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> 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 t

> 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 ago
  Sure, 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 ago
    Sure, 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.
    - dave_sullivan 10y ago
      I think it's more like car dealerships, and the banks are the people that make the cars (mortgages) which the dealerships (mortgage brokerages like countrywide + many many smaller operations) sell. Being a mortgage broker is one step up from being a car salesman. Similar incentives, slightly more complicated, higher ticket, so they make more money. It is an extremely sales driven industry. "Sales driven" has meant different things throughout the decades, but it mainly means "get it sold" and/or "figure out how to get more money for a relatively undifferentiated product". So here's my point: Someone sells me a piece of shit used car for $15,000 that they bought for $2,500 and turns out to have all kinds of problems with it. That car happens to be a Toyota. Am I going after Toyota? Let's say this dealership is also the highest grossing toyota dealership in the tri-state area. Does that make a difference? Maybe I go after the dealership, but again, good luck; they didn't tell you there's nothing wrong with the car and the guy that did (good luck proving that) has moved on to another dealership, or maybe they're selling real estate now. I'm not saying no crime was committed in the philisophical sense. I'm more saying that our practical implementation of crime and punishment is stretched by situations like this, and for good reason (which are the reasons I outline above). The answer to who is culpable, really, is everybody. So what?
      - jacalata 10y ago
        No, these loans involved actual fraud. It's more like Toyota removed every form of safety testing from their manufacturing process and changed it to a 'wave at the foreman if this car has any defects' policy. The specific lies would be from factory workers who were told that they needed to produce x cars per day and that saying a car has a defect will get them fired, but the bigger lie is Toyota selling millions of cars knowing that they were labelling all of them as roadworthy but hadn't even attempted to verify that (and that it was literally impossible for the workers to have verified it when they had one guy testing the brakes on 500 cars per day). But that would probably actually be prosecuted because it's easy for people to understand 'Toyota lied about having verified their cars were safe!' and hard for people to understand 'Countrywide lied about having adequate underwriting practices to ensure that their loans were valid!'.
aceofspades19 10y ago
Should the person taking out the loan have 0 responsibility as well? Surely either the janitor or the english lit major should have some personal responsibility when it comes to taking on debt that they could not possibly pay back. I think both parties in the transaction have some responsibility in making sure that the loan is beneficial.
- dave_sullivan 10y ago
  > I think both parties in the transaction have some responsibility in making sure that the loan is beneficial. I agree.
  - infinite8s 10y ago
    And interestingly enough, the government agrees as well. Student loan debt backed by the government is difficult to discharge through bankruptcy - http://www.usnews.com/education/blogs/student-loan-ranger/2014/08/13/debunking-the-student-loan-bankruptcy-myth http://www.usnews.com/education/blogs/student-loan-ranger/20...
    - dave_sullivan 10y ago
      Indeed, and I strongly disagree with that. It's a feeble attempt to prop up an unsustainable market, at the cost of people's futures. When the student lenders eventually go broke (and they will) I doubt they'll stick to their philosophy of "gotta pay what you owe".
      - nemanja-mit 10y ago
        actually that law predates the explosion of the student debt market. it was intended to close a loophole - lore goes that law school graduates would default on their student loans just after they passed the bar and got their first law firm job
      - infinite8s 10y ago
        Why will they go broke? A large proportion of student debt is guaranteed by the federal government.
fennecfoxen 10y ago
> You want to know who should go to jail? Anyone selling student loans right now. The US government has essentially taken over the student-loan sector after the current administration decided that student loans had interest rates which were too high. (Perhaps they were high because they actually reflected some of the risk?)

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 ago
Sure, 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 ago
  Sure, 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.
  - dave_sullivan 10y ago
    I think it's more like car dealerships, and the banks are the people that make the cars (mortgages) which the dealerships (mortgage brokerages like countrywide + many many smaller operations) sell. Being a mortgage broker is one step up from being a car salesman. Similar incentives, slightly more complicated, higher ticket, so they make more money. It is an extremely sales driven industry. "Sales driven" has meant different things throughout the decades, but it mainly means "get it sold" and/or "figure out how to get more money for a relatively undifferentiated product". So here's my point: Someone sells me a piece of shit used car for $15,000 that they bought for $2,500 and turns out to have all kinds of problems with it. That car happens to be a Toyota. Am I going after Toyota? Let's say this dealership is also the highest grossing toyota dealership in the tri-state area. Does that make a difference? Maybe I go after the dealership, but again, good luck; they didn't tell you there's nothing wrong with the car and the guy that did (good luck proving that) has moved on to another dealership, or maybe they're selling real estate now. I'm not saying no crime was committed in the philisophical sense. I'm more saying that our practical implementation of crime and punishment is stretched by situations like this, and for good reason (which are the reasons I outline above). The answer to who is culpable, really, is everybody. So what?
    - jacalata 10y ago
      No, these loans involved actual fraud. It's more like Toyota removed every form of safety testing from their manufacturing process and changed it to a 'wave at the foreman if this car has any defects' policy. The specific lies would be from factory workers who were told that they needed to produce x cars per day and that saying a car has a defect will get them fired, but the bigger lie is Toyota selling millions of cars knowing that they were labelling all of them as roadworthy but hadn't even attempted to verify that (and that it was literally impossible for the workers to have verified it when they had one guy testing the brakes on 500 cars per day). But that would probably actually be prosecuted because it's easy for people to understand 'Toyota lied about having verified their cars were safe!' and hard for people to understand 'Countrywide lied about having adequate underwriting practices to ensure that their loans were valid!'.

aceofspades19 10y ago

Should the person taking out the loan have 0 responsibility as well? Surely either the janitor or the english lit major should have some personal responsibility when it comes to taking on debt that they could not possibly pay back. I think both parties in the transaction have some responsibility in making sure that the loan is beneficial.

dave_sullivan 10y ago
> I think both parties in the transaction have some responsibility in making sure that the loan is beneficial. I agree.
- infinite8s 10y ago
  And interestingly enough, the government agrees as well. Student loan debt backed by the government is difficult to discharge through bankruptcy - http://www.usnews.com/education/blogs/student-loan-ranger/2014/08/13/debunking-the-student-loan-bankruptcy-myth http://www.usnews.com/education/blogs/student-loan-ranger/20...
  - dave_sullivan 10y ago
    Indeed, and I strongly disagree with that. It's a feeble attempt to prop up an unsustainable market, at the cost of people's futures. When the student lenders eventually go broke (and they will) I doubt they'll stick to their philosophy of "gotta pay what you owe".
    - nemanja-mit 10y ago
      actually that law predates the explosion of the student debt market. it was intended to close a loophole - lore goes that law school graduates would default on their student loans just after they passed the bar and got their first law firm job
    - infinite8s 10y ago
      Why will they go broke? A large proportion of student debt is guaranteed by the federal government.

fennecfoxen 10y ago

> You want to know who should go to jail? Anyone selling student loans right now. The US government has essentially taken over the student-loan sector after the current administration decided that student loans had interest rates which were too high. (Perhaps they were high because they actually reflected some of the risk?)