5 ms·

Thinking about this reminded me of the line from the movie "The Big Short" where Michael Burry says one of the indicators of the coming crisis was an increase i

Thinking about this reminded me of the line from the movie "The Big Short" where Michael Burry says one of the indicators of the coming crisis was an increase in the rate of fraud. Juxtapose that with what feels like an uptick in white collar fraud these past couple years. ie: Theranos, Fyre, 1MDB, numerous crypto token related scams.

darawk 8y ago
That's interesting though i'm not sure that's the right kind of fraud. The fraud Bury was referring to was related to mortgage lending, both on the part of the borrowers (fraudulent documents supporting income, etc.) and on the part of the immediate lenders (the banks / lead generators for mortgages). The comparable type of fraud here would be businesses inflating their assets or income streams to acquire bank loans that they couldn't otherwise qualify for. It may be that that kind of fraud is on the rise, but I don't think the examples you cited (with the notable exception of 1MDB) are instances of it.
- zippy5 8y ago
  It's not causal, it's symptomatic. People tend take bigger risks, even criminal ones, when they have less to lose or less to gain. It's an interesting proxy for economic desperation.
  - darawk 8y ago
    That's an interesting perspective that I hadn't considered. I'm not sure if it's right though. You think it's symptomatic of desperation? I don't think of the lead-up to the 2007 financial crisis as a particularly desperate time for most people.
    - danans 8y ago
      One interpretation is that for many who took on debt they couldn't support, it was a desperate attempt to continue a lifestyle that wasn't possible for them any more due to changes in both the global and local economies, aided by technology, which resulted in the reduced value of their labor.
  - nopassrecover 8y ago
    Is it possible there is greater scrutiny during times of economic downturn leading to greatest discovery of fraud?
- kamaal 8y ago
  >>The fraud Bury was referring to was related to mortgage lending To be frank, I guess the parent was talking about general fraud trends. It will be a little disingenuous to suggest the same set of events have to repeat for it be classified as fraud. For eg, these days start ups with no way of turning in profits, but raising billions in debt could be suggested as a fraud eventually.
the_watcher 8y ago
Burry refers to hard numbers - the rate of fraud was increasing. "What feels like an uptick" does not mean the rate has actually increased (I don't know if it has or not, but an uptick on reporting about fraud is not an actual uptick).
your-nanny 8y ago
wasn't theranos fraud committed for much longer than a couple years?
rco8786 8y ago
You lost me at “feels”. Need more than 4-5 anecdotes to determine if fraud is really upticking.
pembrook 8y ago
Fraud and scams are the second oldest profession. Nothing about theranos or fyre or crypto is unique to this time other than the social media-as-fuel component. If you’re trying to say that corporate bonds are going to tank the economy, you’d need to find an increase in fraudulent issues. This is not the case—-the corporate bond market is highly regulated.
- nipponese 8y ago
  That is, if you trust the ratings agencies.
  - pembrook 8y ago
    You don't have to trust the ratings agencies. You can look at the corporate balance sheets yourself. Find me a recent issue that isn't properly priced considering the riskiness of the firm.
nipponese 8y ago
Accredited investors getting burned is not same as a national policy of grey zero loan restrictions, and the crypto was mostly retail investors using their Vegas money. You have to remember that it wasn't loan fraud that broke Wall Street's back in 2008, it was the the unregulated derivatives market of uncalculated risk... and that risk still exists today. https://www.investopedia.com/ask/answers/052715/how-big-derivatives-market.asp https://www.investopedia.com/ask/answers/052715/how-big-deri...
sn41 8y ago
Theranos, from reading Bad Blood, seems to be fraudulent science with financial fraud as an inevitable effect. Also, it seems to be drawn out from 2011.

darawk 8y ago

That's interesting though i'm not sure that's the right kind of fraud. The fraud Bury was referring to was related to mortgage lending, both on the part of the borrowers (fraudulent documents supporting income, etc.) and on the part of the immediate lenders (the banks / lead generators for mortgages). The comparable type of fraud here would be businesses inflating their assets or income streams to acquire bank loans that they couldn't otherwise qualify for. It may be that that kind of fraud is on the rise, but I don't think the examples you cited (with the notable exception of 1MDB) are instances of it.

zippy5 8y ago
It's not causal, it's symptomatic. People tend take bigger risks, even criminal ones, when they have less to lose or less to gain. It's an interesting proxy for economic desperation.
- darawk 8y ago
  That's an interesting perspective that I hadn't considered. I'm not sure if it's right though. You think it's symptomatic of desperation? I don't think of the lead-up to the 2007 financial crisis as a particularly desperate time for most people.
  - danans 8y ago
    One interpretation is that for many who took on debt they couldn't support, it was a desperate attempt to continue a lifestyle that wasn't possible for them any more due to changes in both the global and local economies, aided by technology, which resulted in the reduced value of their labor.
- nopassrecover 8y ago
  Is it possible there is greater scrutiny during times of economic downturn leading to greatest discovery of fraud?
kamaal 8y ago
>>The fraud Bury was referring to was related to mortgage lending To be frank, I guess the parent was talking about general fraud trends. It will be a little disingenuous to suggest the same set of events have to repeat for it be classified as fraud. For eg, these days start ups with no way of turning in profits, but raising billions in debt could be suggested as a fraud eventually.

the_watcher 8y ago

Burry refers to hard numbers - the rate of fraud was increasing. "What feels like an uptick" does not mean the rate has actually increased (I don't know if it has or not, but an uptick on reporting about fraud is not an actual uptick).

your-nanny 8y ago

wasn't theranos fraud committed for much longer than a couple years?

rco8786 8y ago

You lost me at “feels”. Need more than 4-5 anecdotes to determine if fraud is really upticking.

pembrook 8y ago

Fraud and scams are the second oldest profession. Nothing about theranos or fyre or crypto is unique to this time other than the social media-as-fuel component. If you’re trying to say that corporate bonds are going to tank the economy, you’d need to find an increase in fraudulent issues. This is not the case—-the corporate bond market is highly regulated.

nipponese 8y ago
That is, if you trust the ratings agencies.
- pembrook 8y ago
  You don't have to trust the ratings agencies. You can look at the corporate balance sheets yourself. Find me a recent issue that isn't properly priced considering the riskiness of the firm.

nipponese 8y ago

Accredited investors getting burned is not same as a national policy of grey zero loan restrictions, and the crypto was mostly retail investors using their Vegas money. You have to remember that it wasn't loan fraud that broke Wall Street's back in 2008, it was the the unregulated derivatives market of uncalculated risk... and that risk still exists today. https://www.investopedia.com/ask/answers/052715/how-big-derivatives-market.asp https://www.investopedia.com/ask/answers/052715/how-big-deri...

sn41 8y ago

Theranos, from reading Bad Blood, seems to be fraudulent science with financial fraud as an inevitable effect. Also, it seems to be drawn out from 2011.