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Nowhere in that article does it describe an actual crime that went unprosecuted. Shkreli broke the law. The financiers causing the financial collapse did not.

Nowhere in that article does it describe an actual crime that went unprosecuted. Shkreli broke the law. The financiers causing the financial collapse did not. Perhaps the laws should be changed.

throwaway613834 9y ago
I like how absolutely critical little 'details' like this get missed on HN so easily, by people speaking with extreme confidence. Thanks for the reality check!
theo775 9y ago
"The financiers causing the financial collapse did not." They weren't prosecuted. That doesn't mean they didn't break the law.
- rayiner 9y ago
  Likewise, just because they caused the financial collapse doesn't mean they broke the law.
  - toomuchtodo 9y ago
    CDO (Collateralized Debt Obligation) origination fraud is a crime. The GFC was not caused by law abiding activities. It was fraud, plain and simple. https://www.justice.gov/opa/pr/bank-america-pay-1665-billion-historic-justice-department-settlement-financial-fraud-leading https://www.justice.gov/opa/pr/bank-america-pay-1665-billion... As part of the RMBS Working Group, the U.S. Attorney’s Office for the District of New Jersey conducted a FIRREA investigation into misrepresentations made by Merrill Lynch to investors in 72 RMBS throughout 2006 and 2007. As the statement of facts describes, Merrill Lynch regularly told investors the loans it was securitizing were made to borrowers who were likely and able to repay their debts. Merrill Lynch made these representations even though it knew, based on the due diligence it had performed on samples of the loans, that a significant number of those loans had material underwriting and compliance defects - including as many as 55 percent in a single pool. In addition, Merrill Lynch rarely reviewed the unsampled loans to ensure that the defects observed in the samples were not present throughout the remainder of the pools. Merrill Lynch also disregarded its own due diligence and securitized loans that the due diligence vendors had identified as defective. This practice led one Merrill Lynch consultant to “wonder why we have due diligence performed” if Merrill Lynch was going to securitize the loans “regardless of issues.” Disclaimer: I was privy to this having known several mortgage underwriters who identified this fraud, and despite reporting it with extensive documentation (which I personally collated and delivered via FedEx) to the SEC, DOJ, and OCC, were ignored.
    - ansible 9y ago
      Indeed. There was fraud committed at all levels which lead up to the crash.
    - rayiner 9y ago
      "Fraud" can be civil fraud, or criminal fraud. Criminal fraud is something like "they said they were going to sell me something, but just took my money instead." Civil fraud might be something like "they sold me 10-inch sandwiches as 12-inch sandwiches." What you're describing in the paragraph above is even one step removed from the sandwiches. Knowing that "loans had material underwriting and compliance defects" doesn't prove that Merrill Lynch lied when it said "the borrowers ... were likely and able to repay their debts." It might lead to an inference to that effect, but it's not indisputable proof. Likewise, the fact that it "rarely reviewed the unsampled loans to ensure that the defects observed in the samples were not present throughout the remainder of the pools" might lead to an inference of negligence, but is not indisputable proof of fraud. Everything described in that paragraph is classic civil fraud and negligence, not criminal fraud.
      - kbenson 9y ago
        > Criminal fraud is something like "they said they were going to sell me something, but just took my money instead." Civil fraud might be something like "they sold me 10-inch sandwiches as 12-inch sandwiches." Is it purely a matter of partial delivery, or does magnitude matter? What if it's "they sold me 10 tons of gold as 12 tons of gold?" Because that's a big difference. Then again, 10 inch sandwhiches sold as 12 inch sandwhiches allows you to save over 15% of materials, which if you're a nationwide chain could be quite a lot of money as well.
        rayiner 9y ago
        Civil fraud versus criminal fraud is very fuzzy. it often comes down to what you think you can prove about fraudulent intent. I gave the sandwich example because you can create “reasonable doubt” by saying the mistake was due to bad QA, rather than fraudulent intent. The fact that the sandwiches are shorter, by itself, does not prove fraudulent intent. The mortgages are even harder. The banks are accused of lying about whether borrowers could pay. The fact they couldn’t pay doesn’t prove that. The fact that the banks ignored warning signs doesn’t prove that. The fact they knew about underwriting failures doesn’t prove that. Not beyond a reasonable doubt.
Super_Jambo 9y ago
Madoff went to prison, but then he foolishly made rich people the victims of his ponzi not the economy at large.

Nowhere in that article does it describe an actual crime that went unprosecuted. Shkreli broke the law. The financiers causing the financial collapse did not. Perhaps the laws should be changed.

throwaway613834 9y ago

I like how absolutely critical little 'details' like this get missed on HN so easily, by people speaking with extreme confidence. Thanks for the reality check!

theo775 9y ago

"The financiers causing the financial collapse did not." They weren't prosecuted. That doesn't mean they didn't break the law.

rayiner 9y ago
Likewise, just because they caused the financial collapse doesn't mean they broke the law.
- toomuchtodo 9y ago
  CDO (Collateralized Debt Obligation) origination fraud is a crime. The GFC was not caused by law abiding activities. It was fraud, plain and simple. https://www.justice.gov/opa/pr/bank-america-pay-1665-billion-historic-justice-department-settlement-financial-fraud-leading https://www.justice.gov/opa/pr/bank-america-pay-1665-billion... As part of the RMBS Working Group, the U.S. Attorney’s Office for the District of New Jersey conducted a FIRREA investigation into misrepresentations made by Merrill Lynch to investors in 72 RMBS throughout 2006 and 2007. As the statement of facts describes, Merrill Lynch regularly told investors the loans it was securitizing were made to borrowers who were likely and able to repay their debts. Merrill Lynch made these representations even though it knew, based on the due diligence it had performed on samples of the loans, that a significant number of those loans had material underwriting and compliance defects - including as many as 55 percent in a single pool. In addition, Merrill Lynch rarely reviewed the unsampled loans to ensure that the defects observed in the samples were not present throughout the remainder of the pools. Merrill Lynch also disregarded its own due diligence and securitized loans that the due diligence vendors had identified as defective. This practice led one Merrill Lynch consultant to “wonder why we have due diligence performed” if Merrill Lynch was going to securitize the loans “regardless of issues.” Disclaimer: I was privy to this having known several mortgage underwriters who identified this fraud, and despite reporting it with extensive documentation (which I personally collated and delivered via FedEx) to the SEC, DOJ, and OCC, were ignored.
  - ansible 9y ago
    Indeed. There was fraud committed at all levels which lead up to the crash.
  - rayiner 9y ago
    "Fraud" can be civil fraud, or criminal fraud. Criminal fraud is something like "they said they were going to sell me something, but just took my money instead." Civil fraud might be something like "they sold me 10-inch sandwiches as 12-inch sandwiches." What you're describing in the paragraph above is even one step removed from the sandwiches. Knowing that "loans had material underwriting and compliance defects" doesn't prove that Merrill Lynch lied when it said "the borrowers ... were likely and able to repay their debts." It might lead to an inference to that effect, but it's not indisputable proof. Likewise, the fact that it "rarely reviewed the unsampled loans to ensure that the defects observed in the samples were not present throughout the remainder of the pools" might lead to an inference of negligence, but is not indisputable proof of fraud. Everything described in that paragraph is classic civil fraud and negligence, not criminal fraud.
    - kbenson 9y ago
      > Criminal fraud is something like "they said they were going to sell me something, but just took my money instead." Civil fraud might be something like "they sold me 10-inch sandwiches as 12-inch sandwiches." Is it purely a matter of partial delivery, or does magnitude matter? What if it's "they sold me 10 tons of gold as 12 tons of gold?" Because that's a big difference. Then again, 10 inch sandwhiches sold as 12 inch sandwhiches allows you to save over 15% of materials, which if you're a nationwide chain could be quite a lot of money as well.
      - rayiner 9y ago
        Civil fraud versus criminal fraud is very fuzzy. it often comes down to what you think you can prove about fraudulent intent. I gave the sandwich example because you can create “reasonable doubt” by saying the mistake was due to bad QA, rather than fraudulent intent. The fact that the sandwiches are shorter, by itself, does not prove fraudulent intent. The mortgages are even harder. The banks are accused of lying about whether borrowers could pay. The fact they couldn’t pay doesn’t prove that. The fact that the banks ignored warning signs doesn’t prove that. The fact they knew about underwriting failures doesn’t prove that. Not beyond a reasonable doubt.

Super_Jambo 9y ago

Madoff went to prison, but then he foolishly made rich people the victims of his ponzi not the economy at large.