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Why didn’t any Wall Street CEOs go to jail after the financial crisis? (2019)

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Re: Why didn’t any Wall Street CEOs go to jail after the financial crisis? (2019)

#81

Post by moate »

NovemberWhiskey wrote: post #21

... because none of them were convicted of crimes, in turn because none of them were indicted or tried, presumably because prosecutors either didn't believe they were guilty of any crimes or because they didn't believe the cases against them were strong enough. Fortunately, we by-and-large do not send people to jail without that kind of due process just because large numbers of people are angry at them for whatever r…

Are the cases "not strong enough" because A- prosecutors believe that these types of legal battles will be an uncertainty due to the massive wealth CEOs can use to leverage their legal teams, have massive potential political fallout, and/or are an undue burden on the taxpayers; B- the actions perpetuated are not singular and specifically provable, despite their obvious intent and illegality, but instead spread out over a network of subordinates/proxies creating a fig-leaf of plausible deniability; C- the laws were written by a state deeply indebted (on both sides of the aisle) to the funding provided by exactly these types of citizens and their massive personal wealths?

My point is: While I am a deep and firm lover of due process, I think there's alternative explanations for why these people weren't convicted of crimes that don't solely point to "they were 100% blameless and these accusations are without merit".

That's why people are writing these articles/still want blood from the investor class.

Re: Why didn’t any Wall Street CEOs go to jail after the financial crisis? (2019)

#82

Post by jcranmer »

actually_a_dog wrote: post #25
rspoerri wrote: post #23

Earlier quoted context omitted.

Socialism is when all the people of a country put theyr money together to pay for a system. Such as your taxes or a goverment healthcare. The banks have been rescured by such money.

No, that's called paying taxes and funding a government. I'd suggest you crack a political science textbook if you want to actually know what socialism is.

Uh...

The problem with socialism is that there are so many definitions of the word that it's actually rather meaningless (this is generally true of every -ism in political theory).

Nevertheless, if we're discussing socialism in the context of the contest between different economic and political organizing philosophies in the 19th century, then rspoerri would in fact be correct to call what he did socialism. The demand for the government to provide various social functions (including things like healthcare or pensions), adding progressive taxation to provide some measure of wealth redistribution, and the limitation of corporate rights over workers (e.g., child labor laws, minimum wage laws, working hour laws) are all hallmarks of the socialist movement that were eventually pretty universally adopted, in contrast to the activists for capitalism.

While there is definitely room for disagreement of what constitutes socialism, I would be surprised to find any political science textbook that wouldn't consider government provision of services (especially as opposed to private provision) a hallmark of socialism.

Re: Why didn’t any Wall Street CEOs go to jail after the financial crisis? (2019)

#83

Post by unyttigfjelltol »

paulpauper wrote: post #51

People tend to go to jail for malice (willful intent), not mistakes. The financial crisis was viewed as just a giant mistake in risk management. having a 20-sigma event when your financial model says it is an impossibility, is not a crime.

“It is difficult to get a man to understand something, when his salary depends upon his not understanding it!” --Upton Sinclair (1934)

Re: Why didn’t any Wall Street CEOs go to jail after the financial crisis? (2019)

#84

Post by actually_a_dog »

AnimalMuppet wrote: post #76
actually_a_dog wrote: post #67

Earlier quoted context omitted.

Nationalizing industries is also not socialism.

You know, you keep saying what socialism isn't . I agree with you that rspoerri's definition is too expansive, but we could have a more useful discussion if you supplied a definition, instead of just saying "no, that isn't it". (And "crack a book" isn't a definition.)

Sorry, but I'm not in the mood to get flagged today. I cut it off with "crack a book," because if you go one more step down the road beyond that, that leads to something you can't discuss rationally on Hacker News.

Re: Why didn’t any Wall Street CEOs go to jail after the financial crisis? (2019)

#85

Post by oefrha »

kasey_junk wrote: post #26
actually_a_dog wrote: post #17

Earlier quoted context omitted.

How about we start with massive amounts of loan fraud? https://themreport.com/daily-dose/12-08-2020/the-role-of-len...

Worth noting that if you were going to go after loan fraud you likely would be charging low level folks in the mortgage pipeline (appraisers, mortgage brokers, etc) or even the borrowers, not Wall Street CEOs.

This reminds me of the documentary film Abacus: Small Enough to Jail about how a tiny community bank became the only financial institution criminally charged in relation to the subprime mortgage crisis.

https://en.wikipedia.org/wiki/Abacus:_Small_Enough_to_Jail

Re: Why didn’t any Wall Street CEOs go to jail after the financial crisis? (2019)

#86

Post by pope_meat »

axguscbklp wrote: post #39
glasss wrote: post #11

Unfortunately doing bad things to get rich isn't always illegal, and a lot of the times the parts that are illegal are hard to prove against institutions who have professionally been getting away with it for a while. Payday loans come to mind - they definitely aren't illegal, have tons of predatory practices built in, but are universally (at least in my experience) seen as a scam. I've been told by several people tha…

I used payday loans a few times back in the day - not for anything large, just for like $300 or so at a time. Getting those payday loans really helped me and I never experienced any negative consequences from taking them. I never thought of them as being a scam. I knew what sort of interest rates I was getting into and I took the loans fully knowingly. Personally I did not experience any predatory practices unless yo…

I worked at a payday loan place, and sure, if you make decent income and just find yourself short a few hundred bucks for a few days before a payday you can get out okay, but folks who are at the edge, making ends meet just barely...well those folks get trapped in a very difficult cycle of paying back $795 every two weeks and immediately taking out a $700 loan, rinse repeat 7 cycles of that before the payday company will allow for a different repayment plan (still a hard hole to dig out of, but a little less shitty than the standard pay us 795 right now thing you have to do for 7 cycles before the option for escape is even available to you)

It's a gross business, exploitation of human misery.

Re: Why didn’t any Wall Street CEOs go to jail after the financial crisis? (2019)

#87

Post by anigbrowl »

vkou wrote: post #12
bawolff wrote: post #5

Articles like this never seem to make the case for which crimes were specificly commited. They always talk about the fallout of the financial crisis (losing money on wall street isnt a crime afaik). Idk much about this topic, so im sure crimes could be involved, but its weird how these articles dont start with why didn't someone go to jail for .

It's not weird, it's just populist grousing. Reduce your discontent to a meme, and it will spread to every discussion that ever mentions 2008. I have some opinions about who should have gone to jail (I'd start with the ratings agencies), but that doesn't rabble-rouse quite as well as 'Burn Down Greedy Goldman Sachs!'

I seriously disagree in that there were innumerable thoughtful, measured, and nuanced critiques at the time and they had very little impact. Yes, memes are crude, but they get to the point. And it's a legitimate point; there was a great deal of corruption exposed in numerous markets around the time of the financial crisis, and few of those who profited therefrom suffered any consequences.

I could give a long list of examples and detailed analyses, but my secondary point is that a culture of corruption is enabled partly through talking things to death in abstruse legalistic terms, until everyone is so tired that they become demoralized and lose any motivation to do anything about it.

The US Constitution (not the only operative document, but an important one given the financial industry's very deep roots here) contemplates judicial powers to examine questions of both law and equity. Law is complex and if you have the resources you can hire legal specialists to problematize and pull apart just about any legal assertion. In many respects, a dense thicket of petty legalism surrounds a moral vacuum at the heart of society in which substantive questions about fairness and decency as eschewed as too political for judicial engagement; if you'll forgive my stretching a metaphor, much of our 'shining city on a hill' is just elaborate topiary growing atop crumbling foundations.

Re: Why didn’t any Wall Street CEOs go to jail after the financial crisis? (2019)

#88

Post by 6gvONxR4sf7o »

AlexandrB wrote: post #14
nickff wrote: post #8

These stories all seem to ride on similar popular sentiments: 'bad things happened, and rich people were involved, so they should go to jail'. Having read a few of the books cited at the bottom, I have been repeatedly surprised at how these financial disasters came to be; it often seems like the people at the top were deceiving themselves more than anyone else. Bethany McLean's other book, "The Smartest Guys in the R…

In many other jobs, gross negligence resulting in billions of dollars of property damage can get you jail time. Why is it ok for the people at the top of these financial disasters to be immune? Whether they're deceiving themselves is irrelevant. Drunk drivers deceive themselves about their ability to drive safely, we still put them in jail.

What if someone grossly negligently screws up a $1000 smart contract that convinces the public that bitcoin sucks and the value plummets? It's gross negligence resulting in billions of dollars of losses for others. Are you going to call that property damage in the same way?

Re: Why didn’t any Wall Street CEOs go to jail after the financial crisis? (2019)

#89

Post by deergomoo »

jdavis703 wrote: post #71
taway2021s wrote: post #31

Earlier quoted context omitted.

Sure. Lets start with an easy example. Why didnt any Directors at Goldman Sachs serve prison time for knowingly bundling Synthetic CDOs with bad CDS that they internally know were garbage? They sold these to pension funds, and other public entities. There were documented losses. There are documented emails with full internal discussion on how bad these investments were. (documented with emails.) Note there was a civi…

Selling bad assets isn’t illegal. I worked for a startup. After seeing how the sausage was made I knew they were a bad company. When they IPO’ed I sold all shares as soon as the lockup hit. They have yet to exceed the price I sold at. Should I be in jail for selling what I knew was a crappy, over-valued company? (Mind you I had no MNPI as I hadn’t worked there for 6 years.)

> Should I be in jail for selling what I knew was a crappy, over-valued company?

If your job was to sell these things to people as a professional service, and you set things up so that a supposedly impartial ratings agency would give a high rating to something you know is shit? Absolutely. It’s not the same thing though is it?

Re: Why didn’t any Wall Street CEOs go to jail after the financial crisis? (2019)

#90

Post by mojomark »

taway2021s wrote: post #36
kasey_junk wrote: post #26

Earlier quoted context omitted.

Worth noting that if you were going to go after loan fraud you likely would be charging low level folks in the mortgage pipeline (appraisers, mortgage brokers, etc) or even the borrowers, not Wall Street CEOs.

You dont necessarily need to charge the Wall Street CEOs. You can charge the Senior Managing Director of Structured Products. Or MD of Structured Products banking/trading/risk/whatever. There were plenty of individuals who set policy to enable this. No need for a scarecrow argument about CEO or bust. I could literally look thru Linked In or a Bloomberg Terminal and figure out who the responsible parties are. Too bad…

> You dont necessarily need to charge the Wall Street CEOs. You can charge the Senior Managing Director of Structured Products.

You can delegate authority, not responsibility.

This fundamental rule of hierarchical organizations is why CEO's need to be held accountable. CEO's are responsible for creating the environment, culture and rules that allow such activities to take place. Failure within an organization on a CEO's watch is that CEO's fault. That's why CEO's deserve high compensation - because the difficulty and risk are so high. If there's no CEO penalty for failing (or worse, breaking the law), than all companies in society suffer.

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