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Why Aren’t Any Bankers in Prison for Causing the Financial Crisis? (2016)

407 points by sidcool 9y ago

deleted 9y ago
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revmoo 9y ago
Bankers didn't cause the crisis. Government both fomented it and then failed to take action when needed.
KasianFranks 9y ago
No worries, Cyrpto will be their prison.
deleted 9y ago
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junkscience2017 9y ago
most of the financial instruments expolited prior to the crash were completely legal even though they were "toxic". Martha Stewart and Bernie Madoff are proof that actual crime can imply prison time
- sitkack 9y ago
  Martha Stewart was a fall guy for people to feel like something was being done. What she was actually guilty of was, "lying to a federal agent." http://corporate.findlaw.com/litigation-disputes/how-to-avoid-going-to-jail-under-18-u-s-c-section-1001-for-lying.html http://corporate.findlaw.com/litigation-disputes/how-to-avoi...
  - goodcanadian 9y ago
    And Al Capone went to jail for tax evasion. The prosecutors use what tools they have at their disposal to get the desired outcome. Sometimes, it is an overall good, and sometimes it is not.
jrochkind1 9y ago
> I think we have an ambivalent relationship with the large corporation and with capitalism. It's a relationship that involves need and dependency and some level of celebration but also resentment, anger, and victimization. Sounds like an abusive relationship to me.
bitL 9y ago
There are some in Iceland, and one NASDAQ founder was jailed as well.
rwallace 9y ago
This suggestion keeps popping up as though 'do nothing' and 'destroy some randomly selected lives, at additional cost to society, by way of revenge' were an exhaustive list of options. I think a much more constructive response would be to claw back all the bonuses the bankers were awarded in the years leading up to the crash. If the losses must be socialized, the gains should not stay privatized.
- junkscience2017 9y ago
  why stop at bankers? millions of Americans flipped homes, took out loans to buy baubles and then benefited when their loan papers became lost in the resulting chaos...and almost everyone knew damn well what they were doing the government CHOSE to bail it all out, and they will probably be doing something similar one day for Uber, Bitcoin and maybe even Tesla. we have CHOSEN the bubble/bailout cycle
  - Zigurd 9y ago
    You can't sink a big investment bank with bad mortgages. not even securitized bad mortgages. Not even corruptly rated bad mortgage securities (and we are already far from the retail borrower's culpability). To blow up the global banking system, you need a cascading set of bets that goes bad and creates orders of magnitude more counterparty risk than retail lending could possibly create.
    - chrisbennet 9y ago
      I don't think most people realize that i.e. it wasn't the mortgages themselves that caused the crises - it was the wall street's bets on the mortgages that made things blow up.
    - sseveran 9y ago
      What you need is any pool of securities that is devalued by more than the capital base of the company. It was the way that the post partnership, publicly traded investment banks were financed that ultimately led to their collapse. When you borrow short and lend long with 30X leverage you can never have a serious market correction. Otherwise your counterparties get nervous and their refusing to continue to lend becomes a self fulfilling prophecy. Its not the first time we have seen this and it won't be the last.
exabrial 9y ago
Unless they did something illegal, or took taxpayer money illegally, why would they be? We choose to use their services. If you don't like it, start paying cash (or Bitcoin).
- exabrial 9y ago
  Apologies to the HN readers who felt the need to downvote me for implying due process is necessary for a civilized society.
  - mfringel 9y ago
    I'm not aware of any reason being relayed to the person being downvoted. What leads you to believe that that was the reason you were downvoted?
- wallacoloo 9y ago
  I'd love for this to be the case, but your options are severely limited if you only accept physical cash or bitcoin as payment. Pretty sure my company only allows direct deposit or paper checks, for example, which means I wouldn't be able to keep that job. Furthermore, as seen in the past few months, the alternatives to banking (e.g. cryptocurrencies, and bitcoin transaction fees/delay) would not be able to handle all the people currently using banks. So for the time being, using a bank isn't practically a choice, because one option comes with the loss of many social opportunities that are otherwise assumed. But in the long term, this is all the more reason to develop alternatives to the current banking system. And maybe in the next 15 years, or perhaps a few years after the next crisis, we'll have an alternative that can support the volume of the current system. It's no coincidence that bitcoin was launched so shortly after the last financial crisis.
maxxxxx 9y ago
I don't know if anything they did was even illegal in the sense that there was a crime involved. I think the big mistake was to bail them out. The should have lost all their money and their companies should have been allowed to go bankrupt. I also would question the existence of large corporations where the owners get all the upside but can avoid the downside.
- pocm_2 9y ago
  If they had lost all their money and their companies went bankrupt, the american people would've lost all their savings as well. As much as it sucks to have the banks bailed out, it may have been the only way to relief the people and not cause a depression.
  - maxxxxx 9y ago
    The government could have bought the banks for cheap, stabilized them and resold them on the market. That way shareholders and employees would have lost but not bank customers.
deleted 9y ago
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chroem- 9y ago
This article falls back on the "I was just following orders" excuse. It doesn't matter if there was no intent of fraud: the issue at hand is that there is currently no downside risk for engaging in these profitable but destructive behaviors, so banks will continue to risk harming the economy as long as they are making money this way. Other professions where screw-ups tend to have disasterous effects, like medicine, law, and engineering, have legal liability frameworks in place to hold businesses and individuals responsible for the negative impact of their actions. I don't see why our financial system should be any different.
deleted 9y ago
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save_ferris 9y ago
Preet Bharara, former US attorney for the Southern District of NY, discussed this on his podcast recently. He basically pointed out that there wasn't evidence to support the notion that individuals had the intention of committing a crime, which is what prosecutors need. It's aggravating because I see similarities in other ways that the law falls short (Equifax, Sony, etc.) Acting stupidly or neglectfully in these scenarios just doesn't seem to have consequences beyond the damage of data exposure, market collapse, etc. as long as you can argue that you weren't aware that you were doing anything wrong. So how do we properly deal with people that don't willingly commit crime but are so bad at what they do that the damage can be catastrophic?
- sitkack 9y ago
  It is still gross financial negligence, when you build a house of cards and rent out all the rooms, you are responsible for the ensuing collapse even if it isn't want you intended.
- graedus 9y ago
  IANAL My understanding is that proof of intent to break the law is not the legal standard needed to move forward with prosecution[0]. It's being used as cover for insufficient political will to prosecute a powerful protected class - Wall Street executives. https://www.leagle.com/decision/199634380f3d2631296 https://www.leagle.com/decision/199634380f3d2631296 § II A
  - tomalpha 9y ago
    IANAL too, but believe that in common law systems like the U.K. and most of the U.S. that intent is required. In the jargon: Mens Rea is required in addition to Actus Rea. https://en.m.wikipedia.org/wiki/Mens_rea https://en.m.wikipedia.org/wiki/Mens_rea That isn’t always true for certain laws that create “strict liability” which removes the requirement to prove intent: https://en.m.wikipedia.org/wiki/Strict_liability https://en.m.wikipedia.org/wiki/Strict_liability
- revelation 9y ago
  That's why the legal barrier to a search warrant is only "probable cause". No one is expecting that prosecutors can prove all elements of a crime by reading a bunch of public material. So how many executives have had their "no-knock" raid?
paulus_magnus2 9y ago
Causing financial crisis wasn't illegal. Unethical but not a crime. Except for some cases of misselling products, banks playing against the customer etc. Bailout was. For $3 trillion less than bailout, we could have paid off every U.S. mortgage! http://www.jameslavin.com/articles/2009/04/16/for-3-trillion-less-than-bailout-we-could-have-paid-off-every-u-s-mortgage/ http://www.jameslavin.com/articles/2009/04/16/for-3-trillion... [need better source??] Without bank bailout we'd buy banks for pennies. Market forces would work and banking sector would be incentivised to behave properly.
- pjc50 9y ago
  The bailout was loan rather than gift though, and I believe eventually made a small profit?
  - paulus_magnus2 9y ago
    The same way if someone steals your car, you buy a new one and the economy as whole (GDP) is in profit. What bailout did (also via QE + ZIRP/NIRP) is prop-up property & asset prices effectively legitimising the prior speculation. This prevented resetting of prices to the levels where people would start buying again for non speculative reasons. Effect is young generation sees houses at 10x earnings whereas the average is 3-3.5x. Boomers sit on tons of unearned house equity that is only there because land prices are inflating like crazy. For capitalism to work well there needs to be a mechanism for wealth destruction, at least for the "unrealised wealth".
    - pjc50 9y ago
      > mechanism for wealth destruction Well, that's never going to be popular, to the extent that all lobbying is going to be diverted to making sure that it's not your wealth that gets destroyed. Have you seen how unpopular even tiny amounts of inflation are? Getting wealth redistribution would be a start.
      - ric2b 9y ago
curtis 9y ago
Generally speaking bad business decisions and losing money are not against the law. Do you think they should sometimes be against the law for businesses that receive substantial government guarantees (say to the tune of hundreds of billions of dollars or more)? Sure, that's probably a good idea. But did those laws exist before the Financial Crisis? Not really, as far as I can tell. So what are you going to throw the bankers in jail for? You can't pass new laws and apply them retroactively in the U.S. since the Constitution doesn't allow ex post facto laws. There is a discussion we could be having about new laws that will apply to financial institutions in the future, to prevent, or at least reduce, the consequences of financial institutions behaving recklessly. But for some reason we're not having that conversation.
jeffdavis 9y ago
Because the rule of law means we have to make clear rules beforehand, and it's hard to make rules about some kinds of bad behavior.
CalChris 9y ago
The reason why there aren't any bankers in prison is Enron. Enron and Arthur Andersen were aggressively prosecuted. Many top execs went to prison, Fastow and Skilling. Lay would have gone but 'died' before sentencing. But Arthur Andersen also lost 85,000 jobs. Enron lost 4000+. Employees pensions were wiped out. Politicians and prosecutors do not have the stomach for that. Citizens don't have the backbone to elect politicians who have that stomach. (US Attorneys are appointed by an elected politician and confirmed by elected politicians.) This is really just one more wrinkle on too big to fail. That and regulatory capture. And also Citizens United. And a few other things.
- jacobolus 9y ago
  Why the scare quotes around 'died'?
  - CalChris 9y ago
    Because by 'dying', Lay's conviction was vacated. Of course, that meant he didn't go to jail but it also meant that he didn't pay any fines, leaving his rather large estate secure as an inheritance. W even went to his funeral.
    - jessaustin 9y ago
      Do you imply that Lay was not present at the funeral? I think that could be a pretty good idea for a movie...
    - dTal 9y ago
      You didn't really answer the question.
- ryankennedyio 9y ago
  I don't know why this is being downvoted, because it is quite accurate. Jesse Eisinger's "The Chickenshit Club" - is a book written entirely about the OP subject. I remember a podcast with the author, and this was a key point.
lend000 9y ago
The 'bankers' most responsible are Greenspan and Bernanke. Everyone loves a witch hunt, but blaming the financial crisis on private bankers for legally following misaligned incentives created by the government is ridiculous (and the norm, unfortunately).
- mempko 9y ago
  You do realize that most banking regulations and misaligned incentives are written and lobbied for by those same private bankers?
  - averagewall 9y ago
    It's still politicians that pass laws. Politicians are voted for by American people. Those people just can't help themselves voting for the most well funded candidates. They're blind to the fact that their so called free will choice is determined by lobbyist's payments and refuse to vote for underfunded candidates.
cryoshon 9y ago
this reads like longform apologia for government inaction and banker exploitation... at one point the interviewee makes it seem like the government didn't do prosecutions because it would have taken a lot of paperwork. why do we pay taxes?
- jeffdavis 9y ago
  The government is restrained by due process and the rule of law. "Paperwork" should not be able to overcome that. The much more reasonable explanation is that there simply were not laws clearly written to prevent this behavior, or that some attempt was made to write such laws but they are unenforceable for some reason.
leoc 9y ago
For the other side of this argument, see Bill Black. http://neweconomicperspectives.org/category/william-k-black http://neweconomicperspectives.org/category/william-k-black https://www.cato-unbound.org/contributors/william-k-black https://www.cato-unbound.org/contributors/william-k-black https://twitter.com/williamkblack https://twitter.com/williamkblack https://en.wikipedia.org/wiki/William_K._Black https://en.wikipedia.org/wiki/William_K._Black He was one of the group which brought successful prosecutions during the Savings & Loan crisis in the '80s, and he has very little sympathy for the failure to bring similar prosecutions in response to the GFC. https://www.youtube.com/watch?time_continue=221&v=J8CqaHTygSc https://www.youtube.com/watch?time_continue=221&v=J8CqaHTygS...
grandalf 9y ago
As others have pointed out, the actions taken by the financial firms' employees were not illegal. In hindsight some were harmful and perhaps should have been, but the question should be why weren't they illegal in the first place. The answer is that regulators did an abysmal job of understanding the perverse incentives that plagued the industry. Among the biggest causes of bad judgment was the incorrect price signaling created by GSEs that were not following proper accounting and disclosure procedures. On one hand the financial firms had significant regulatory capture and had been enjoying lots of profits due to their success influencing regulators. But on the other hand, the entire system of "markets" that were most relevant to the crisis were the most heavily regulated and tied to specific policy goals. It seems odd that we'd ever expect a system that is so politicized to ever be regulated in a rational and appropriate way. Broadly viewed, we can see that the combination of regulations and areas loosely regulated and left up to the discretion of firms constituted a significant degree of centralized control, which turned out to be "corrupt" enough to result in a lot of bad decisions and the crash that ensued. If we assume that all systems are prone to this sort of "centralization risk" we can better appreciate the benefits of decentralized governance that exist with some block chain systems. Forget about jail for what happened in 2008, why should we ever trust financial regulators of financial firms again to regulate our financial system responsibly? Are we supposed to believe that the perverse incentives for regulatory capture, socializing risk, etc., suddenly ceased to exist? I'd argue that we should not. We should realize that human institutions typically require participants to have some trust in other participants, but that the more trust is required the more vulnerable the institution is to the kind of problems that plagued the finance industry. We trusted the GSEs to be acting responsibly even though no financials were released. Regulators trusted ratings agencies to apply disciplined processes to rating generation in spite of the profit motive not to do so, the public trusted regulators to ensure adequate underwriting of risk capital, etc., etc. All these things, many of them not even measurable due to the significant accounting slop involved, were vulnerabilities waiting to be exploited. When a building has marble pillars outside and everyone inside is wearing expensive suits, what we are seeing is signaling of trustworthiness. When the banker is wearing $1500 Italian leather shoes and a $50K watch we can assume he's earned those things by being trustworthy over time. When we enter the high ceilinged room and see the marble we are meant to trust the institution itself. After all, how could this structure, meant to last thousands of years in the elements, not indicate the highest level of accountability and honesty? We must realize that even the most well-intentioned institutions are vulnerable to centralization risk, aka the corruption of the inner workings and mechanisms in a way that is not at first noticeable but benefits insiders. The finance industry used to be simply about risk, money and time. But in today's world it typically follows the pattern of taking money as an input, and producing as an output financial products that foist off some of the risk to society so that the owners can make a profit, with the downside risk being borne by society as a whole. We see this process in action time and again, and it will continue to happen as long as our regulatory approach rewards massive firm size, prevents competition, and socializes losses. Let's hope that we see an emergence of an alternative system that relies on a lot less trust and is much less vulnerable to centralization and corruption.
lefstathiou 9y ago
I don’t want to live in a world where an engineer and QA team could get jail time for signing off on a feature release like Apple Maps which wipes out $30bn in equity value on release day because it is loaded with bugs. Almost every time we miss a deadline or every time bugs go into production, losses are incurred somewhere by someone. These were human beings like us that were doing the job they were mandated to do to the best of their ability. Many lost their livelihoods in the process. It created trillions of dollars in wealth (and losses) and anyone who has looked at their 401k lately can see that they are at it again.
- mplewis 9y ago
  The banking crisis is a very different situation from a bad product launch. The banking executives knew exactly how bad things could be if the subprime markets failed.
UncleEntity 9y ago
Why aren't Bernanke and Greenspan in prison for causing the financial crisis?
- sumedh 9y ago
  Because lowering interest rates and pushing for deregulation is not illegal.
down 9y ago
leave them without Jobs as they left us, use crypto, a crypto address is like a bank account.
thisisit 9y ago
This a great quote: But convicting bankers—or any other white-collar workers whose decisions at work have ostensibly damaged the economy—is difficult because while it is easy to identify systematic wrongdoing, it's much harder to pin blame, at least in the way a court might approve of, on an individual within that system. So you can find a bigger issue with collective behavior but it becomes difficult if everyone is doing it.
lowbloodsugar 9y ago
Why aren't the politicians?
rayiner 9y ago
Judge Jed Rakoff has an interesting article on the same subject, which brings to bear his experience as the former chief of the securities fraud division of the southern district of new york’s US Attorney’s Office: http://www.nybooks.com/articles/2014/01/09/financial-crisis-why-no-executive-prosecutions http://www.nybooks.com/articles/2014/01/09/financial-crisis-....
amckinlay 9y ago
And yet, strangely, no one blames the SEC.
VeronicaJJ123 9y ago
I don't think anyone should go to prison for running their business poorly. However I would have liked to see some of those big banks going out of business. Bush/Obama helped their cronies and ideally they are the ones who should have been jailed for misusing tax payer money.
epberry 9y ago
The bailout was necessary but a tough pill to swallow. My understanding is that there was really no good way to provide direct relief to citizens. AIG and others failing posed a systematic risk and the most effective way to stabilize the economy was to directely lend them hundreds of billions. I think most economists agree that letting the banks fail would have resulted in a depression. Sure the bankers would have lost everything but so would normal people. Instead your average American was spared the worst of it but at the cost of bankers not going to jail and a truly alarming amount of future debt.
- bradleyjg 9y ago
  There was the Swedish solution (pushed during the crisis as I recall by Krugman among others): nationalize the failed institutions, with an eye to spinning them back off after the crisis had passed. That would have wiped out the shareholders, including employees with stock holdings, and caused losses on bonds, but would have kept the institutions running on a go forward basis in order to continue to provide financial services to the real economy.
  - qaq 9y ago
    Financial sector is 40% of US GDP one would imagine wiping out 20-30% of everyone's retirement accounts would not go over too well with voters.
- sumedh 9y ago
  > The bailout was necessary but a tough pill to swallow Capitalism for profits and socialism for losses.
pjmorris 9y ago
It would have been easy to root out the rot; let the bad banks fail, and let the good banks stay afloat. “Lend without limit, to solvent firms, against good collateral, at 'high rates' - Bagehot's rule. Geithner and company argued that doing so would destroy the system. If it turned out that all the banks were bad, maybe it would serve the citizens best to have a new system.
- jessaustin 9y ago
  Unfortunately Bush the Lesser, for all his strutting around in flight suits, turned out to be a chickenshit when the big bad Treasury Secretary barged into his office and hollered that he had to "act now!" Anyone with a spine would have kicked that corrupt asshole to the curb immediately. Instead, we got bailouts.
- qaq 9y ago
  no bank would stay afloat
  - pjmorris 9y ago
    A bank's purpose is to manage credit risk. If a bank's management can't make money on the spread between the Fed lending rate and the mortgage lending rate, they should get out of the business. I don't know whether the top echelon of circa-2007 bank management should be in prison or not, but I do know they ought to be working as baristas or something rather than continuing to run businesses they aren't competent to manage.
    - qaq 9y ago
      Finance sector is 40% of US GDP so while it's cool to throw around theoretical "solutions" they would need to account for this simple fact. So let them fail was not a realistic solution.
      - pjmorris 9y ago
        Free-market fundamentalism, as I have advocated for above, may be too much to ask of capitalism. I do think it's fair to ask whether US citizens, who have been asked to spend Trillions on the 'free market's' behalf (see the Fed's balance sheet pre- and post-crisis [0]), were best served by the way in which it was done. Keeping housing prices high and the existing management in place was not the only way to use those new funds. [0] https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm https://www.federalreserve.gov/monetarypolicy/bst_recenttren...
xchaotic 9y ago
So that's in the past and now we have a cryptocurrencies bubble coming up. Who should be punished and why? Here there is no intermediary, just the greed of the people and their stupidity. Let the markets punish or reward them.
whatyoucantsay 9y ago
In the US, like most countries, the justice system is pay to play.
cowpig 9y ago
I don't know enough about finance or law to know what should have been done. But I can clearly see that what was done did nothing to restore public faith in our banking institutions.
bluetwo 9y ago
Do you think anyone will go to jail for causing the next great financial crisis?
1024core 9y ago
> Why Aren’t Any Bankers in Prison for Causing the Financial Crisis? Two words: Chuck Schumer. He's the Democrats lifeline to the Wall Street, and he'll be damned if the Democrats do anything to jeopardize that relationship. Of course, Republicans are even worse.
ianai 9y ago
IIRC it took 10 years after the Great Depression for anyone to go to prison. The US economy is largely unregulated.
patientplatypus 9y ago
So...for those of you saying "benefitting from a financial collapse is not illegal" I present to you Magnetar Capital. Yes, folks that's right, some asshole named their hedge fund after the magnetic field caused by a collapsing star. If someone were to name their company Human Piles of Shit Inc. it could not be any more obvious that this company was founded in order to cause harm. What they did was to buy up CDOs and then short the positions during the height of the bubble. So if, when the bubble was waning, a $90 million CDO needed an extra $10 million to come to offer on the market they would take that position. Then they would turn around and short the position to 20x. Classic pump and dump with the original long position clearly made in bad faith. And if you think I'm kidding: The hedge fund Magnetar helped create billions of dollars’ worth of risky deals called collateralized debt obligations, many of which failed spectacularly in the financial crisis. Magnetar, meanwhile, had taken positions that allowed the firm to profit when many of those same CDOs collapsed. https://www.huffingtonpost.com/2012/05/17/magnetar-roundup-hedge-fund-sec_n_1525718.html https://www.huffingtonpost.com/2012/05/17/magnetar-roundup-h... More here: https://en.wikipedia.org/wiki/Magnetar_Capital https://en.wikipedia.org/wiki/Magnetar_Capital The founders Alec Litowitz and Ross Laser still run the fund and are worth millions and millions of dollars. How many lives did these people ruin? They literally killed people from suicide, depression, economic ruination. If there is a hell I hope they burn in it. EDIT: And yes, offering a contract in bad faith is illegal.
agumonkey 9y ago
Energy physicist Jean Marc Jancovic says that the subprime crisis was due to shifts in energy productions, so somehow maybe bankers weren't directly responsible, or not more than other eras where energy kept growing
mnm1 9y ago
Oh, please. Federal statutes are so broad, prosecutors could literally pick the people they want to bring down and do so. While this is not a good thing generally, it should have been done here and the perpetrators prosecuted. Federal prosecutors just weren't interested in doing their job and potentially, eliminating some of the biggest political donors ever. But don't tell me that they don't have the tools given our extremely vague federal laws. Hell, many of our federal laws don't even require that the prosecutors prove criminal intent, something the author seems unaware of.
fallingfrog 9y ago
I've always assumed the reason was that the bankers could point fingers and name names of people in government who facilitated the fraud. If there was some better reason, the SEC would have given it to us a long time ago. The silence speaks loudly enough IMHO.
bpanon 9y ago
Because if you were smart enough to understand that the banks own quite literally everything as they control currency itself and they're not going to put themselves in jail.
BurningFrog 9y ago
The assumption in the headline is very questionable. Was the cause of the crisis really that bankers happened to be extra criminally minded in the early 2000-s? I don't doubt crimes were committed, but I think the root causes are found in government and Fed policies of the era.
- nathanvanfleet 9y ago
  But isn't the policy set by the banks by specifically telling the government to remove laws and restrictions?
dogruck 9y ago
Why aren’t any congress people in prison for causing the financial crisis?
- sumedh 9y ago
  Like who?
  - dogruck 9y ago
    Any of them who voted for laws that forced banks to lower, or ignore, existing standards for giving out home loans.
eganist 9y ago
I keep seeing the "we made a profit on the bailouts" line repeated. Usually these comments would end up partially sourced, but I got a bit tired of hearing the line repeated ad nauseam, so I did a bit of googling and came up with this Pro Publica scorecard: https://projects.propublica.org/bailout/ https://projects.propublica.org/bailout/ Taking them on faith alone, it'd seem that in the aggregate, we did alright. Is there any reason why I should believe otherwise?
- babaganoosh89 9y ago
  In case of the banks, fed cut the fed rate to 0%, then banks preceded to massively buy 10 year treasuries. Banks were speculating the fed wouldn’t risk raising rates too fast and bankrupt already weak banks that were speculating on the 10 years in the first place.
rcdrury 9y ago
Because they "caused" it by complying with irresponsible "fair" lending regulations. Unfortunately, they had to; it was the law.
Frogolocalypse 9y ago
They did their jobs. They got a pay rise.
ataturk 9y ago
The financial crisis has many facets. I was deeply interested in the subject at the and in the ensuing years afterwards. I highly recommend Michael Lewis' books on the subject, especially "The Big Short." The film was decent, but didn't go into the same amount of detail as the book. There was much fraud, especially in two places: At the ratings agencies who turned garbage bonds into A+++ good to go, never-gonna-lose investments. They should have all gone to jail for that. The second place was at the banks doing no-doc mortgages because the bankers had huge demand for the crap bonds and the result was that lenders were both outright fabricating loans or lending money to illegal immigrants who couldn't speak any English and didn't even have jobs. Tons of un-prosecuted fraud all over the place there. A few people went to jail, not many. Look at Wachovia Bank and Countrywide as two examples. The other place there was not fraud but enormous unethical behavior was in the sale of CDOs--the "insurance" policies that backed up all the garbage bonds with huge leverage. CDOs took down Bear Stearns and in all honesty, should have taken down all the big players including Goldman Sachs, but the Fed stepped in and bailed them out to the tune of trillions of dollars. The American public paid the price. If you recall the $4-5+/gal gasoline from 2009 and on? That was all part of the bailout scheme. And your 401K took a huge hit, some people still haven't recovered from that time period. Regular people paid literally out of their own pockets so that a bunch of shitbirds could stay billionaires. We allowed corrupt politicians to bail out their pals and we didn't do anything. We the people should have revolted and shot every one of those stinking crooks. Instead, we the people are treated for what we are--a bunch of doormats.
anm89 9y ago
This is one of the fundamental problems of our democracy. Within our current legal framework, there really isn't any good way to prosecute these people. Our current system distributes almost all the benefits to those at the top without distributing the liablility in the same way. A system which was designed to hold the people at the top of our system directly legally accountable for fraudulent and damaging activities within their organizations is one thing which I think would have a chance of making a meaningful change in our society.
known 9y ago
Governments across the world are DEPENDENT on Banks.
ethn 9y ago
Bankers aren't the cause of the financial crisis. Societies have always had a scapegoat to conveniently break societal tensions, previously with physical sacrifices, and presently with sacrificing the money of scapegoated individuals. It's unlikely that a single sector of economy could suddenly cause a widespread collapse, especially without unrecoverable failure. A more cogent explanation is the behavior of the Federal Reserve. Similar to the Great Depression, the growth rate of the M3 was reduced by around 10 percent during the peaks of the recessions. Reading: https://iea.org.uk/blog/a-monetarist-explanation-of-the-great-recession* https://iea.org.uk/blog/a-monetarist-explanation-of-the-grea...

407 points by sidcool 9y ago

deleted 9y ago

[deleted]

revmoo 9y ago

Bankers didn't cause the crisis. Government both fomented it and then failed to take action when needed.

KasianFranks 9y ago

No worries, Cyrpto will be their prison.

deleted 9y ago

[deleted]

junkscience2017 9y ago

most of the financial instruments expolited prior to the crash were completely legal even though they were "toxic". Martha Stewart and Bernie Madoff are proof that actual crime can imply prison time

sitkack 9y ago
Martha Stewart was a fall guy for people to feel like something was being done. What she was actually guilty of was, "lying to a federal agent." http://corporate.findlaw.com/litigation-disputes/how-to-avoid-going-to-jail-under-18-u-s-c-section-1001-for-lying.html http://corporate.findlaw.com/litigation-disputes/how-to-avoi...
- goodcanadian 9y ago
  And Al Capone went to jail for tax evasion. The prosecutors use what tools they have at their disposal to get the desired outcome. Sometimes, it is an overall good, and sometimes it is not.

jrochkind1 9y ago

> I think we have an ambivalent relationship with the large corporation and with capitalism. It's a relationship that involves need and dependency and some level of celebration but also resentment, anger, and victimization. Sounds like an abusive relationship to me.

bitL 9y ago

There are some in Iceland, and one NASDAQ founder was jailed as well.

rwallace 9y ago

This suggestion keeps popping up as though 'do nothing' and 'destroy some randomly selected lives, at additional cost to society, by way of revenge' were an exhaustive list of options. I think a much more constructive response would be to claw back all the bonuses the bankers were awarded in the years leading up to the crash. If the losses must be socialized, the gains should not stay privatized.

junkscience2017 9y ago
why stop at bankers? millions of Americans flipped homes, took out loans to buy baubles and then benefited when their loan papers became lost in the resulting chaos...and almost everyone knew damn well what they were doing the government CHOSE to bail it all out, and they will probably be doing something similar one day for Uber, Bitcoin and maybe even Tesla. we have CHOSEN the bubble/bailout cycle
- Zigurd 9y ago
  You can't sink a big investment bank with bad mortgages. not even securitized bad mortgages. Not even corruptly rated bad mortgage securities (and we are already far from the retail borrower's culpability). To blow up the global banking system, you need a cascading set of bets that goes bad and creates orders of magnitude more counterparty risk than retail lending could possibly create.
  - chrisbennet 9y ago
    I don't think most people realize that i.e. it wasn't the mortgages themselves that caused the crises - it was the wall street's bets on the mortgages that made things blow up.
  - sseveran 9y ago
    What you need is any pool of securities that is devalued by more than the capital base of the company. It was the way that the post partnership, publicly traded investment banks were financed that ultimately led to their collapse. When you borrow short and lend long with 30X leverage you can never have a serious market correction. Otherwise your counterparties get nervous and their refusing to continue to lend becomes a self fulfilling prophecy. Its not the first time we have seen this and it won't be the last.

exabrial 9y ago

Unless they did something illegal, or took taxpayer money illegally, why would they be? We choose to use their services. If you don't like it, start paying cash (or Bitcoin).

exabrial 9y ago
Apologies to the HN readers who felt the need to downvote me for implying due process is necessary for a civilized society.
- mfringel 9y ago
  I'm not aware of any reason being relayed to the person being downvoted. What leads you to believe that that was the reason you were downvoted?
wallacoloo 9y ago
I'd love for this to be the case, but your options are severely limited if you only accept physical cash or bitcoin as payment. Pretty sure my company only allows direct deposit or paper checks, for example, which means I wouldn't be able to keep that job. Furthermore, as seen in the past few months, the alternatives to banking (e.g. cryptocurrencies, and bitcoin transaction fees/delay) would not be able to handle all the people currently using banks. So for the time being, using a bank isn't practically a choice, because one option comes with the loss of many social opportunities that are otherwise assumed. But in the long term, this is all the more reason to develop alternatives to the current banking system. And maybe in the next 15 years, or perhaps a few years after the next crisis, we'll have an alternative that can support the volume of the current system. It's no coincidence that bitcoin was launched so shortly after the last financial crisis.

maxxxxx 9y ago

I don't know if anything they did was even illegal in the sense that there was a crime involved. I think the big mistake was to bail them out. The should have lost all their money and their companies should have been allowed to go bankrupt. I also would question the existence of large corporations where the owners get all the upside but can avoid the downside.

pocm_2 9y ago
If they had lost all their money and their companies went bankrupt, the american people would've lost all their savings as well. As much as it sucks to have the banks bailed out, it may have been the only way to relief the people and not cause a depression.
- maxxxxx 9y ago
  The government could have bought the banks for cheap, stabilized them and resold them on the market. That way shareholders and employees would have lost but not bank customers.

deleted 9y ago

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chroem- 9y ago

This article falls back on the "I was just following orders" excuse. It doesn't matter if there was no intent of fraud: the issue at hand is that there is currently no downside risk for engaging in these profitable but destructive behaviors, so banks will continue to risk harming the economy as long as they are making money this way. Other professions where screw-ups tend to have disasterous effects, like medicine, law, and engineering, have legal liability frameworks in place to hold businesses and individuals responsible for the negative impact of their actions. I don't see why our financial system should be any different.

deleted 9y ago

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save_ferris 9y ago

Preet Bharara, former US attorney for the Southern District of NY, discussed this on his podcast recently. He basically pointed out that there wasn't evidence to support the notion that individuals had the intention of committing a crime, which is what prosecutors need. It's aggravating because I see similarities in other ways that the law falls short (Equifax, Sony, etc.) Acting stupidly or neglectfully in these scenarios just doesn't seem to have consequences beyond the damage of data exposure, market collapse, etc. as long as you can argue that you weren't aware that you were doing anything wrong. So how do we properly deal with people that don't willingly commit crime but are so bad at what they do that the damage can be catastrophic?

sitkack 9y ago
It is still gross financial negligence, when you build a house of cards and rent out all the rooms, you are responsible for the ensuing collapse even if it isn't want you intended.
graedus 9y ago
IANAL My understanding is that proof of intent to break the law is not the legal standard needed to move forward with prosecution[0]. It's being used as cover for insufficient political will to prosecute a powerful protected class - Wall Street executives. https://www.leagle.com/decision/199634380f3d2631296 https://www.leagle.com/decision/199634380f3d2631296 § II A
- tomalpha 9y ago
  IANAL too, but believe that in common law systems like the U.K. and most of the U.S. that intent is required. In the jargon: Mens Rea is required in addition to Actus Rea. https://en.m.wikipedia.org/wiki/Mens_rea https://en.m.wikipedia.org/wiki/Mens_rea That isn’t always true for certain laws that create “strict liability” which removes the requirement to prove intent: https://en.m.wikipedia.org/wiki/Strict_liability https://en.m.wikipedia.org/wiki/Strict_liability
revelation 9y ago
That's why the legal barrier to a search warrant is only "probable cause". No one is expecting that prosecutors can prove all elements of a crime by reading a bunch of public material. So how many executives have had their "no-knock" raid?

paulus_magnus2 9y ago

Causing financial crisis wasn't illegal. Unethical but not a crime. Except for some cases of misselling products, banks playing against the customer etc. Bailout was. For $3 trillion less than bailout, we could have paid off every U.S. mortgage! http://www.jameslavin.com/articles/2009/04/16/for-3-trillion-less-than-bailout-we-could-have-paid-off-every-u-s-mortgage/ http://www.jameslavin.com/articles/2009/04/16/for-3-trillion... [need better source??] Without bank bailout we'd buy banks for pennies. Market forces would work and banking sector would be incentivised to behave properly.

pjc50 9y ago
The bailout was loan rather than gift though, and I believe eventually made a small profit?
- paulus_magnus2 9y ago
  The same way if someone steals your car, you buy a new one and the economy as whole (GDP) is in profit. What bailout did (also via QE + ZIRP/NIRP) is prop-up property & asset prices effectively legitimising the prior speculation. This prevented resetting of prices to the levels where people would start buying again for non speculative reasons. Effect is young generation sees houses at 10x earnings whereas the average is 3-3.5x. Boomers sit on tons of unearned house equity that is only there because land prices are inflating like crazy. For capitalism to work well there needs to be a mechanism for wealth destruction, at least for the "unrealised wealth".
  - pjc50 9y ago
    > mechanism for wealth destruction Well, that's never going to be popular, to the extent that all lobbying is going to be diverted to making sure that it's not your wealth that gets destroyed. Have you seen how unpopular even tiny amounts of inflation are? Getting wealth redistribution would be a start.
    - ric2b 9y ago

curtis 9y ago

Generally speaking bad business decisions and losing money are not against the law. Do you think they should sometimes be against the law for businesses that receive substantial government guarantees (say to the tune of hundreds of billions of dollars or more)? Sure, that's probably a good idea. But did those laws exist before the Financial Crisis? Not really, as far as I can tell. So what are you going to throw the bankers in jail for? You can't pass new laws and apply them retroactively in the U.S. since the Constitution doesn't allow ex post facto laws. There is a discussion we could be having about new laws that will apply to financial institutions in the future, to prevent, or at least reduce, the consequences of financial institutions behaving recklessly. But for some reason we're not having that conversation.

jeffdavis 9y ago

Because the rule of law means we have to make clear rules beforehand, and it's hard to make rules about some kinds of bad behavior.

CalChris 9y ago

The reason why there aren't any bankers in prison is Enron. Enron and Arthur Andersen were aggressively prosecuted. Many top execs went to prison, Fastow and Skilling. Lay would have gone but 'died' before sentencing. But Arthur Andersen also lost 85,000 jobs. Enron lost 4000+. Employees pensions were wiped out. Politicians and prosecutors do not have the stomach for that. Citizens don't have the backbone to elect politicians who have that stomach. (US Attorneys are appointed by an elected politician and confirmed by elected politicians.) This is really just one more wrinkle on too big to fail. That and regulatory capture. And also Citizens United. And a few other things.

jacobolus 9y ago
Why the scare quotes around 'died'?
- CalChris 9y ago
  Because by 'dying', Lay's conviction was vacated. Of course, that meant he didn't go to jail but it also meant that he didn't pay any fines, leaving his rather large estate secure as an inheritance. W even went to his funeral.
  - jessaustin 9y ago
    Do you imply that Lay was not present at the funeral? I think that could be a pretty good idea for a movie...
  - dTal 9y ago
    You didn't really answer the question.
ryankennedyio 9y ago
I don't know why this is being downvoted, because it is quite accurate. Jesse Eisinger's "The Chickenshit Club" - is a book written entirely about the OP subject. I remember a podcast with the author, and this was a key point.

lend000 9y ago

The 'bankers' most responsible are Greenspan and Bernanke. Everyone loves a witch hunt, but blaming the financial crisis on private bankers for legally following misaligned incentives created by the government is ridiculous (and the norm, unfortunately).

mempko 9y ago
You do realize that most banking regulations and misaligned incentives are written and lobbied for by those same private bankers?
- averagewall 9y ago
  It's still politicians that pass laws. Politicians are voted for by American people. Those people just can't help themselves voting for the most well funded candidates. They're blind to the fact that their so called free will choice is determined by lobbyist's payments and refuse to vote for underfunded candidates.

cryoshon 9y ago

this reads like longform apologia for government inaction and banker exploitation... at one point the interviewee makes it seem like the government didn't do prosecutions because it would have taken a lot of paperwork. why do we pay taxes?

jeffdavis 9y ago
The government is restrained by due process and the rule of law. "Paperwork" should not be able to overcome that. The much more reasonable explanation is that there simply were not laws clearly written to prevent this behavior, or that some attempt was made to write such laws but they are unenforceable for some reason.

leoc 9y ago

For the other side of this argument, see Bill Black. http://neweconomicperspectives.org/category/william-k-black http://neweconomicperspectives.org/category/william-k-black https://www.cato-unbound.org/contributors/william-k-black https://www.cato-unbound.org/contributors/william-k-black https://twitter.com/williamkblack https://twitter.com/williamkblack https://en.wikipedia.org/wiki/William_K._Black https://en.wikipedia.org/wiki/William_K._Black He was one of the group which brought successful prosecutions during the Savings & Loan crisis in the '80s, and he has very little sympathy for the failure to bring similar prosecutions in response to the GFC. https://www.youtube.com/watch?time_continue=221&v=J8CqaHTygSc https://www.youtube.com/watch?time_continue=221&v=J8CqaHTygS...

grandalf 9y ago

As others have pointed out, the actions taken by the financial firms' employees were not illegal. In hindsight some were harmful and perhaps should have been, but the question should be why weren't they illegal in the first place. The answer is that regulators did an abysmal job of understanding the perverse incentives that plagued the industry. Among the biggest causes of bad judgment was the incorrect price signaling created by GSEs that were not following proper accounting and disclosure procedures. On one hand the financial firms had significant regulatory capture and had been enjoying lots of profits due to their success influencing regulators. But on the other hand, the entire system of "markets" that were most relevant to the crisis were the most heavily regulated and tied to specific policy goals. It seems odd that we'd ever expect a system that is so politicized to ever be regulated in a rational and appropriate way. Broadly viewed, we can see that the combination of regulations and areas loosely regulated and left up to the discretion of firms constituted a significant degree of centralized control, which turned out to be "corrupt" enough to result in a lot of bad decisions and the crash that ensued. If we assume that all systems are prone to this sort of "centralization risk" we can better appreciate the benefits of decentralized governance that exist with some block chain systems. Forget about jail for what happened in 2008, why should we ever trust financial regulators of financial firms again to regulate our financial system responsibly? Are we supposed to believe that the perverse incentives for regulatory capture, socializing risk, etc., suddenly ceased to exist? I'd argue that we should not. We should realize that human institutions typically require participants to have some trust in other participants, but that the more trust is required the more vulnerable the institution is to the kind of problems that plagued the finance industry. We trusted the GSEs to be acting responsibly even though no financials were released. Regulators trusted ratings agencies to apply disciplined processes to rating generation in spite of the profit motive not to do so, the public trusted regulators to ensure adequate underwriting of risk capital, etc., etc. All these things, many of them not even measurable due to the significant accounting slop involved, were vulnerabilities waiting to be exploited. When a building has marble pillars outside and everyone inside is wearing expensive suits, what we are seeing is signaling of trustworthiness. When the banker is wearing $1500 Italian leather shoes and a $50K watch we can assume he's earned those things by being trustworthy over time. When we enter the high ceilinged room and see the marble we are meant to trust the institution itself. After all, how could this structure, meant to last thousands of years in the elements, not indicate the highest level of accountability and honesty? We must realize that even the most well-intentioned institutions are vulnerable to centralization risk, aka the corruption of the inner workings and mechanisms in a way that is not at first noticeable but benefits insiders. The finance industry used to be simply about risk, money and time. But in today's world it typically follows the pattern of taking money as an input, and producing as an output financial products that foist off some of the risk to society so that the owners can make a profit, with the downside risk being borne by society as a whole. We see this process in action time and again, and it will continue to happen as long as our regulatory approach rewards massive firm size, prevents competition, and socializes losses. Let's hope that we see an emergence of an alternative system that relies on a lot less trust and is much less vulnerable to centralization and corruption.

lefstathiou 9y ago

I don’t want to live in a world where an engineer and QA team could get jail time for signing off on a feature release like Apple Maps which wipes out $30bn in equity value on release day because it is loaded with bugs. Almost every time we miss a deadline or every time bugs go into production, losses are incurred somewhere by someone. These were human beings like us that were doing the job they were mandated to do to the best of their ability. Many lost their livelihoods in the process. It created trillions of dollars in wealth (and losses) and anyone who has looked at their 401k lately can see that they are at it again.

mplewis 9y ago
The banking crisis is a very different situation from a bad product launch. The banking executives knew exactly how bad things could be if the subprime markets failed.

UncleEntity 9y ago

Why aren't Bernanke and Greenspan in prison for causing the financial crisis?

sumedh 9y ago
Because lowering interest rates and pushing for deregulation is not illegal.

down 9y ago

leave them without Jobs as they left us, use crypto, a crypto address is like a bank account.

thisisit 9y ago

This a great quote: But convicting bankers—or any other white-collar workers whose decisions at work have ostensibly damaged the economy—is difficult because while it is easy to identify systematic wrongdoing, it's much harder to pin blame, at least in the way a court might approve of, on an individual within that system. So you can find a bigger issue with collective behavior but it becomes difficult if everyone is doing it.

lowbloodsugar 9y ago

Why aren't the politicians?

rayiner 9y ago

Judge Jed Rakoff has an interesting article on the same subject, which brings to bear his experience as the former chief of the securities fraud division of the southern district of new york’s US Attorney’s Office: http://www.nybooks.com/articles/2014/01/09/financial-crisis-why-no-executive-prosecutions http://www.nybooks.com/articles/2014/01/09/financial-crisis-....

amckinlay 9y ago

And yet, strangely, no one blames the SEC.

VeronicaJJ123 9y ago

I don't think anyone should go to prison for running their business poorly. However I would have liked to see some of those big banks going out of business. Bush/Obama helped their cronies and ideally they are the ones who should have been jailed for misusing tax payer money.

epberry 9y ago

The bailout was necessary but a tough pill to swallow. My understanding is that there was really no good way to provide direct relief to citizens. AIG and others failing posed a systematic risk and the most effective way to stabilize the economy was to directely lend them hundreds of billions. I think most economists agree that letting the banks fail would have resulted in a depression. Sure the bankers would have lost everything but so would normal people. Instead your average American was spared the worst of it but at the cost of bankers not going to jail and a truly alarming amount of future debt.

bradleyjg 9y ago
There was the Swedish solution (pushed during the crisis as I recall by Krugman among others): nationalize the failed institutions, with an eye to spinning them back off after the crisis had passed. That would have wiped out the shareholders, including employees with stock holdings, and caused losses on bonds, but would have kept the institutions running on a go forward basis in order to continue to provide financial services to the real economy.
- qaq 9y ago
  Financial sector is 40% of US GDP one would imagine wiping out 20-30% of everyone's retirement accounts would not go over too well with voters.
sumedh 9y ago
> The bailout was necessary but a tough pill to swallow Capitalism for profits and socialism for losses.

pjmorris 9y ago

It would have been easy to root out the rot; let the bad banks fail, and let the good banks stay afloat. “Lend without limit, to solvent firms, against good collateral, at 'high rates' - Bagehot's rule. Geithner and company argued that doing so would destroy the system. If it turned out that all the banks were bad, maybe it would serve the citizens best to have a new system.

jessaustin 9y ago
Unfortunately Bush the Lesser, for all his strutting around in flight suits, turned out to be a chickenshit when the big bad Treasury Secretary barged into his office and hollered that he had to "act now!" Anyone with a spine would have kicked that corrupt asshole to the curb immediately. Instead, we got bailouts.
qaq 9y ago
no bank would stay afloat
- pjmorris 9y ago
  A bank's purpose is to manage credit risk. If a bank's management can't make money on the spread between the Fed lending rate and the mortgage lending rate, they should get out of the business. I don't know whether the top echelon of circa-2007 bank management should be in prison or not, but I do know they ought to be working as baristas or something rather than continuing to run businesses they aren't competent to manage.
  - qaq 9y ago
    Finance sector is 40% of US GDP so while it's cool to throw around theoretical "solutions" they would need to account for this simple fact. So let them fail was not a realistic solution.
    - pjmorris 9y ago
      Free-market fundamentalism, as I have advocated for above, may be too much to ask of capitalism. I do think it's fair to ask whether US citizens, who have been asked to spend Trillions on the 'free market's' behalf (see the Fed's balance sheet pre- and post-crisis [0]), were best served by the way in which it was done. Keeping housing prices high and the existing management in place was not the only way to use those new funds. [0] https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm https://www.federalreserve.gov/monetarypolicy/bst_recenttren...

xchaotic 9y ago

So that's in the past and now we have a cryptocurrencies bubble coming up. Who should be punished and why? Here there is no intermediary, just the greed of the people and their stupidity. Let the markets punish or reward them.

whatyoucantsay 9y ago

In the US, like most countries, the justice system is pay to play.

cowpig 9y ago

I don't know enough about finance or law to know what should have been done. But I can clearly see that what was done did nothing to restore public faith in our banking institutions.

bluetwo 9y ago

Do you think anyone will go to jail for causing the next great financial crisis?

1024core 9y ago

> Why Aren’t Any Bankers in Prison for Causing the Financial Crisis? Two words: Chuck Schumer. He's the Democrats lifeline to the Wall Street, and he'll be damned if the Democrats do anything to jeopardize that relationship. Of course, Republicans are even worse.

ianai 9y ago

IIRC it took 10 years after the Great Depression for anyone to go to prison. The US economy is largely unregulated.

patientplatypus 9y ago

So...for those of you saying "benefitting from a financial collapse is not illegal" I present to you Magnetar Capital. Yes, folks that's right, some asshole named their hedge fund after the magnetic field caused by a collapsing star. If someone were to name their company Human Piles of Shit Inc. it could not be any more obvious that this company was founded in order to cause harm. What they did was to buy up CDOs and then short the positions during the height of the bubble. So if, when the bubble was waning, a $90 million CDO needed an extra $10 million to come to offer on the market they would take that position. Then they would turn around and short the position to 20x. Classic pump and dump with the original long position clearly made in bad faith. And if you think I'm kidding: The hedge fund Magnetar helped create billions of dollars’ worth of risky deals called collateralized debt obligations, many of which failed spectacularly in the financial crisis. Magnetar, meanwhile, had taken positions that allowed the firm to profit when many of those same CDOs collapsed. https://www.huffingtonpost.com/2012/05/17/magnetar-roundup-hedge-fund-sec_n_1525718.html https://www.huffingtonpost.com/2012/05/17/magnetar-roundup-h... More here: https://en.wikipedia.org/wiki/Magnetar_Capital https://en.wikipedia.org/wiki/Magnetar_Capital The founders Alec Litowitz and Ross Laser still run the fund and are worth millions and millions of dollars. How many lives did these people ruin? They literally killed people from suicide, depression, economic ruination. If there is a hell I hope they burn in it. EDIT: And yes, offering a contract in bad faith is illegal.

agumonkey 9y ago

Energy physicist Jean Marc Jancovic says that the subprime crisis was due to shifts in energy productions, so somehow maybe bankers weren't directly responsible, or not more than other eras where energy kept growing

mnm1 9y ago

Oh, please. Federal statutes are so broad, prosecutors could literally pick the people they want to bring down and do so. While this is not a good thing generally, it should have been done here and the perpetrators prosecuted. Federal prosecutors just weren't interested in doing their job and potentially, eliminating some of the biggest political donors ever. But don't tell me that they don't have the tools given our extremely vague federal laws. Hell, many of our federal laws don't even require that the prosecutors prove criminal intent, something the author seems unaware of.

fallingfrog 9y ago

I've always assumed the reason was that the bankers could point fingers and name names of people in government who facilitated the fraud. If there was some better reason, the SEC would have given it to us a long time ago. The silence speaks loudly enough IMHO.

bpanon 9y ago

Because if you were smart enough to understand that the banks own quite literally everything as they control currency itself and they're not going to put themselves in jail.

BurningFrog 9y ago

The assumption in the headline is very questionable. Was the cause of the crisis really that bankers happened to be extra criminally minded in the early 2000-s? I don't doubt crimes were committed, but I think the root causes are found in government and Fed policies of the era.

nathanvanfleet 9y ago
But isn't the policy set by the banks by specifically telling the government to remove laws and restrictions?

dogruck 9y ago

Why aren’t any congress people in prison for causing the financial crisis?

sumedh 9y ago
Like who?
- dogruck 9y ago
  Any of them who voted for laws that forced banks to lower, or ignore, existing standards for giving out home loans.

eganist 9y ago

I keep seeing the "we made a profit on the bailouts" line repeated. Usually these comments would end up partially sourced, but I got a bit tired of hearing the line repeated ad nauseam, so I did a bit of googling and came up with this Pro Publica scorecard: https://projects.propublica.org/bailout/ https://projects.propublica.org/bailout/ Taking them on faith alone, it'd seem that in the aggregate, we did alright. Is there any reason why I should believe otherwise?

babaganoosh89 9y ago
In case of the banks, fed cut the fed rate to 0%, then banks preceded to massively buy 10 year treasuries. Banks were speculating the fed wouldn’t risk raising rates too fast and bankrupt already weak banks that were speculating on the 10 years in the first place.

rcdrury 9y ago

Because they "caused" it by complying with irresponsible "fair" lending regulations. Unfortunately, they had to; it was the law.

Frogolocalypse 9y ago

They did their jobs. They got a pay rise.

ataturk 9y ago

The financial crisis has many facets. I was deeply interested in the subject at the and in the ensuing years afterwards. I highly recommend Michael Lewis' books on the subject, especially "The Big Short." The film was decent, but didn't go into the same amount of detail as the book. There was much fraud, especially in two places: At the ratings agencies who turned garbage bonds into A+++ good to go, never-gonna-lose investments. They should have all gone to jail for that. The second place was at the banks doing no-doc mortgages because the bankers had huge demand for the crap bonds and the result was that lenders were both outright fabricating loans or lending money to illegal immigrants who couldn't speak any English and didn't even have jobs. Tons of un-prosecuted fraud all over the place there. A few people went to jail, not many. Look at Wachovia Bank and Countrywide as two examples. The other place there was not fraud but enormous unethical behavior was in the sale of CDOs--the "insurance" policies that backed up all the garbage bonds with huge leverage. CDOs took down Bear Stearns and in all honesty, should have taken down all the big players including Goldman Sachs, but the Fed stepped in and bailed them out to the tune of trillions of dollars. The American public paid the price. If you recall the $4-5+/gal gasoline from 2009 and on? That was all part of the bailout scheme. And your 401K took a huge hit, some people still haven't recovered from that time period. Regular people paid literally out of their own pockets so that a bunch of shitbirds could stay billionaires. We allowed corrupt politicians to bail out their pals and we didn't do anything. We the people should have revolted and shot every one of those stinking crooks. Instead, we the people are treated for what we are--a bunch of doormats.

anm89 9y ago

This is one of the fundamental problems of our democracy. Within our current legal framework, there really isn't any good way to prosecute these people. Our current system distributes almost all the benefits to those at the top without distributing the liablility in the same way. A system which was designed to hold the people at the top of our system directly legally accountable for fraudulent and damaging activities within their organizations is one thing which I think would have a chance of making a meaningful change in our society.

known 9y ago

Governments across the world are DEPENDENT on Banks.

ethn 9y ago

Bankers aren't the cause of the financial crisis. Societies have always had a scapegoat to conveniently break societal tensions, previously with physical sacrifices, and presently with sacrificing the money of scapegoated individuals. It's unlikely that a single sector of economy could suddenly cause a widespread collapse, especially without unrecoverable failure. A more cogent explanation is the behavior of the Federal Reserve. Similar to the Great Depression, the growth rate of the M3 was reduced by around 10 percent during the peaks of the recessions. Reading: https://iea.org.uk/blog/a-monetarist-explanation-of-the-great-recession* https://iea.org.uk/blog/a-monetarist-explanation-of-the-grea...