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How about we start with massive amounts of loan fraud? https://themreport.com/daily-dose/12-08-2020/the-role-of-lending-fraud-in-a-financial-crisis https://the

How about we start with massive amounts of loan fraud? https://themreport.com/daily-dose/12-08-2020/the-role-of-lending-fraud-in-a-financial-crisis https://themreport.com/daily-dose/12-08-2020/the-role-of-len...

kasey_junk 5y ago
Worth noting that if you were going to go after loan fraud you likely would be charging low level folks in the mortgage pipeline (appraisers, mortgage brokers, etc) or even the borrowers, not Wall Street CEOs.
- actually_a_dog 5y ago
  Not at the scale noted in the article I linked: > Mortgage originators that emphasized profit-fueled quantity over loan quality, which resulted in the misreporting of key financial information in 48% of loans securitized by nongovernment agencies; If 48% of your company's financial transactions were fraudulent, would you expect the CEO to bear responsibility for that? At that point, I'd expect to see a RICO case, or something come out of it.
  - rkk3 5y ago
    The corruption may be rampant but those aren't "Wall Street" jobs. Countrywide was based out of Calabasas, California.
    - actually_a_dog 5y ago
      There's no way half the loans in a portfolio are fraudulent, and that doesn't get noticed. That includes by the Wall Street firms that are repackaging and securitizing them as CDOs and CDSs. At some point, in a functioning system, that does attract the attention of the CEO.
  - kasey_junk 5y ago
    I probably would but proving that they acted _criminally_ would be hard. You can’t just wave your hands and make up a law they broke. Meanwhile, that number likely means that the borrowers lied on those same applications. That’s where the fraud actually occurred. And would be easy to prove.
    - actually_a_dog 5y ago
      I told you the law: RICO. > The Racketeer Influenced and Corrupt Organizations (RICO) Act is a United States federal law that provides for extended criminal penalties and a civil cause of action for acts performed as part of an ongoing criminal organization. The RICO Act focuses specifically on racketeering and allows the leaders of a syndicate to be tried for the crimes they ordered others to do or assisted them in doing, closing a perceived loophole. For example, before RICO, a person who instructed someone else to murder could be exempt from prosecution because they did not personally commit the crime.[1] https://en.wikipedia.org/wiki/Racketeer_Influenced_and_Corrupt_Organizations_Act https://en.wikipedia.org/wiki/Racketeer_Influenced_and_Corru...
      - kasey_junk 5y ago
        You’d need to prove that a “Wall Street CEO” told someone to commit mortgage fraud. That almost certainly didn’t happen. Quite the opposite you’ll find all manner of examples of the CEO’s enabling things like anti-fraud and risk management teams. The issue was the implicit organizational pressures between those parts of the companies and the lending/revenue arms. Making a new class of law that makes those implicit conflicts a criminal responsibility of company CEOs seems extremely fraught, but more importantly those laws didn’t exist at the time.
        jcranmer 5y ago
        > You’d need to prove that a “Wall Street CEO” told someone to commit mortgage fraud. For it to be RICO, no you do not need to prove that. You need to prove more. You'd need to prove that the "Wall Street CEO" told someone to commit mortgage fraud, and then used the proceeds of that mortgage fraud to take control of an enterprise (which would presumably have to exclude the company of which he is CEO). (https://www.law.cornell.edu/uscode/text/18/1962 https://www.law.cornell.edu/uscode/text/18/1962, for reference)
- taway2021s 5y ago
  You dont necessarily need to charge the Wall Street CEOs. You can charge the Senior Managing Director of Structured Products. Or MD of Structured Products banking/trading/risk/whatever. There were plenty of individuals who set policy to enable this. No need for a scarecrow argument about CEO or bust. I could literally look thru Linked In or a Bloomberg Terminal and figure out who the responsible parties are. Too bad they all go to the same country clubs as the folks at the SEC and NY Times At the same time, convicting a low level work in his 20s as the ring leader (https://www.theguardian.com/business/2013/aug/01/fabulous-fab-tourre-guilty-fraud https://www.theguardian.com/business/2013/aug/01/fabulous-fa...) is disingenuous.
  - NovemberWhiskey 5y ago
    >You can charge the Senior Managing Director of Structured Products ... like Kareem Serageldin. Who went to prison.
    - taway2021s 5y ago
      https://en.wikipedia.org/wiki/Kareem_Serageldin https://en.wikipedia.org/wiki/Kareem_Serageldin He was literally the ONLY single person who did.
  - rkk3 5y ago
    What do you charge them with? They were effectively lied to about the underlying assets that went into the securities.
  - mojomark 5y ago
    > You dont necessarily need to charge the Wall Street CEOs. You can charge the Senior Managing Director of Structured Products. You can delegate authority, not responsibility. This fundamental rule of hierarchical organizations is why CEO's need to be held accountable. CEO's are responsible for creating the environment, culture and rules that allow such activities to take place. Failure within an organization on a CEO's watch is that CEO's fault. That's why CEO's deserve high compensation - because the difficulty and risk are so high. If there's no CEO penalty for failing (or worse, breaking the law), than all companies in society suffer.
- oefrha 5y ago
  This reminds me of the documentary film Abacus: Small Enough to Jail about how a tiny community bank became the only financial institution criminally charged in relation to the subprime mortgage crisis. https://en.wikipedia.org/wiki/Abacus:_Small_Enough_to_Jail https://en.wikipedia.org/wiki/Abacus:_Small_Enough_to_Jail
- onlyrealcuzzo 5y ago
  This sounds very Mafia-esque. We created RICO to convict the Mafia. Not sure why we can't create a new type of crime to hold financial companies responsible for massive fraud. I mean - we already have Securities Fraud - for which bank CEOs should be held accountable. I'm not sure how they escaped from that.

kasey_junk 5y ago

Worth noting that if you were going to go after loan fraud you likely would be charging low level folks in the mortgage pipeline (appraisers, mortgage brokers, etc) or even the borrowers, not Wall Street CEOs.

actually_a_dog 5y ago
Not at the scale noted in the article I linked: > Mortgage originators that emphasized profit-fueled quantity over loan quality, which resulted in the misreporting of key financial information in 48% of loans securitized by nongovernment agencies; If 48% of your company's financial transactions were fraudulent, would you expect the CEO to bear responsibility for that? At that point, I'd expect to see a RICO case, or something come out of it.
- rkk3 5y ago
  The corruption may be rampant but those aren't "Wall Street" jobs. Countrywide was based out of Calabasas, California.
  - actually_a_dog 5y ago
    There's no way half the loans in a portfolio are fraudulent, and that doesn't get noticed. That includes by the Wall Street firms that are repackaging and securitizing them as CDOs and CDSs. At some point, in a functioning system, that does attract the attention of the CEO.
- kasey_junk 5y ago
  I probably would but proving that they acted _criminally_ would be hard. You can’t just wave your hands and make up a law they broke. Meanwhile, that number likely means that the borrowers lied on those same applications. That’s where the fraud actually occurred. And would be easy to prove.
  - actually_a_dog 5y ago
    I told you the law: RICO. > The Racketeer Influenced and Corrupt Organizations (RICO) Act is a United States federal law that provides for extended criminal penalties and a civil cause of action for acts performed as part of an ongoing criminal organization. The RICO Act focuses specifically on racketeering and allows the leaders of a syndicate to be tried for the crimes they ordered others to do or assisted them in doing, closing a perceived loophole. For example, before RICO, a person who instructed someone else to murder could be exempt from prosecution because they did not personally commit the crime.[1] https://en.wikipedia.org/wiki/Racketeer_Influenced_and_Corrupt_Organizations_Act https://en.wikipedia.org/wiki/Racketeer_Influenced_and_Corru...
    - kasey_junk 5y ago
      You’d need to prove that a “Wall Street CEO” told someone to commit mortgage fraud. That almost certainly didn’t happen. Quite the opposite you’ll find all manner of examples of the CEO’s enabling things like anti-fraud and risk management teams. The issue was the implicit organizational pressures between those parts of the companies and the lending/revenue arms. Making a new class of law that makes those implicit conflicts a criminal responsibility of company CEOs seems extremely fraught, but more importantly those laws didn’t exist at the time.
      - jcranmer 5y ago
        > You’d need to prove that a “Wall Street CEO” told someone to commit mortgage fraud. For it to be RICO, no you do not need to prove that. You need to prove more. You'd need to prove that the "Wall Street CEO" told someone to commit mortgage fraud, and then used the proceeds of that mortgage fraud to take control of an enterprise (which would presumably have to exclude the company of which he is CEO). (https://www.law.cornell.edu/uscode/text/18/1962 https://www.law.cornell.edu/uscode/text/18/1962, for reference)
taway2021s 5y ago
You dont necessarily need to charge the Wall Street CEOs. You can charge the Senior Managing Director of Structured Products. Or MD of Structured Products banking/trading/risk/whatever. There were plenty of individuals who set policy to enable this. No need for a scarecrow argument about CEO or bust. I could literally look thru Linked In or a Bloomberg Terminal and figure out who the responsible parties are. Too bad they all go to the same country clubs as the folks at the SEC and NY Times At the same time, convicting a low level work in his 20s as the ring leader (https://www.theguardian.com/business/2013/aug/01/fabulous-fab-tourre-guilty-fraud https://www.theguardian.com/business/2013/aug/01/fabulous-fa...) is disingenuous.
- NovemberWhiskey 5y ago
  >You can charge the Senior Managing Director of Structured Products ... like Kareem Serageldin. Who went to prison.
  - taway2021s 5y ago
    https://en.wikipedia.org/wiki/Kareem_Serageldin https://en.wikipedia.org/wiki/Kareem_Serageldin He was literally the ONLY single person who did.
- rkk3 5y ago
  What do you charge them with? They were effectively lied to about the underlying assets that went into the securities.
- mojomark 5y ago
  > You dont necessarily need to charge the Wall Street CEOs. You can charge the Senior Managing Director of Structured Products. You can delegate authority, not responsibility. This fundamental rule of hierarchical organizations is why CEO's need to be held accountable. CEO's are responsible for creating the environment, culture and rules that allow such activities to take place. Failure within an organization on a CEO's watch is that CEO's fault. That's why CEO's deserve high compensation - because the difficulty and risk are so high. If there's no CEO penalty for failing (or worse, breaking the law), than all companies in society suffer.
oefrha 5y ago
This reminds me of the documentary film Abacus: Small Enough to Jail about how a tiny community bank became the only financial institution criminally charged in relation to the subprime mortgage crisis. https://en.wikipedia.org/wiki/Abacus:_Small_Enough_to_Jail https://en.wikipedia.org/wiki/Abacus:_Small_Enough_to_Jail
onlyrealcuzzo 5y ago
This sounds very Mafia-esque. We created RICO to convict the Mafia. Not sure why we can't create a new type of crime to hold financial companies responsible for massive fraud. I mean - we already have Securities Fraud - for which bank CEOs should be held accountable. I'm not sure how they escaped from that.