Posted on 01/09/2014 8:35:15 PM PST by Brad from Tennessee
Five years have passed since the onset of what is sometimes called the Great Recession. While the economy has slowly improved, there are still millions of Americans leading lives of quiet desperation: without jobs, without resources, without hope.
Who was to blame? Was it simply a result of negligence, of the kind of inordinate risk-taking commonly called a “bubble,” of an imprudent but innocent failure to maintain adequate reserves for a rainy day? Or was it the result, at least in part, of fraudulent practices, of dubious mortgages portrayed as sound risks and packaged into ever more esoteric financial instruments, the fundamental weaknesses of which were intentionally obscured?
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Without multiplying examples further, my point is that the Department of Justice has never taken the position that all the top executives involved in the events leading up to the financial crisis were innocent; rather it has offered one or another excuse for not criminally prosecuting them—excuses that, on inspection, appear unconvincing. So, you might ask, what’s really going on here? I don’t claim to have any inside information about the real reasons why no such prosecutions have been brought, but I take the liberty of offering some speculations.
(Excerpt) Read more at nybooks.com ...
No action on prosecution because this lead back to the Democrat party as did lots of money from the bad loans through donations.
Want to bet a huge chuck of the numerous stimulus packages also went in donations back to the Democrat party?
We live in strange times, for as Hillary Clinton would say, “SO WHAT”, and they get away with it.
Who is going to catch crime in a criminal organization that regulates itself and doesn’t want to be caught?
The financial crisis was caused by the US Government in an effort to buy votes and further the prospects of the the Democrat Party and Progressivism.
The financial services executives operated in the milieu created by government policies. They indeed greased the wheels and enabled the bubble to develop, but they were simply responding to artificial needs generated by government policy. It is true, their competence in so responding lined their pockets and allowed the bubble to grow really big before it finally burst. But the fact remains, it was the government's fault.
So, no, they shouldn't be prosecuted. And if the sheeple find that outrageous, they have only themselves to blame for voting wrong.
Bahney Fwank: “Dodd is my co-piwate”
I can name one Senator who never went to jail for his involvement....McCain.
The executives from Fannie Mae & Freddie Mac are the ones who should be prosecuted, along with Barney Frank & Christoper Dodd. I’m not holding my breath waiting for this to happen. Our Federal government is so corrupt! Send me a mail when the revolution is going to start.
BWAAHAHAhahahaha... You’re funny :-)
You seem to be forgetting all the repackaging of shit for resale in tranches, and the collusive rating of same by agencies to name one thing.
If “Wall Streeters” didn’t commit any crimes, why don’t folks like JPM tell the FEDS to pound sand instead of shelling out all the billions in “fines”?
Exactly.
In creating mortgage pools and determining risk, lenders depended on algorithms that had been accurate for 80 years:
(1) There had never been a prolonged or significant drop in national home prices since the Great Depression.
(2) Even during the worst recessions, the national mortgage default rate rarely exceeded 7%.
In 2006, the blind spot in those algorithms was that ALL the malfeasance and ALL the fraud was going on at the one-on-one level, between the individual home buyers and the mortgage brokers, so it was essentially impossible to measure the scale of this disaster before the Crash.
This created two critical problems:
(1) Prices for homes exploded upwards because millions of previously unqualified buyers were allowed to enter the market.
(2) Almost no one understood that millions of new buyers were moving into homes with no down payment, and with mortgage payments that were often equal to, or less than, the rent they had been paying. Thus, when they lost their jobs, or when the price of their new home dropped 25%, they just walked out the front door, rented a new apartment, and never looked back.
This is why home prices collapsed by 50%, and default rates reached 35%, in the worst hit areas.
It's also important to recall that the mortgage crisis was INTERNATIONAL, not just in America.
Spain, Ireland, and parts of eastern Europe had a housing collapse that was at least as bad as the USA.
When the AG tries to prosecute individuals, the cases have been falling apart. When they shake down and harass companies, the get “go away” settlements.
That said, there *may* have been as much as about $40 Billion in potential corporate wrongdoing, out of a multi-trillion dollar event - though much of that appears to be questionable too.
“Why? Because all the Wall Street executives bought off the politicians.”
Insider trading by members of Congress had to (has to?)
be the most obnoxious and unholy practice ever.
It has made a mockery of stocktrading and free enterprise
and allowed a bunch of elected officials to become rich at the expense of constituents as the process of government was (is) subverted.
They strut like peacocks and consider themselves to be brilliant, intellectual geniuses, governing the “morons” in flyover country, while doing that for which other people have spent time in jail.
(One of these days, it would be nice to see a list of people who have engaged in law-making and equities trading at the same time.)
IMHO
Because those who would prosecute belong to the same class.
You don’t eat your own.
There was one guy (Citibank?) who admitted to fraudulent activity in under oath before Congress.
In most jurisdictions, "fraud" is against the law.
In Jefferson County, AL, several county officials went to prison for accepting bribes in a grotesquely mismanaged construction project of a new sewage-treatment system. The project, as I recall, ultimately bankrupted the county.
Curiously, nobody who actually paid the bribes went to prison.
In most jurisdictions, bribery is against the law.
Ping.
No one has yet to name names of who among the financial execs actually committed fraud or bribery.
If the CRA was to be the cause of the housing crisis, how come neither Ronald Reagan, GHW Bush, nor GW Bush sought to eliminate the CRA?
The answer is that the CRA contributed very little to the housing crisis. The vast majority of bad loans were funded by investment banks and hedge funds, none of which were covered by the CRA.
Too many conservatives are eager to glom onto a politically convenient but factually deficient myth about the causes of the financial crisis.
The private financial sector spent most of Clinton’s years lobbying for repeal of the Glass Steagall Act and the exemption of derivatives from any sort of regulation. And they got it.
It is not a coincidence that less than 10 years after passage of the Gramm-Leach-Bliley Act and the The Commodity Futures Modernization Act of 2000 that the United States experienced another financial crisis of the sort that the Glass Steagall Act had headed off for nearly 70 years.
The financial industry lobbied and got laws that permitted them to do the things that they did during the bubble. They didn’t break any laws because they spent a lot of time and money getting the laws changed for their own benefit.
They got rid of the last vestiges of the Glass Steagall Act which had kept investment banks out of the retail lending field for 70 years. They got the CFMA2000 passed which exempted derivatives from being regulated or even reported. They turned the derivatives market, including the swaps market, into a virtual casino.
Anyone who believes that this crisis was solely the result of government meddling is too ignorant of the facts to warrant consideration. The causes include the two laws mentioned above, the transition away from lenders having a stake in the loans they write, to David X Li’s Gaussian Copula Function, to the Magnetar hedge fund gaming the creation of CDOs. And more.
You make a lot of good points.
“(2) Almost no one understood that millions of new buyers were moving into homes with no down payment, and with mortgage payments that were often equal to, or less than, the rent they had been paying”
Dubya should have known, because he was championing and promoting an incredibly foolish policy known as the American Dream Downpayment Initiative that was designed to do exactly that.
“In creating mortgage pools and determining risk, lenders depended on algorithms that had been accurate for 80 years:”
The entire industry ended up pricing risk by using David X Li’s Gaussian Copula Function which he borrowed from the life insurance field. The problem is that there was a serious flaw in using this formula for mortgages- which none of the wizards running the the lenders were aware of because they didn’t understand the complex math involved and they didn’t listen to their risk officers who warned of impending disaster.
“If the CRA was to be the cause of the housing crisis, how come neither Ronald Reagan, GHW Bush, nor GW Bush sought to eliminate the CRA?”
Unfortunately because they were probably afraid of being branded “racists”.
“The answer is that the CRA contributed very little to the housing crisis. The vast majority of bad loans were funded by investment banks and hedge funds, none of which were covered by the CRA.”
You mean like WAMU or Countrywide?
Yes, bankers, like you and me are greedy, but I would venture to guess that the vast majority of them are not stupid. If you were a banker would you make a loan that you knew there was a 90% chance that it wouldn’t be repaid?
Please tell me what could have caused these “greedy’ bankers to lose their minds and make loans to people with no proof of income and nothing down? Would you as a banker have done that?
Also please tell me, who bought most of the securitized loans?
Also please tell me, why did the top rating agencies give AAA ratings to these securitized subprime loans?
You use a lot of handwaving in your arguments, but I didn’t see a single factual rebuttal of the article that I referenced. Please reread the article and provide facts to rebut each of his points.
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