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Imagine you have a house and you go to 5 different banks and take 5 different mortgages. One mortgage is safe for the banks because they can take back the hous
by kjksf 2y ago
Imagine you have a house and you go to 5 different banks and take 5 different mortgages.
One mortgage is safe for the banks because they can take back the house. Low risk means low rates.
If you could take 5 mortgages, that would be very risky for the banks so they wouldn't give you a loan or charge much higher interest.
Hence you can't take more than one mortgage.
But what if you lie to the bank when you apply for mortgage?
Well, to prevent that we made lying to the banks about such things a crime.
Hwang is accused of a variation of that: he got loans from multiple banks without telling them about other loans i.e. lying to banks.
He made leveraged investments into lousy stocks and when he got called on those loans, he couldn't repay them and banks that gave him loans lost billions.
- notfromhere 2y agoThere is this notion that white collar crime is complicated but it’s really just lying, stealing, or cheating
- bobthepanda 2y agothe complicated thing to prove is usually intent, and the paper trail. it turns out there are very complicated ways to lie, steal and cheat.
- hackernewds 2y agoThanks for this helpful explanation
- waltbosz 2y agoAren't there mechanisms in place to verify Hwang's financial claims? When I get a mortgage I have to provide proof of income and assets with bank statements. Did he forge documents, or did the banks just take his word for it ?
- lotsofpulp 2y agoThere is no credit reporting bureau for business debts, so it’s not as simple as looking up a social security number.
- pavlov 2y agoThis is also effectively the same crime that got Donald Trump a $450 million penalty in the recent New York civil fraud case. To get those five mortgages, maybe you could just exaggerate the value of the property by 5x? Lenders would think there’s ample collateral, but in fact the property is over-leveraged. Unlike Hwang, Trump’s scheme didn’t blow up and result in massive losses for the banks. But the underlying fraud was the same.