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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

#101

Post by cmrdporcupine »

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.

We did not run a budget surplus during the crisis. Far from it.

There was extensive stimulus spending that led to very high deficits during that period.

We had a budget surplus in the decade prior to the crisis, but not right before, and once the Harper gov't took power it slashed revenue through a bunch of tax cuts and then once the crisis hit the opposition demanded stimulus spending or it would bring the gov't down (minority parliament at the time).

And while Canada was "riding a commodity boom" at the time this hardly helped anybody east of Saskatchewan or west of Alberta. You could argue it helped their investments but you'd also be wrong, in 2008 the stock market tumbled the same here as everyone else, including energy stocks.

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

#102

Post by emodendroket »

ktRolster wrote: post #70
emodendroket wrote: post #32

Earlier quoted context omitted.

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.

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.

I think there was something to the argument that systemic risk made the collapse of big banks undesirable -- but to the extent that was true it was obviously an argument for breaking up the banks and probably even outright nationalizing the ones that were bailed out, not just handing them a bunch of money, not prosecuting anyone, and leaving the system unchanged otherwise.

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

#103

Post by cmrdporcupine »

cmrdporcupine wrote: post #101
tosseraccount wrote: post #90

Earlier quoted context omitted.

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.

We did not run a budget surplus during the crisis. Far from it. There was extensive stimulus spending that led to very high deficits during that period. We had a budget surplus in the decade prior to the crisis, but not right before, and once the Harper gov't took power it slashed revenue through a bunch of tax cuts and then once the crisis hit the opposition demanded stimulus spending or it would bring the gov't dow…

And I should add that housing prices did dip briefly immediately following the crash in the US. Just not nearly as bad and they almost immediately recovered.

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

#104

Post by feelgood »

jokull wrote: post #22
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.

My uncle is one of the jailed, mentioned in the article. One of Iceland’s most respected lawyers and teacher at the University of Iceland has gone on paper, and on radio, and on TV, saying that the Al Thani trials did not make any sense, for more than one reason. The most obvious mistake was that by the time the case went from local courtrooms to the federal level the prosecution had completely switched the focus of…

I would take this reply with a huge grain of salt, the lawyer in the article is a personal friend/business partner and a defendant of one of the persons accused of the same crimes.

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

#105

Post by cmrdporcupine »

ktRolster wrote: post #70
emodendroket wrote: post #32

Earlier quoted context omitted.

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.

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.

Oh this is the ugliest part.

When you spend 20 years convincing people that the right place to put their retirement nest egg is in mutual funds and stocks and that defined benefit pensions are not economically viable and that gov't run social security should be capped or cut...

Well big surprise you now have a huge constituency demanding that 'the stock market' be bailed out.

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

#106

Post by cmrdporcupine »

tosseraccount wrote: post #79
thedataslinger wrote: post #54

Earlier quoted context omitted.

Put simply: it is fraudulent when a creditor uses lies or deception. JP Morgan deceived the Greek people by masking a massive loan to the Greek government as a "currency swap", seemingly to avoid the financial regulators within the EU. See here: http://www.nytimes.com/2010/02/14/business/global/14debt.htm...

"Instruments developed by Goldman Sachs, JPMorgan Chase and a wide range of other banks enabled politicians to mask additional borrowing in Greece, Italy and possibly elsewhere." Sounds like the Greek government was culpable. Not blaming the culture of corruption in Greece and not pointing out that the Greek overspending was the root of the problem is disingenuous.

There have been two different Greek governments in this period.

Smearing Syriza, a socialist formation which made the same critique as the above poster, and would never have signed those deals -- for the corrupt actions of New Democracy & PASOK which did is a little bit of intellectual dishonesty.

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

#107

Post by halviti »

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.

You're making a comment that's often repeated when talking about whether or not a bank bailout is a good idea.. but that is not the issue being discussed here.

This conversation is about whether or not it's in everyone's best interest to try harder for criminal prosecution in these cases.. which should not be something determined by things like population size.

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

#108

Post by splintercell »

DickingAround wrote: post #92
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.

Austrian Economics clearly favors letting banks fail. Keynesian Economics and Chicago School Monetarists support bailing out banks. Although you have to infer these things out.

http://www.wsj.com/articles/SB100014240527023034439045755782...

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

#109

Post by tosseraccount »

cmrdporcupine wrote: post #101
tosseraccount wrote: post #90

Earlier quoted context omitted.

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.

We did not run a budget surplus during the crisis. Far from it. There was extensive stimulus spending that led to very high deficits during that period. We had a budget surplus in the decade prior to the crisis, but not right before, and once the Harper gov't took power it slashed revenue through a bunch of tax cuts and then once the crisis hit the opposition demanded stimulus spending or it would bring the gov't dow…

http://www.tradingeconomics.com/canada/government-budget

According to this link, the Canada Federal Budget appears to have been in surplus during 2007-2008 crisis.

Deficits came later.

Their previous fiscal prudence mitigated the problems that struck Italy, Greece and the United States.

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

#110

Post by legutierr »

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…

One of the driving factors behind the bad mortgages that were issued pre-2008 was the lack of ongoing oversight and poor risk assessment with regards to those mortgages, driven primarily by securitization.

Your linked article itself tells that Geithner and his ilk admit to securitization being at the heart of the crisis, saying that "other factors were more important in causing the 2008 crisis, such as bad mortgage underwriting, poor work by the ratings agencies and a securitization market gone crazy."

But strangely, they write this as a defense of Glass-Steagall's repeal, as if those factors came from nowhere. In fact, those factors were the specific result of the efforts by the largest banks to sell as many of their banking products as possible--and offload as much of their risk as possible--through their investment banking and securities divisions. Many suspect that some banks took advantage of the inherent opacity of mortgage-backed-securities to knowingly hide bad assets (and possibly even fraudulent, non-existant assets) and sell them to unsuspecting securities buyers at fraudulently inflated prices.

Would securitization have become such a problem if the repeal of Glass Steagall hadn't effectively pushed all of the money center banks to acquire or build their own investment banks? Would it have been so easy for bad actors to have committed fraud in this area if it wasn't so easy to keep everything "in house"?

The main reason that Glass-Steagal was enacted in 1933 was because the Crash of 1929 was in-part caused by Banks' selling over-hyped, over-priced securities to ordinary, unsophisticated banking consumers. OK, so it happened in the reverse this time. That doesn't mean that the crisis wouldn't have been prevented by the same firewall, had it existed, from 2003-2006.

Yes, none of the institutions that failed initially were deposit taking. But maybe that was because this time around they were the outsiders and the rubes. Who had a better sense of what kind of risk mortgage-backed-securities actually represented, than the people who were originating them?

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