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Iceland put top finance executives behind bars, but fears of cronyism remain

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Re: Iceland put top finance executives behind bars, but fears of cronyism remain

#31

Post by crdoconnor »

forgetsusername wrote: post #24
deepnet wrote: post #16

Exactly, the problem has got worse. Banks are larger and more centralised, the offenders unpunished know they can act with impunity, legislation is unchanged. Banking/ finance types now know that if they are losing money they must simply lose big enough to trigger more bailouts and the taxpayer pays. This is despotic anti-capitalism: they keep the winnings and losses are generational debt on which they again profit.…

> the offenders unpunished Unpunished...for what? What are the crimes? I mean, people were certainly punished financially when their banks equity was wiped out or bought for pennies on the dollar. > Quantative easing is bailouts by the backdoor. Please elaborate. > Keynsian economics got this right. Do you know the academic origins of QE?

>Unpunished...for what? What are the crimes?

Wire fraud. Illegal since 1872.

>Please elaborate.

QE pushed up the value of assets which had plunged in value. Assets which were used by the banks as collateral for loans which were now bigger than the value of those assets and were going bad very quickly. That made those banks what is technically known as "insolvent"... until the stealth bailout.

>Do you know the academic origins of QE?

Monetarism. You can place the blame squarely at Milton Friedman's feet for QE, not Keynes. Keynes advocated fiscal expansion, not funny money tricks to reduce interest rates below zero.

Milton Friedman was firmly of the opinion that tweaking interest rates was enough to successfully manage any economy. Clearly not so much...

Re: Iceland put top finance executives behind bars, but fears of cronyism remain

#32

Post by emodendroket »

grabcocque wrote: post #7

Just to clarify, They were sent to prison for "market manipulation and fraud" which are crimes in many places, not just Iceland. They weren't sent to prison for being "bad bankers" which isn't a crime in Iceland or anywhere else.

The difference is that in the US, while it would have been possible to prosecute bankers under existing law after the 2008 meltdown, we did not.

Re: Iceland put top finance executives behind bars, but fears of cronyism remain

#34

Post by forgetsusername »

crdoconnor wrote: post #26
forgetsusername wrote: post #20

Earlier quoted context omitted.

> Well no bankers anyway. Please point to the convictions. We don't throw people in jail because we don't like their business practices. The idea that the government wasn't absolutely salivating at the opportunity to throw some bankers in jail is one of the funniest things I read on the internet. People don't seem to understand that the government and banking industry are often at odds on many things. Of course, ofte…

>We don't throw people in jail because we don't like their business practices. We do when they're fraudulent* * Exceptions for too big to jail bankers. Jamie Dimon won't see a day in jail despite running a criminal enterprise. >The idea that the government wasn't absolutely salivating at the opportunity to throw some bankers in jail is one of the funniest things I read on the internet. People don't seem to understand…

>Jamie Dimon won't see a day in jail despite running a criminal enterprise.

Funniest thing I might read today.

This is just another near-daily HackerNews anti-bank circlejerk amongst people who spend way too much time watching conspiracy theories on YouTube.

Re: Iceland put top finance executives behind bars, but fears of cronyism remain

#36

Post by iheartmemcache »

forgetsusername wrote: post #20
bradleyjg wrote: post #12

Earlier quoted context omitted.

Yes. Just look at all those bankers that went to prison for 30+ years of manipulating LIBOR. Well one banker anyway. And all those bankers that went to prison for reps and warranty fraud on synthetic CDOs. Well no bankers anyway. This is clearly a dog bites man story about something that happens all over.

> Well no bankers anyway. Please point to the convictions. We don't throw people in jail because we don't like their business practices. The idea that the government wasn't absolutely salivating at the opportunity to throw some bankers in jail is one of the funniest things I read on the internet. People don't seem to understand that the government and banking industry are often at odds on many things. Of course, ofte…

Let's be honest, for every overworked DA who is ambitious enough to attempt to prosecute a banker, you will immediately have ten 6th year associates out of their top 1/3rd from UChic, Yale and Stanford willing to put in 90 hours because junior partner at Cravath or Skadden is so close they can taste it. TARP was absolutely necessary (we absolutely would have had a complete and total systemic failure had relief not been provided), but the US government could have dictated far stricter terms at which the T-notes were issued which would have benefited the country in the long-term.

Instead of a simple bond, they could have offered an alternative instrument that ensured less of a .. cavalier.. attitude towards trading. "These bonds are issued contingent upon .. {loans must be underwritten by X% in fungible assets, rather than ISDA 3rd-order derivatives (ugh bad pun); Y% of your profits for the next Z years must be invested in a FDIC-esque safety fund as insurance for the next crash; or hell, 'the US government will offer $foo MM in exchange for $bar equity, the profits of which will go towards this years deficit/national debt/...'. If you read first-party accounts at the time when Mae/Mac/Stearns and AIG when down, absolutely everyone was so panicked the board members/CEOs would have taken those terms.

Re: Iceland put top finance executives behind bars, but fears of cronyism remain

#37

Post by Shivetya »

deepnet wrote: post #16

Exactly, the problem has got worse. Banks are larger and more centralised, the offenders unpunished know they can act with impunity, legislation is unchanged. Banking/ finance types now know that if they are losing money they must simply lose big enough to trigger more bailouts and the taxpayer pays. This is despotic anti-capitalism: they keep the winnings and losses are generational debt on which they again profit.…

You are still free to join about credit unions, use local banks, and the like.

You get bigger because of all the support persons your need to comply with regulations. The auditors alone can be very burdensome to smaller banks. They certainly don't try to grow large just to fail.

I am not sure you understand the words you are using.

Paying the poor is a calculated game where politicians try to find the point they won't be annoyed enough to vote against them the next election and finding that point which they won't take stuff from those who are voting

Keynsian is easily proven wrong on many accounts

Capital pools until there is a good outlet for it. It also tends to pull when taxing systems become burdensome with regards to spending it

Investment and savings do not need separation. you could say that making loans is a form of investment with similar risks and rewards

finance is confusing to many but it isn't rotten

quantitative easing is the result of poor money policy of the countries enacting it. usually the result of the same country borrowing so much money it depletes that which is available to others

Austerity does not cause stagnation, first you would actually have to find a country that claimed austerity that actually reduced expenditure and not simply slowed the rate of increase. Greece is an exception to the rule

In the end adopting a the sky is falling outlook never works. Politicians created this mess and they are damn good at ducking responsibility. This is because most operate under the ideals of fascism, meaning pretty much force the hands of private companies to behave a certain way and then blame them when it doesn't work. This lets politicians further exert control because the general population doesn't understand what is going on

Re: Iceland put top finance executives behind bars, but fears of cronyism remain

#38

Post by haberman »

The whole article feels like a non-sequitur. "Iceland put bankers in prison for helping cause the financial crisis, yet there is still crony capitalism." How are these two facts related? Putting bankers in prison for helping the economy crash is not intended to solve the problem of bankers being too cozy with politicians. It's intended to solve the problem of bankers reaping private returns from taking public/socialized risk. It's trying to ensure that when bankers hurt everybody, they feel the hurt too.

Re: Iceland put top finance executives behind bars, but fears of cronyism remain

#39

Post by JumpCrisscross »

TheBiv wrote: post #6
melling wrote: post #4

There's a lot to read. Can someone explain the details of actual crimes for which they were convicted? The whole "finance crimes" always seem a little fuzzy. If you run up $70 billion in debt, for example, and need a bailout, is that a crime? http://www.bloomberg.com/news/articles/2016-03-29/puerto-ric... It almost seems like a game.

Market manipulation http://www.reuters.com/article/us-iceland-bankers-idUSKBN0LG...

No, they went to jail for fraud.

For example, these bankers [1] approved a loan to a shell company owned by the bank's insiders for the purpose of buying the banks shares. None of the large banks in the U.S. did anything like that. The closest we've had was the LIBOR scandal, where prosecution is certainly happening.

[1] http://uk.reuters.com/article/uk-iceland-crisis-idUKBRE8BR0E...

Re: Iceland put top finance executives behind bars, but fears of cronyism remain

#40

Post by arethuza »

bmh_ca wrote: post #30
KKKKkkkk1 wrote: post #2

Why should Iceland bankers have gone to prison? For taking money from British depositors and investing it in the Spanish housing bubble? Let the British send their bankers to prison.

There was outright fraud by some Iceland bankers, who indicated they had assets and relationships that did not exist. Issues include: - Indicating to the ECB and others that they had relationships with strong German banks (when the Iceland bankers showed up at the German banks, the Germans indicated they had never heard of the Iceland banks) - Engaging in "next-gen Enron-style" corporate asset-liability accounting de…

"...you have a dog, and I have a cat. We agree that each is worth a billion dollars. You sell me the dog for a billion, and I sell you the cat for a billion. Now we are no longer pet owners but Icelandic banks, with a billion dollars in new assets."

Michael Lewis in Boomerang.

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