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> The problem with this view is that the financial crisis was not the result of individual actions on an individual level. Come on. Is the 2008-09 time period

by r0h1n 13y ago

> The problem with this view is that the financial crisis was not the result of individual actions on an individual level. Come on. Is the 2008-09 time period already so distant that we've forgotten that, yes, firms & their CEOs did individually misrepresent/lie/fudge their investments and operations. Sure there was a "structural" issue like you say, but it was fanned by an orgy of company-specific actions. Some of them, to jog our collective memory: - The use of 'Repo 105' transactions to conceal $50 billion in loans on Lehman's balance sheet [Source: http://www.accountancyage.com/aa/news/1934026/-sued-lehmans-audit http://www.accountancyage.com/aa/news/1934026/-sued-lehmans-...] - A series of obsfuscations to hide the true value of stock options awarded to executives. In one instance Fuld claimed he earned $146 million via stock grants when he actually earned $409.5 million. Also, Fuld made $469 million from stock sales between 2000 and 2008, compared to his claims to have hardly made any money that way. [Source: http://www.businessweek.com/magazine/content/10_19/b4177056214833.htm http://www.businessweek.com/magazine/content/10_19/b41770562...] - Bank of America hiding $5.8 billion in bonuses it authorized for Merrill Lynch executives before taking over the firm [Source: http://abcnews.go.com/Business/story?id=8240633&page=1 http://abcnews.go.com/Business/story?id=8240633&page=1] - Citigroup understating its subprime exposure by $40 billion [Source: http://blogs.wsj.com/deals/2010/07/29/the-secs-citi-complaint-when-13-billion-should-have-been-50-billion/ http://blogs.wsj.com/deals/2010/07/29/the-secs-citi-complain...] I could go on. I'm not arguing for jail time for each of the CEOs of these companies. But in most cases these companies and their executives have gotten off through settlements and fines, paid for by their shareholders. Which brings me to your strong conclusion: > You will never see these people prosecuted because by our standards of justice there is nothing to prosecute I beg to differ. There is TONS of stuff to prosecute. But perhaps, there is no desire or will. Cue, the SEC's Revolving Door: http://www.bloomberg.com/news/2013-08-04/sec-door-spinning-mightily-smacks-investors-william-d-cohan.html http://www.bloomberg.com/news/2013-08-04/sec-door-spinning-m...

lotsofcows 13y ago
It's fortunate that no private individuals did similar things - specifically misreporting their capability for taking on debt, particularly mortgages... It was global crisis brought on by global creed. And when I say global, I mean capitalist 1st world. Stop scapegoating.
rayiner 13y ago
So let's break these down here. As a background principle, remember that every company takes measures to make its books look good. Accounting isn't a simple mechanical process, and there is quite a bit of leeway in how to classify various things and treat various assets. Re: Repo 105 transactions. From Cuomo's lawsuit against E&Y: "E&Y not only approved but consistently supported Lehman's Repo 105 policy, and advised Lehman that it could take advantage of a technical accounting rule, known as FAS 140, to treat these Repo 105 transactions, which in reality were short-term financings, as 'sales,' enabling Lehman to remove the securities from inventory on its financial statements until they were repurchased." Here's a description of the Repo 105 transaction: http://www.npr.org/blogs/money/2010/03/repo_105_lehmans_accounting_gi.html http://www.npr.org/blogs/money/2010/03/repo_105_lehmans_acco.... Essentially, a bond is sold for cash with a short-term agreement to repurchase it. Lehman's accountant signed off on its treating these transactions as sales instead of loans, pursuant to FAS 140 (an accounting standard). This is criminally fraudulent activity? Re: obfuscations to hide value of stock options. How is this fraudulent? Fraud doesn't just mean lying or misleading. It means basing a transaction on a lie or a misstatement. Re: hiding bonuses. Again, how is this fraudulent? Re: the revolving door article, see: http://www.slate.com/blogs/moneybox/2013/07/23/robert_khuzami_sec_revolving_door_research_says_it_s_fine.html http://www.slate.com/blogs/moneybox/2013/07/23/robert_khuzam... ("If you manage to unplug from the revolving door narrative for a second, you can see why this makes sense—if you spend your time as a government lawyer being extremely lackadaisical in your prosecutorial efforts that's going to make you look like a bad lawyer who people don't want to hire. If you want to cash in some day, you want to have the reputation of being someone who's really smart and tough and effective and who understands how to make cases.") Note that article is by Matthew Yglesias, who is hardly some industry shill.
- r0h1n 13y ago
  # On Repo 105: Lehman's accountant - EY - signing off does not imply anything was kosher. Accounting firms rarely ever blow the whistle against their large clients, especially one that earned it $150 million in fees between 2001 and 2008.AFAIK, the case against EY for fraud still isn't dead. [Source: http://www.forbes.com/sites/francinemckenna/2012/12/13/lehman-troubles-not-over-for-ernst-young/ http://www.forbes.com/sites/francinemckenna/2012/12/13/lehma...] And btw, Dick Fuld denied having any knowledge of Repo 105 transactions at Lehman, a tool that was used to hide nearly $50 billion on its books. [Source: http://www.zerohedge.com/article/repo-105-scam-how-lehman-fooled-everyone-including-allegedly-dick-fuld-and-how-other-banks-a http://www.zerohedge.com/article/repo-105-scam-how-lehman-fo...] # And while you are correct that wilfully understating the value of executive stock options by $250 million may not be fraud, it is a lie told to shareholders and regulators. And we can't blame it on "global" or "structural" issues. # Hiding bonuses is fraudulent when it is done in the context of an acquisition (Bank of America authorized those bonuses to be paid to Merrill Lynch execs, when the financial world was collapsing all around). # Khuzami wasn't the first or only person who walked through SEC's revolving door, nor will he be the last. Here's a great, comprehensive and data-driven analysis of SEC's Revolving Door by the Project on Government Oversight: http://www.pogo.org/our-work/reports/sec-revolving-door.html http://www.pogo.org/our-work/reports/sec-revolving-door.html Again, I'm not alleging each of these (or the numerous others just a simple web search will throw up) is fraud, but refuting the parent's suggestion that the financial crisis was "a consequence of the structure of a system"; that there was no individual culpability/actions; and that "by our standards of justice there is nothing to prosecute".

by r0h1n 13y ago

lotsofcows 13y ago

It's fortunate that no private individuals did similar things - specifically misreporting their capability for taking on debt, particularly mortgages... It was global crisis brought on by global creed. And when I say global, I mean capitalist 1st world. Stop scapegoating.

rayiner 13y ago

So let's break these down here. As a background principle, remember that every company takes measures to make its books look good. Accounting isn't a simple mechanical process, and there is quite a bit of leeway in how to classify various things and treat various assets. Re: Repo 105 transactions. From Cuomo's lawsuit against E&Y: "E&Y not only approved but consistently supported Lehman's Repo 105 policy, and advised Lehman that it could take advantage of a technical accounting rule, known as FAS 140, to treat these Repo 105 transactions, which in reality were short-term financings, as 'sales,' enabling Lehman to remove the securities from inventory on its financial statements until they were repurchased." Here's a description of the Repo 105 transaction: http://www.npr.org/blogs/money/2010/03/repo_105_lehmans_accounting_gi.html http://www.npr.org/blogs/money/2010/03/repo_105_lehmans_acco.... Essentially, a bond is sold for cash with a short-term agreement to repurchase it. Lehman's accountant signed off on its treating these transactions as sales instead of loans, pursuant to FAS 140 (an accounting standard). This is criminally fraudulent activity? Re: obfuscations to hide value of stock options. How is this fraudulent? Fraud doesn't just mean lying or misleading. It means basing a transaction on a lie or a misstatement. Re: hiding bonuses. Again, how is this fraudulent? Re: the revolving door article, see: http://www.slate.com/blogs/moneybox/2013/07/23/robert_khuzami_sec_revolving_door_research_says_it_s_fine.html http://www.slate.com/blogs/moneybox/2013/07/23/robert_khuzam... ("If you manage to unplug from the revolving door narrative for a second, you can see why this makes sense—if you spend your time as a government lawyer being extremely lackadaisical in your prosecutorial efforts that's going to make you look like a bad lawyer who people don't want to hire. If you want to cash in some day, you want to have the reputation of being someone who's really smart and tough and effective and who understands how to make cases.") Note that article is by Matthew Yglesias, who is hardly some industry shill.

r0h1n 13y ago
# On Repo 105: Lehman's accountant - EY - signing off does not imply anything was kosher. Accounting firms rarely ever blow the whistle against their large clients, especially one that earned it $150 million in fees between 2001 and 2008.AFAIK, the case against EY for fraud still isn't dead. [Source: http://www.forbes.com/sites/francinemckenna/2012/12/13/lehman-troubles-not-over-for-ernst-young/ http://www.forbes.com/sites/francinemckenna/2012/12/13/lehma...] And btw, Dick Fuld denied having any knowledge of Repo 105 transactions at Lehman, a tool that was used to hide nearly $50 billion on its books. [Source: http://www.zerohedge.com/article/repo-105-scam-how-lehman-fooled-everyone-including-allegedly-dick-fuld-and-how-other-banks-a http://www.zerohedge.com/article/repo-105-scam-how-lehman-fo...] # And while you are correct that wilfully understating the value of executive stock options by $250 million may not be fraud, it is a lie told to shareholders and regulators. And we can't blame it on "global" or "structural" issues. # Hiding bonuses is fraudulent when it is done in the context of an acquisition (Bank of America authorized those bonuses to be paid to Merrill Lynch execs, when the financial world was collapsing all around). # Khuzami wasn't the first or only person who walked through SEC's revolving door, nor will he be the last. Here's a great, comprehensive and data-driven analysis of SEC's Revolving Door by the Project on Government Oversight: http://www.pogo.org/our-work/reports/sec-revolving-door.html http://www.pogo.org/our-work/reports/sec-revolving-door.html Again, I'm not alleging each of these (or the numerous others just a simple web search will throw up) is fraud, but refuting the parent's suggestion that the financial crisis was "a consequence of the structure of a system"; that there was no individual culpability/actions; and that "by our standards of justice there is nothing to prosecute".