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Because the government doesn't consider this as crime.

by wch4999 10y ago

stephengillie 10y ago
Because the government is made from people, specifically people with an interest in decriminalizing this kind of action.
ptaipale 10y ago
More 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 ago
  It's important to note that the "this" in question - reckless lending - is not what the guys in Ireland are going away for.
  - Zuider 10y ago
    That 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 ago
      The rule of law is important -- which criminal law specifically applies to ratings agencies giving incorrect ratings to CMOs?
      - wolf550e 10y ago
        There 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 ago
        The 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 ago
        There 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 ago
        You'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 ago
  This 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 ago
It 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.

Because the government doesn't consider this as crime.

by wch4999 10y ago

Because the government doesn't consider this as crime.

Because the government is made from people, specifically people with an interest in decriminalizing this kind of action.

ptaipale 10y ago

More 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 ago
It's important to note that the "this" in question - reckless lending - is not what the guys in Ireland are going away for.
- Zuider 10y ago
  That 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 ago
    The rule of law is important -- which criminal law specifically applies to ratings agencies giving incorrect ratings to CMOs?
    - wolf550e 10y ago
      There 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 ago
        The 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 ago
        There 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 ago
        You'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 ago
This 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 ago

It 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.