real estate collapse.
  - pnathan 11y ago
    > At a big bank like Goldman, a routine part of a banker's or trader's job is running things by the in-house lawyers. By and large that wasn't true for the savings and loans that failed decades ago. And while legal oversight doesn't prevent excessive risk-taking, or buying loans with bad underwriting, it does tend to prevent activities that can be easily prosecuted as criminally fraudulent. I think this is one of the basic things going on here: this wasn't crime, by and large. This wasn't illegal. People have not understood that. And so they are angry...
    - RobertoG 11y ago
      It seems to me that a lot of people is angry precisely because it wasn't illegal.
      - EdHominem 11y ago
        Or rather, wasn't illegal when it was friends of the prosecutor and people too big to fail. You try this and you'll be in jail tomorrow.
      - pnathan 11y ago
        > It seems to me that a lot of people is angry precisely because it wasn't illegal. Sure. And that's totally reasonable(I would personally not support that, but I can understand that). But, that isn't generally how things are framed, though - "throw the banking crisis bankers in jail" is one of the popular memes.
    - dopamean 11y ago
      I understand that things can look bad and perhaps even look illegal but then an investigation is done the prosecutors correctly conclude that no actual law was violated. That makes sense and is totally fine by me. What's hard for me to understand and believe is that a company like GS would be willing to pay out that much money when no crime had occurred. If no crime had occurred why did they set aside nearly 2 billion dollars for legal defense. I can understand setting aside that much to defend against an actual prosecution but there was none here. Another thing that is concerning is that if all of this happened but no actual crime was committed then maybe the laws need to be changed. I don't know enough about the current state of the law (or previous) but it would seem that through years of lobbying the big banks were able to buy themselves a much more comfortable legal and regulatory environment within which they could operate. One so comfortable that they could do what they did without even breaking the law. I think that is something worth being angry about.
- sseveran 11y ago
  It turns out its not that simple. The conditions that allowed the housing bubble to happen were not created overnight. And contrary to popular belief these are highly regulated entities. The truth is that many individuals in government were just as complicit as the MBS desks at banks. If a bank was prosecuted they would very rightly be able to point out that the GSEs and various agencies set a lot of the loan standards. You might be able to say something about material misrepresentation but a lot of firms buying securities based on these loans were asleep at the wheel. They were telling their investors that they were conducting extensive due diligence on these loans and they weren't really doing any. If you have ever picked up a derivative contract (I mean the dead tree type) its full of disclaimers and warranties. It is true that the buy-side has become much more engaged when evaluating new financial products. In the end most of the players were greedy. Politicians wanted to be elected and demanded "affordable housing" and the relaxation of loan standards. Individuals leveraged up and bought properties to make quick money. Investors around the world chased yield and created immense demand for securities. Banks are a flow business and loved the margins on this flow. Its certainly not as simple as lets go find someone and put them in jail.
  - specialist 11y ago
    The conditions that allowed the housing bubble to happen were not created overnight. Creating the housing bubble was official policy. Not an accident, not unintended consequences, not coincidence.
    - sseveran 11y ago
      Very, very true.
tootie 11y ago
You're comparing people vs executives. A lot of low-level predatory lenders were convicted this time around. The execs were all pretty careful to push the risk (and compliance violations) on to originators.

dopamean 11y ago

From this it seems that what financial executives learned from their buddies going to jail was that they need to lobby the correct people so that when the shit hits the fan (and it's their fault) no one will prosecute them. Every prosecutor who had the ability to investigate and eventually bring charges and did not should be ashamed of themselves.

rayiner 11y ago
Contrary to popular belief, there are no lucrative private practice jobs/political appointments waiting for unsuccessful prosecutors. Successfully prosecuting a major bank executive would have been a career-making win for an ambitious attorney in the DOJ. Indeed, shortly after Bear Stearns collapsed, the government brought criminal cases against two Bear Stearns executives: http://www.npr.org/templates/story/story.php?storyId=91899047 http://www.npr.org/templates/story/story.php?storyId=9189904.... Both men were acquitted at trial: http://www.wsj.com/articles/SB125788421912541971 http://www.wsj.com/articles/SB125788421912541971. That was a humiliating result, given the DOJ's white collar division boasts a 90%+ conviction rate. People ignore the relevant differences between the S&L crisis and the mortgage crisis. The former took place during a time of heavy regulation, and involved thousands of smaller banks and relatively unsophisticated individuals. The latter took place at the tail of a long period of deregulation, and involved large, legally-sophisticated banks. At a big bank like Goldman, a routine part of a banker's or trader's job is running things by the in-house lawyers. By and large that wasn't true for the savings and loans that failed decades ago. And while legal oversight doesn't prevent excessive risk-taking, or buying loans with bad underwriting, it does tend to prevent activities that can be easily prosecuted as criminally fraudulent. It's notable that there were virtually no prosecutions in the aftermath of the Great Depression either. It's worth considering what similarities and differences there are between the Great Depression, the Savings and Loan crisis, and the 2008 real estate collapse.
- pnathan 11y ago
  > At a big bank like Goldman, a routine part of a banker's or trader's job is running things by the in-house lawyers. By and large that wasn't true for the savings and loans that failed decades ago. And while legal oversight doesn't prevent excessive risk-taking, or buying loans with bad underwriting, it does tend to prevent activities that can be easily prosecuted as criminally fraudulent. I think this is one of the basic things going on here: this wasn't crime, by and large. This wasn't illegal. People have not understood that. And so they are angry...
  - RobertoG 11y ago
    It seems to me that a lot of people is angry precisely because it wasn't illegal.
    - EdHominem 11y ago
      Or rather, wasn't illegal when it was friends of the prosecutor and people too big to fail. You try this and you'll be in jail tomorrow.
    - pnathan 11y ago
      > It seems to me that a lot of people is angry precisely because it wasn't illegal. Sure. And that's totally reasonable(I would personally not support that, but I can understand that). But, that isn't generally how things are framed, though - "throw the banking crisis bankers in jail" is one of the popular memes.
  - dopamean 11y ago
    I understand that things can look bad and perhaps even look illegal but then an investigation is done the prosecutors correctly conclude that no actual law was violated. That makes sense and is totally fine by me. What's hard for me to understand and believe is that a company like GS would be willing to pay out that much money when no crime had occurred. If no crime had occurred why did they set aside nearly 2 billion dollars for legal defense. I can understand setting aside that much to defend against an actual prosecution but there was none here. Another thing that is concerning is that if all of this happened but no actual crime was committed then maybe the laws need to be changed. I don't know enough about the current state of the law (or previous) but it would seem that through years of lobbying the big banks were able to buy themselves a much more comfortable legal and regulatory environment within which they could operate. One so comfortable that they could do what they did without even breaking the law. I think that is something worth being angry about.
sseveran 11y ago
It turns out its not that simple. The conditions that allowed the housing bubble to happen were not created overnight. And contrary to popular belief these are highly regulated entities. The truth is that many individuals in government were just as complicit as the MBS desks at banks. If a bank was prosecuted they would very rightly be able to point out that the GSEs and various agencies set a lot of the loan standards. You might be able to say something about material misrepresentation but a lot of firms buying securities based on these loans were asleep at the wheel. They were telling their investors that they were conducting extensive due diligence on these loans and they weren't really doing any. If you have ever picked up a derivative contract (I mean the dead tree type) its full of disclaimers and warranties. It is true that the buy-side has become much more engaged when evaluating new financial products. In the end most of the players were greedy. Politicians wanted to be elected and demanded "affordable housing" and the relaxation of loan standards. Individuals leveraged up and bought properties to make quick money. Investors around the world chased yield and created immense demand for securities. Banks are a flow business and loved the margins on this flow. Its certainly not as simple as lets go find someone and put them in jail.
- specialist 11y ago
  The conditions that allowed the housing bubble to happen were not created overnight. Creating the housing bubble was official policy. Not an accident, not unintended consequences, not coincidence.
  - sseveran 11y ago
    Very, very true.

tootie 11y ago

You're comparing people vs executives. A lot of low-level predatory lenders were convicted this time around. The execs were all pretty careful to push the risk (and compliance violations) on to originators.