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Ireland jails three top bankers over 2008 banking meltdown
- appleflaxen 10y agoI don't understand how bankers in the US haven't been criminally investigated for their roles in making loans that had no good faith data behind them.
- wch4999 10y agoBecause the government doesn't consider this as crime.
- stephengillie 10y agoBecause the government is made from people, specifically people with an interest in decriminalizing this kind of action.
- ptaipale 10y agoMore specifically, the law doesn't consider it a crime, and being hated by population/government/etc is not a reason to put people in jail. This is a good thing: due process.
- dempseye 10y agoIt's important to note that the "this" in question - reckless lending - is not what the guys in Ireland are going away for.
- Zuider 10y agoThat is true, but there are similarities. The American lenders went beyond simple 'reckless lending' by disguising the subprime loans as healthy assets. This is similar to what the Irish bankers did when they created fictitious assets to give the false impression that the banks were not financially in trouble.
- mikeyouse 10y agoThe rule of law is important -- which criminal law specifically applies to ratings agencies giving incorrect ratings to CMOs?
- wolf550e 10y agoThere has to be criminal fraud somewhere in the process of taking very bad mortgages, transforming them into AAA securities and selling them to pension funds.
- tedunangst 10y agoThe pension funds had the prospectus, and on top of that a list of all the bundled mortgages. If they had wanted to look deeper beyond the AAA rating, they could have, but they were lazy and greedy too.
- wolf550e 10y agoThere are very profitable things that are illegal to do when selling vegetables in a street market, like fudging the scale. But you say there is no such protection against bad actors when selling billions in securities. Ok, in this Libertarian system where everything except physical violence is legal, why do people still deal with institutions that obviously deal in bad faith? Were there any lies in the prospectus? Are Chinese companies selling asbestos with "asbestos-free" certificates doing anything wrong?
- tedunangst 10y agoYou're a pension fund manager. Your job isn't very exciting because you're rather limited in the assets you're allowed to invest in. Each month you get to wake up and decide whether you want to buy more US securities or more GE bonds. Not a lot of room to distinguish yourself in this environment. One day Mr. Lehman knocks on your door and announces he has a new "AAA" security for sale that pays twice the market rate. Hot diggity! You're god damned right I'm interested, I'll take everything you've got. Now, as any fund manager who's been on the job even a week knows, you also know that if the rate goes up, so does the risk. There's no possible way that these "AAA" securities are as safe as the AAA securities you're used to dealing with. Not your problem, though. You're knocking it out of the park and your fund still has the exact AAA/AA/A asset ratio that your promised your pensioners. Same story at AIG. As long as they were collecting premiums, nobody thought to ask why people were buying up all this insurance on "default-proof" securities. Oh, wait, somebody did, but they were told to shut up because free money. Of course, after the music stops, out come the crocodile tears. "Oh, woe is me, I never could have guessed there was anything unusual happening here." But yes, let's blame the MBS packagers for making exactly the product the buyers wanted. If anybody was defrauded, it was the pensioners whose manager shut his eyes as tightly as possible and the AIG stockholders who were not informed of the risk AIG was carrying.
- alasdair_ 10y agoThis is a good thing in principle. In practice, when people give bribes/campaign donations to cause these very laws to be created in such a way that keeps the actions of the people offering the bribes legal, there is something bad going on.
- leommoore 10y agoIt was a crime because they did a inter bank loan to bust bank through a non bank subsidiary and portrayed it as a deposit. This fraudulently portrayed the bust bank as being more secure than it was.
- arethuza 10y agoDoesn't sound like these people were found guilty of simply being bad bankers - they were actively conducting dubious transactions to prop up the banks balance sheet via a "circular transaction scheme".
- randyrand 10y agobecause giving a bad loan, just like taking a bad loan, is not illegal.
- wyager 10y agoBecause the US government forced banks to make those subprime loans through the Community Reinvestment Act. Although the government (through the FCIC, a government-created commission) obviously denied that this was a root cause of the housing crisis, they probably know that if they try to pin it on some scapegoat bankers it will not hold up legally or in the court of public opinion.
- lefstathiou 10y agoNot so easy and it is a dangerous, slippery slope. There is a large and (warranted) initiative to bank minorities and other disadvantaged communities. Until the government created huge incentives to do this it didn't happen. In many markets it still doesn't. If you tell someone they are criminally responsible for the loans they underwrite, on the margin, they are far less likely to bank the people who "really" need it. The rich get richer, the poor stay poor. As the saying goes, you can't have the cake and eat it too.
- Zuider 10y agoYour stated position is deeply troublesome in terms of both de-ontological and consequentialist moral reasoning. In the first case, it raises the question of how one can possibly have the right to attempt social engineering on such a scale, forcing people to act against what morality and prudence would dictate, and compelling them to take on potentially ruinous risk. People are not dirt to be shoveled about on a whim. From the consequentialist position, we have seen that people who belong to those demographics that the law was supposed to help are actually the hardest hit. They have been made much worse off.
- deleted 10y ago[deleted]
- caminante 10y agoI tried making sense of your 2nd paragraph. You lost me (and others?).
- deleted 10y ago[deleted]
- Zuider 10y agoSorry. I ought to have been more specific. I was referring to making a law that made it compulsory to lend to an individual even if it was clear from assessing that particular individual that their likelihood of defaulting was unacceptably high.
- StanislavPetrov 10y agoBecause the SEC and the FED are staffed by the same rotating crew of bankers and politicians that engaged in, endorsed, and continue to profit massively from exactly the same behavior. Mary Jo White, Chairwoman of the SEC is a prime example. This "revolving door" is unfortunately nothing new and not limited to the SEC. http://www.businessinsider.com/new-report-about-sec-chair-mary-jo-white-and-revolving-doors-2015-6 http://www.businessinsider.com/new-report-about-sec-chair-ma...
- jonknee 10y agoHow would you go about creating a competent banking regulatory system that includes no trained bankers? Once they have gained experience how would you prevent the staff from leaving to more lucrative options?
- tedunangst 10y agoEverything I need to know about banking regulation I read in Rolling Stone. Make me the regulator!
- efng 10y agoI'm down for that. You couldn't do much worse.
- pjmorris 10y agoReasonable questions. What incentives would lead a trained banker to rigorously and honestly enforce regulations? What incentives would lead to retaining trained, rigorous, honest people?
- dilemma 10y agoThe parent poses good questions and they're rhetorical - instead of disincentivising this, it would be better to accept it and then create an organization with checks and balances to counteract it.
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- dave_sullivan 10y ago> their roles in making loans that had no good faith data behind them Everyone was doing it and the government was practically demanding it because a) they'd told everyone that real estate is the only asset class that never goes down, so keep buying and b) everyone should have a home, whether they can afford it or not, so make it happen banks, we'll even help. So what law was broken exactly that these bankers should go to jail for? I have no doubt they've been investigated. You want to know who should go to jail? Anyone selling student loans right now. That's going to blow up just as hard as the housing market did, and--in hindsight--their business practices will look just as shady. The equivalent of "How was a janitor going to afford a $300,000 house?" will be "How was an English lit major going to afford a $300,000 student loan?" The answer is "They can't" and I think you're a piece of shit if your job is to say otherwise. But when I say they should go to jail, I say so facetiously; they're not breaking any laws.
- jacalata 10y ago> So what law was broken exactly that these bankers should go to jail for? I have no doubt they've been investigated. Well, you could start with the widespread falsification of income documents, etc, to make people qualify on paper for federally backed mortgages?
- dave_sullivan 10y agoSure, that's a good one. But wasn't that done by the mortgage applicants themselves? Or in many cases wink-wink encouraged by the brokers themselves? I haven't heard where that was a formalized policy within an organization, so it seems to me you'd be going after pretty low-level individuals?
- jacalata 10y agoSure, the individuals committing crimes with easily provable signatures were small fry. But the instructions, incentives and 'wink wink you know' practices were coming down from the management. Nobody believes that all the mortgage brokers in America spontaneously began lying on their loans, or that management at e.g Countrywide was blissfully unaware of it happening. They were doing this in the company's name and a company that allows (/encourages) this to happen should be liable. IMO it's a very similar case to Zenefits except that Zenefits was just one company and not an entire industry.
- randyrand 10y agosimilarly individuals that took out bad loas without properly reading and understanding the terms should be prosecuted too.
- dvtv75 10y agoUnder what grounds would you recommend that someone who didn't understand the terms be prosecuted? What law makes it illegal to not understand the terms of the contract that you are signing?
- randyrand 10y ago>What law makes it illegal to not understand the terms of the contract that you are signing? Interesting the US law already does this. The law is literally the terms of living in the USA and we prosecute people for not understanding them all the time. You can also easily prosecute people that did not understand the terms of a contract. Happens all the time, though I'm too lazy to look for an example right now =)
- mtgx 10y agoThe former DoJ chief literally said he wouldn't prosecute them "because that could hurt the economy" .... ?!? He only said that perhaps it wouldn't have hurt the economy, after he quit that job and got hired at a big financial institution, and when it didn't matter anymore.
- pjc50 10y agoNever mind the loans; that wasn't actually illegal. It's the robo-signing that should be prosecuted into the ground.
- adanto6840 10y agoCare to elaborate? I love online / e-signing, so would like to know what you're talking about and how it is differentiated...?
- amock 10y agoI think https://en.wikipedia.org/wiki/2010_United_States_foreclosure_crisis#Robo-signing_controversy https://en.wikipedia.org/wiki/2010_United_States_foreclosure... is what he's talking about.
- pjc50 10y agoNot e-signing, but the mass signing of defective mortgage title documentation. Due to re-sale and tranching of mortgages it was not always clear who had the authority to evict homeowners. So the documentation was simply made up, "robo-signed" by applying a notary's signature who had never seen the document and had no idea of its veracity. And tens of thousands of people were evicted based on essentially forged documents. Nobody seems to care about this; after all, they usually (but not always!) were genuinely behind on payments. And there seems to be strong moral pressure to punish borrowers rather than lenders in the debt crisis. Without stopping to establish the facts of individual cases.
- finid 10y agoBecause they control the system, including your elected officials. Don't ever dream of that happening here. Ever!
- Animats 10y agoThe S&L crisis of the 1980s[1] put hundreds of bankers in jail. The 2008 banking crisis did not. The Administration was squishy-soft on banker crime. It didn't help that the Secretary of the Treasury was from Goldman Sachs. [1] https://en.wikipedia.org/wiki/Savings_and_loan_crisis https://en.wikipedia.org/wiki/Savings_and_loan_crisis
- rayiner 10y agoBecause "bankers" didn't "make loans" to Joe and Sally Blow. Relatively low-level folks at mortgage companies did that. Then those companies sold off the mortgages and ultimately the "bankers" took bundles of them and securitized them. Somewhere between Point A and Point B it becomes hard to articulate what someone did that warrants sending them to jail. And the US did try to prosecute bankers. It brought two headline prosecutions against Bear Stearns executives as the company collapsed. It suffered stunning losses at trial.
- theli0nheart 10y agoThese folks engaged in acts that would be viewed as criminal in any other industry. It's not so much the loans themselves, but what happened after they were sold. The credit ratings assigned to CDOs and MBSs containing mostly junk were so off the mark that it's impossible to claim that they were realistic. There was clear collusion between the credit agencies, the banks, and the SEC. It's a shame no one has gotten more than a slap on the wrist.
- deleted 10y ago[deleted]
- wmccullough 10y agoEven in my position of just an average citizen, I've tried to do something: https://petitions.whitehouse.gov//petition/hold-accountable-those-who-were-charge-financial-institutions-during-2008-financial-collapse https://petitions.whitehouse.gov//petition/hold-accountable-... With the people I've shared this with, I've been met with downright hostility and vitriol. I felt like I should do something, so I started that petition. To date, I literally have two signatures... Apathy is incredibly strong in this country right now.
- fennecfoxen 10y agowmccullough - you hang out on HN, you seem like you might be a smart person, let's all do a smart-person thing together to analyze this failure, instead of just blaming 'apathy' as the first thing that comes to mind and giving up (which would be a little ironic after all). We can brainstorm and write down a list of reasons, besides apathy, which could potentially explain to the lukewarm response to a petition like yours. A few to get started: - People might be concerned that a petition to charge unpopular people with a crime smacks of mob justice and kangaroo courts, the sort of thing you'd expect from an administration which rounds up and purges its political enemies (like, say, Turkey over the past few weeks). - People may not feel sufficiently informed about the facts of the case to accuse the named individuals of wire fraud, and as such do not wish to make such serious allegations. - Your particular petition (as an artifact of the website associated with your creation) may seem unlikely to succeed with only limited word-of-mouth marketing.
- Lazare 10y agoProbably some mixture of the fact that: 1. The bankers you probably are hoping to net had no role in "making loans". 2. "making loans that had no good faith data behind them", once translated into concrete legal terms, turns out not to be a crime. The punishment for lending someone money they can't pay back is, historically and legally, that you don't get paid back. If I work at a bar, and I let one of my customers run up a $800 bar tab and it turns out they're not good for it, I might be an idiot, but I'm not a criminal and I'm not going to jail.
- bmmayer1 10y agoYou forgot that in America, the punishment for lending someone money they can't pay back is getting free money from taxpayers.
- SturgeonsLaw 10y ago> 2. "making loans that had no good faith data behind them", once translated into concrete legal terms, turns out not to be a crime. Aren't we really talking about junk rated mortgage back securities being packaged and sold as AAA? If so, how is that not straight up fraud?
- spyspy 10y agoBecause the entity that is selling it is not the same as the one rating it.
- rahimnathwani 10y agoBankers don't mark bonds as AAA. The ratings agencies do.
- Rylinks 10y agoI have heard a story that goes like this: -Rating agencies set criteria for marking things BB, BBB, etc. -Banks noticed that those criteria did not perfectly correlate with credit risk and created products that optimized for ratings rather than low risk. -People bought these products based on the rating, and then got blown up. You should take this with several grams of salt; I don't know if it's actually true.
- forgetsusername 10y agoWait a minute... People actually think bankers should go to jail for bad loans? What about the people who lied on their mortgage applications? Should they go to jail too?
- fennecfoxen 10y agoInvestigated? Yes. Jailed? Not often. http://www.wsj.com/articles/wall-street-crime-7-years-156-cases-and-few-convictions-1464217378 http://www.wsj.com/articles/wall-street-crime-7-years-156-ca... "The Wall Street Journal examined 156 criminal and civil cases brought by the Justice Department, Securities and Exchange Commission and Commodity Futures Trading Commission against 10 of the largest Wall Street banks since 2009. In 81% of those cases, individual employees were neither identified nor charged... analysis shows not only the rarity of proceedings brought against individual bank employees, but also the difficulty authorities have had winning cases they do bring.... One of the few successful government cases was overturned Monday [May 23, 2016]."
- nl 10y agoArguably it was the ratings agencies that should have been prosecuted. They certified many, many unsafe investment as "AAA rated", when they should have asked questions. The few people who did pick the crash did exactly what the rating agencies were supposed to do - they dug through the paperwork, found out what was backing each investment and saw how bad they were. One might argue that they couldn't because they were paid by the banks. I say that is a separate issue to what could be argued was either careless or fraudulent behaviour.
- carsongross 10y agoIt's a start.
- misiti3780 10y agoGreat start - now how about sending Dick Fuld, Jimmy Caynes, and a few other top bankers in the US to jail.
- trhway 10y agoIceland sent 29 bankers to prison for the 2008 crisis.
- bmmayer1 10y agoOn what charge? "Being banker during a financial crisis" is not a crime.
- ddebernardy 10y agoOn charges of holding them accountable for the rampant fraud that occurred in the run up to the crisis.
- joekrie 10y agoWas the fraud uncovered by the crisis, or was it known about and tolerated until it turned into a crisis?
- ddebernardy 10y agoIt was uncovered by the crisis. It was laid bare when the assets banks were booking as tier-1 capital turned out to be illiquid or worthless, and often both; and when off balance sheet losses revealed they were swimming naked for the same reasons.
- yummyfajitas 10y agoI recently read Rene Girard's "Things Hidden Since the Foundation of the World". He postulates the following theory of collective violence in the world. First, people form mimetic desire - they want things before other people also want and have them. Second, this mimetic desire results in a crisis - the collective actions of virtually everyone result in bad circumstances. Finally, in order to resolve this crisis, a scapegoat must be identified and subjected to collective violence. At this point, society can return to normal. He wrote this book in 1978. I find it quite amazing how well it describes the financial crisis, and the post-crisis search for a scapegoat/villain.
- arcadeparade 10y agoSounds similar to "the theory of the leisure class".
- yummyfajitas 10y agoBased on the wikipedia summary, Girard's mimesis seems similar to Veblen's conspicuous consumption. But Girard generally doesn't go too much into the economic details of any specific era - he is more focused on traditional religion. I may need to read Veblen. I'd also be curious to see a modern update of it - Veblen's theory of a leisure class driving conspicuous consumption and a worker class partaking of it doesn't reflect modern reality at all (these days the poor form the leisure class). Yet the consumption/Girardian mimetic behavior persists.
- tezza 10y agoThe scapegoat was for collecting the sins of the group onto one thing ( animal ) and casting it out of the village. Leviticus 16:9... this is where the term comes from and way predates 1978. There is another goat which is sacrificed immediately as well. http://biblehub.com/leviticus/16-10.htm http://biblehub.com/leviticus/16-10.htm
- stdbrouw 10y agoAu contraire, I find it interesting how there's a total lack of enthusiasm among the general populace to put bankers in jail. Many potential explanations: maybe a certain degree of unethical behavior has become the norm for bankers, and so we feel we can't punish people when really they're the norm? Maybe we feel like the system has to change and that punishing individual actors doesn't make sense? Maybe we don't understand the economic crisis and thus find it hard to identify culprits?
- jazzyk 10y agoTo the audience in the US: NOT coming to a theater near you. :-)
- scandox 10y agoJust to be clear Ireland's bankers for the most part have so far escaped anything harsher than public censure. These guys committed the unforgivable sin of actually thinking they were doing the morally correct thing, encouraged tacitly by a hapless regulator and a terrified government. They did something so obvious and so transparent exactly because they felt they had the assent of the establishment. They just literally lent another bank 7.2 billion so it could say all was well and thus "save" the country from financial meltdown.
- garrettheaver 10y agoNow now scandox, not sure if you're trolling with this one? I don't for one second think "the green jersey" was a factor in their thinking at all.
- ben_jones 10y agoIt's funny because Ireland had a real estate problem.
- k__ 10y agoIn capitalist america you listen to radio. In soviet russia, radio listens to you! In soviet russia you rob bank. In capitalist america, bank robs you!
- Mushro 10y ago"DISHONEST, DECEITFUL AND CORRUPT"
- prirun 10y agoThe financial scams continue even now. In 2011 I sold my deceased mom's house. The buyer was financing it through Chase. Appraiser comes out to do the appraisal for the loan approval. Since the deadline for closing was coming up fast, I asked when he'd have the appraisal finished. He said he'd be done in a couple of days, but when he submits the appraisal to "the middle man between him and the bank" via email, the MM always has changes. This goes on for a couple of weeks. Why is a middle man who has never seen the house forcing an appraiser to make changes to his appraisal? It's nuts. The mortgage industry was rife with fraud in the 2000's because appraisers were inflating home prices at banks' request to justify stupidly overvalued loans. Some government agency made a rule that appraisers couldn't talk to banks to avoid this problem, but now there is some other "middle man" involved who is cooking appraisals. Here's my suggestion on how to prevent fraud in the financial industry: 1. Keep investment banks and deposit-taking banks separate, as was done successfully for years. 2. When an investment bank fails, let them fail. 3. If there is fraud, try executives and put them in prison. Instead, we have a revolving door between govt regulatory agencies and big banks.