Iceland put top finance executives behind bars, but fears of cronyism remain • Hacker News Board

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

#91

Post by jessaustin » Thu, Mar 31, 2016, 3:47 PM UTC

nickles wrote: post #51

jsprogrammer wrote: post #27

Earlier quoted context omitted.

OK, how was TARP not a gift?

TARP has yielded a $64.5B profit [0] for the government. It was a loan, not a gift. It should be noted that the financial bailout was profitable, while the auto bailout netted a $9.5B loss [1]. [0] https://projects.propublica.org/bailout/ [1] http://www.nytimes.com/2014/12/20/business/us-signals-end-of...

As the auto bailout shows, bailouts are risky. There was no guarantee that the Treasury would "profit" on either bailout. Therefore, these public actions must be judged in terms of public priorities, not by the "returns". Really though, does this have to be spelled out? The government should represent citizens, not investors.

All of the chronic systemic problems that led to the "crisis" conditions in 2008 have only gotten worse since the bailouts. By that measure, they were not the best public actions that could have been taken, for the public. For Hank Paulson and his cronies, they certainly were the best public actions that could have been taken.

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

#92

Post by DickingAround » Thu, Mar 31, 2016, 3:48 PM UTC

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.…

I worry we're confusing a number of different things here. I don't think Keynsian or Austrian economics is in favor of or really even addresses the idea of bank bailouts. Those two forms of economic thinking are much more about how to fundamentally run/grow an economy. This bank bailout thing is mostly about corruption and systemic risk management, which is really totally different.

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

#93

Post by merpnderp » Thu, Mar 31, 2016, 3:49 PM UTC

delecti wrote: post #84

ktRolster wrote: post #70

Earlier quoted context omitted.

I don't even care that we didn't prosecute them. I just wish they weren't bailed out by the government (aka my tax money) when they went under. It's a free market: you make mistakes, you lose.

We didn't give them money, we invested in businesses that were in desperate need of investments. Those investments later paid back very good returns. You can argue that we shouldn't have interfered in the free market like that, and in fact I agree in principle, but the "rawr, my tax money" argument doesn't hold water.

It does hold up. "rawr, my tax money was used to prop up a failed business distorting the market, damaging more successful players, and decreasing market efficiency, along with increasing real and perceived corruption of the government."

It's not like those banks were protected with no external consequences. What would have been an industry wide boon to mid and small cap banks instead turned into the ugliest type of market intervention conceivable. The only reason those tax dollars were paid back with interest is because no one can compete with the 800 pound gorilla who when he falls out of the tree because he got drunk on his own power, the government picks him back up and places him back on top.

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

#94

Post by guelo » Thu, Mar 31, 2016, 3:52 PM UTC

illumin8 wrote: post #59

theseatoms wrote: post #56

Earlier quoted context omitted.

I agree that this is the heart of the issue. And the American people are about to elect back into the White House the couple that presided over the repeal of the Glass Steagal Act. So much for learned lessons.

To be fair, Clinton only signed the law - it was created and voted for by a Republican majority congress. Look at the votes - every Republican senator voted Yea and only one Democrat voted Nay: https://www.govtrack.us/congress/votes/106-1999/s105 He still shouldn't have signed it, but to blame this law on the Clintons is really not being honest.

That's not the final vote. It passed 90-8 in the senate and 362-57 in the house. https://www.govtrack.us/congress/votes/106-1999/s354 https://www.govtrack.us/congress/votes/106-1999/h570

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

#95

Post by ptaipale » Thu, Mar 31, 2016, 3:57 PM UTC

vette982 wrote: post #80

Bringing white-collar criminal cases may be easier in Iceland because courts don’t use juries. Rather, they employ neutral experts to help judges understand the intricacies of finance. I believe Iceland is in the minority among developed nations that don't use juries, but I think this is a major strength in their court system.

I think that at least in most crimes and with a definition of "jury" similar to that of USA or UK, most developed nations don't have jury trials. The common law countries do (USA and UK plus some Commonwealth countries, such as Canada, Australia, Hong Kong).

Some countries have some elements of traditional juries in some kinds of court cases, but for example in Nordic countries, there are no jurors, just lay judges. The lay judges don't sit in a jury box, they sit on the bench for judges, and they sit many cases, not just one where they'd be called to jury duty.

For example, Iceland, Norway, Sweden, Denmark, Finland, Poland, Germany, Czech Republic, Slovakia, Hungary, Netherlands, Italy, Spain don't really have jury trials.

Belgium, France, Switzerland and Russia have some kind of juries in some limited cases, but not commonly.

Also many developed former Commonwealth countries have given up jury trials (South Africa, Singapore) while some countries that did not have jury trials have fairly recently started to experiment with them (South Korea, Japan).

However, it would be safe to say that most developed nations don't have jury trials, or only have them for very specific circumstances.

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

#96

Post by edanm » Thu, Mar 31, 2016, 4:01 PM UTC

crdoconnor wrote: post #31

forgetsusername wrote: post #24

Earlier quoted context omitted.

> 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 academi…

Who was committing wire fraud?

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

#97

Post by ptaipale » Thu, Mar 31, 2016, 4:04 PM UTC

onion2k wrote: post #89

We should note that Iceland is a country with a population of 323,000 people - that's a large town in most other countries. The scale of the Icelandic banks compared to other countries was really not equivalent.

The scale of the Icelandic banks compared to the country's population/national economy was humongous. That is probably why the banking business was so difficult to control (once it was fed, as rumored, with some grey money from Russia).

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

#98

Post by cylinder » Thu, Mar 31, 2016, 4:18 PM UTC

rosalinekarr wrote: post #49

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.…

> GWBush style $1000 cheques Note that none of those checks went to the poor or middle class, at least not with a value as high as $1000. All the $1000 checks were reserved for the relatively wealthy. http://www.sfgate.com/politics/article/Bush-signs-1-3-trilli...

The fact that he got away with this with no real protest or outcry shows just how apathetic and disabled the lower classes in America are.

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

#99

Post by pyre » Thu, Mar 31, 2016, 4:19 PM UTC

JumpCrisscross wrote: post #63

illumin8 wrote: post #52

Earlier quoted context omitted.

This can really be traced back to the repeal of Glass Steagal. After the great depression in the 30s, congress passed the Glass Steagal act, which put a firewall between investment banks and commercial banks. In other words, Wall Street investment banks could no longer gamble with customer deposits. This seems like common sense, and all of the financial problems actually occurred after Glass Steagal was repealed in t…

> This can really be traced back to the repeal of Glass Steagal Can it? Because none of the banks who initially failed would have been firewalled by Glass-Steagal. Bear Stearns, Lehman Brothers, AIG...none of these were deposit-taking institutions. The problem erupted from corn-fed mortgages, something Glass-Steagall wouldn't have saved us from. This isn't just my opinion. Most economists see Gramm-Leach-Bliley (the…

AIG wasn't a bad, but an insurance company that failed because it took on too much risk. If, for example, AIG was that only one to fail I'm not sure it would have taken down the economy with it. I see them as someone that got embroiled in the "sub-prime mortgage crisis", but not necessarily a perpetrator (unless I'm missing something).

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

#100

Post by RobertoG » Thu, Mar 31, 2016, 4:20 PM UTC

tosseraccount wrote: post #90

ktRolster wrote: post #64

Earlier quoted context omitted.

>This can really be traced back to the repeal of Glass Steagal. The evidence against this hypothesis is that Canada did not have Glass Steagal (or legislation similar to it), and yet they were not harmed by the financial crisis nearly as much. The banks were smart enough to not invest so deeply in mortgage backed securities.

Canada does not have personal residence mortgage deductibility and was riding a commodities boom at the time. Speaking of the popular "austerity ruins the economy", Canada ran a budget surplus during the crisis, enabling them to weather the financial crisis quite well. Keeping an eye on the accounting books is always a good idea.

OK, I propose we change the popular

"austerity ruins the economy"

to the most precise

"austerity ruins an economy, if it's not ridding a commodities boom at the time, and you don't have a private debt grow for compensating what the government is not spending."