4 ms·

FDIC insured accounts were protected, as for letting banks fail and wiping out shareholders... did you hold any bearstearns stock? Also, Bernie Madoff went to

by fleitz 13y ago

FDIC insured accounts were protected, as for letting banks fail and wiping out shareholders... did you hold any bearstearns stock? Also, Bernie Madoff went to jail...

grey-area 13y ago
Bernie Madoff was not a bank exec and was not involved in or the cause of the financial crisis, he was just exposed by it as the tide went out. All the devils are here has a nice history of this financial crisis, I thought, and no-one who was involved in the fraud which caused the collapse of AIG, for example, was convicted, though there have been some investigations, AFAIK. Also Iceland defaulted on its external debt and only protected national interests - the UK and US didn't really do anything similar, they have chosen to inflate their way out of debt instead.
- arethuza 13y ago
  I don't think it was fraud that caused AIG problems, it was making really bad business decisions. Meanwhile, Joseph Cassano the guy at AIG FP London responsible for a lot of the problems walked away with at least $280 million http://www.telegraph.co.uk/finance/financialcrisis/3225213/AIG-trail-leads-to-London-casino.html http://www.telegraph.co.uk/finance/financialcrisis/3225213/A...
  - grey-area 13y ago
    Well, GS knowingly sold AIG junk CDOs days before the collapse, while shorting those same CDOs to make money on them. I'd call that fraud. I think they were fined less than they made on the deal, and no-one was punished. Of course AIG deserves blame, but so do those who tricked them into buying junk. http://online.wsj.com/news/articles/SB10001424052748704201404574590453176996032 http://online.wsj.com/news/articles/SB1000142405274870420140...
    - arethuza 13y ago
      In Liar's Poker Michael Lewis describes his time as a bond salesman for Salomon Brothers and the realization that everything he was selling was junk, after all, it the bonds that he was selling were a good investment why would Salomon Brothers be selling them? [Edit: He also describes the right of passage for new bond salesmen - when you bankrupt your first client....]
    - rayiner 13y ago
      > Well, GS knowingly sold AIG junk CDOs days before the collapse, while shorting those same CDOs to make money on them. I'd call that fraud. That's not fraud. It's probably unethical, but businesses selling customers products they know are shit is more or less legal, or at most the subject of a civil action by the purchaser. I mean, look at the software industry. How many software companies sell products that are buggy crap, that they know are buggy crap? And when it comes to investments, that basic dynamic is at the heart of a lot of sales. If I think this investment is a great deal that's going to just go up and up, why would I sell it to you? I'm willing to entertain the idea that what GS did crossed the line in terms of the standard of ethics people expect of investment professionals, which maybe should be higher than for businesses generally. Maybe we should put such standards in place and make them enforceable,[1] but it wouldn't be fair to throw people in jail for what they did before those standards were in place. [1] For example, it would be punishable ethical breach for a lawyer to represent a client then take a financial position adverse to the client's interests.
      - tptacek 13y ago
        It's dancing right on the line of fraud, isn't it? The elements of a fraud case are (paraphrasing model jury instructions) (a) a false statement, (b) intentionally made, of (c) a material fact that (d) someone reasonably relied on and (e) was injured (usually, financially) by. The only thing missing from a fraud case in the "selling shit products" story is "knowingly making false statements", right?
        minimax 13y ago
        grey-area's summary of the WSJ article isn't accurate. GS knowingly sold AIG junk CDOs days before the collapse GS didn't sell CDOs to AIG. GS didn't actually sell anything to AIG. GS bought insurance (in the form of credit default swaps) on the CDOs from AIG and apparently sold at least some of those swaps on to other banks for a profit. If Goldman had done something to accelerate the deterioration of the value of the CDOs (something like insuring a house and then burning it down), then you could probably claim GS was in the wrong. AIG would have known it was insuring subprime mortgage CDOs. There also isn't anything in the article asserting that GS misrepresented the quality of the loans or anything like that. It's hard to get from that WSJ article to fraud.

by fleitz 13y ago

FDIC insured accounts were protected, as for letting banks fail and wiping out shareholders... did you hold any bearstearns stock? Also, Bernie Madoff went to jail...

grey-area 13y ago

Bernie Madoff was not a bank exec and was not involved in or the cause of the financial crisis, he was just exposed by it as the tide went out. All the devils are here has a nice history of this financial crisis, I thought, and no-one who was involved in the fraud which caused the collapse of AIG, for example, was convicted, though there have been some investigations, AFAIK. Also Iceland defaulted on its external debt and only protected national interests - the UK and US didn't really do anything similar, they have chosen to inflate their way out of debt instead.

arethuza 13y ago
I don't think it was fraud that caused AIG problems, it was making really bad business decisions. Meanwhile, Joseph Cassano the guy at AIG FP London responsible for a lot of the problems walked away with at least $280 million http://www.telegraph.co.uk/finance/financialcrisis/3225213/AIG-trail-leads-to-London-casino.html http://www.telegraph.co.uk/finance/financialcrisis/3225213/A...
- grey-area 13y ago
  Well, GS knowingly sold AIG junk CDOs days before the collapse, while shorting those same CDOs to make money on them. I'd call that fraud. I think they were fined less than they made on the deal, and no-one was punished. Of course AIG deserves blame, but so do those who tricked them into buying junk. http://online.wsj.com/news/articles/SB10001424052748704201404574590453176996032 http://online.wsj.com/news/articles/SB1000142405274870420140...
  - arethuza 13y ago
    In Liar's Poker Michael Lewis describes his time as a bond salesman for Salomon Brothers and the realization that everything he was selling was junk, after all, it the bonds that he was selling were a good investment why would Salomon Brothers be selling them? [Edit: He also describes the right of passage for new bond salesmen - when you bankrupt your first client....]
  - rayiner 13y ago
    > Well, GS knowingly sold AIG junk CDOs days before the collapse, while shorting those same CDOs to make money on them. I'd call that fraud. That's not fraud. It's probably unethical, but businesses selling customers products they know are shit is more or less legal, or at most the subject of a civil action by the purchaser. I mean, look at the software industry. How many software companies sell products that are buggy crap, that they know are buggy crap? And when it comes to investments, that basic dynamic is at the heart of a lot of sales. If I think this investment is a great deal that's going to just go up and up, why would I sell it to you? I'm willing to entertain the idea that what GS did crossed the line in terms of the standard of ethics people expect of investment professionals, which maybe should be higher than for businesses generally. Maybe we should put such standards in place and make them enforceable,[1] but it wouldn't be fair to throw people in jail for what they did before those standards were in place. [1] For example, it would be punishable ethical breach for a lawyer to represent a client then take a financial position adverse to the client's interests.
    - tptacek 13y ago
      It's dancing right on the line of fraud, isn't it? The elements of a fraud case are (paraphrasing model jury instructions) (a) a false statement, (b) intentionally made, of (c) a material fact that (d) someone reasonably relied on and (e) was injured (usually, financially) by. The only thing missing from a fraud case in the "selling shit products" story is "knowingly making false statements", right?
      - minimax 13y ago
        grey-area's summary of the WSJ article isn't accurate. GS knowingly sold AIG junk CDOs days before the collapse GS didn't sell CDOs to AIG. GS didn't actually sell anything to AIG. GS bought insurance (in the form of credit default swaps) on the CDOs from AIG and apparently sold at least some of those swaps on to other banks for a profit. If Goldman had done something to accelerate the deterioration of the value of the CDOs (something like insuring a house and then burning it down), then you could probably claim GS was in the wrong. AIG would have known it was insuring subprime mortgage CDOs. There also isn't anything in the article asserting that GS misrepresented the quality of the loans or anything like that. It's hard to get from that WSJ article to fraud.