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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)

#131

Post by bawolff »

jakelazaroff wrote: post #60
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 .

The focus on whether specific crimes were or were not committed is weird to me — as if people from these companies didn't help write the laws that are supposed to regulate this stuff in the first place. These people gambled with the economy, lost trillions of dollars and destroyed the lives and savings of millions of people… and then got bailed out by the federal government. Who cares whether they committed specific…

> as if people from these companies didn't help write the laws that are supposed to regulate this stuff in the first place.

So what instead? - just arrest people based on public sentiment? Or rewrite the laws later, ex post facto-ly?

I'll take the rule of law, despite the failure case of regulatory capture, over just punishing people because they're unpopular, any day.

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

#132

Post by candybar »

taway2021s wrote: post #31
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 .

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…

Their counterparties are all sophisticated institutional investors and these things are generally traded on a buyer-beware basis. Sure there may have been some actual wrongdoing that went unpunished, but the nature of these transactions is that the cases are likely be civil rather than criminal.

The real reason for the lack of convictions is that there just weren't many cases of big bad wall street bankers defrauding ordinary people. That's typically what results in criminal convictions because 1) the law is far more protective of unsophisticated individuals than of institutional investors and 2) prosecutors have a much easier time winning cases and also benefitting politically from pursuing cases with relatable victims. And the reason why people wanted bankers to go to jail is because they thought wall street bankers did bad things to ordinary people. In reality though, the best cases against Wall Street folks are ones where the victims are also institutional investors (which is often included within the broader definition of Wall Street). The traders at Goldman Sachs outsmarting the traders at AIG just doesn't make for a particularly good fraud case, the same way Enron defrauding individual investors including their employees. And from the public's perspective, they are all part of the same class of people. And where ordinary people were directly involved, they were the ones defrauding lenders (and by extension, Wall Street and so on) by lying on their loan applications.

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

#133

Post by vlovich123 »

fsckboy wrote: post #120
vlovich123 wrote: post #27

Earlier quoted context omitted.

When it's a handful of people, you go after the individuals. When it's wide spread, you go after the institution [1]. The challenge is that the DOJ appears to continue to insist on going after white collar crimes like these with civil penalties against the company rather than piercing the corporate veil & starting to criminally prosecute the officers responsible. Talk about moral hazards they're constantly hand wring…

"piercing the corporate veil" generally refers to going after owners/shareholders or their assets, rather than going after employees; that's the level of liability that a corporation protects. IANAL so I'm not sure what level of legal "protection" employees have vs managers etc. for which levels of crimes (obviously, the janitor is not allowed to shoot people, while the accountant's assistant is not going to bear the…

> Piercing the corporate veil refers to the act of holding a company’s owners and executives liable for the company’s debts. This can include either debts owed to commercial creditors, debts owed to judgment creditors, or both. [1]

In a c-corp, everyone is generally absolved of all wrong doing personally. That's the point of the corporate structure. The company & its assets are held liable instead. Peircing the corporate veil is the main way you can go after people & to my knowledge only the board of directors (maybe some shareholders?) & officers are liable. A common short-hand is "C-level executive" but the latter is often a title the company makes up & may not designate an officer. CEO & CFO I believe are statutorily required to be officers but I'm not sure if all statutory C-level positions are required to be officers & I'm not clear if there can be officers who don't have some kind of C-level title. That's why they have to carry personal (expensive) liability insurance to cover their legal costs if that ever happens (in these situations the company can't/won't cover your legal costs) & is one of the justifications they use for having large salaries (to be able to cover these costs).

The link below has instances when an officer may be held personally liable even without piercing the corporate veil but generally can be thought of as the officer did something intentionally illegal that can't be excused as "just doing my job". I don't think gross negligence is generally prosecuted, especially in nuanced technical fields like tech or finance and in larger companies that'll throw lawyers at the problem to maintain the shield (looks bad for you if your CEO is being investigated for fraud).

I'm not a lawyer but I've picked up a bit of (flawed/imperfect) knowledge here & there over the years.

[1] https://www.natlawreview.com/article/how-ceo-can-be-liable-n...

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

#134

Post by TuringNYC »

candybar wrote: post #132
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…

Their counterparties are all sophisticated institutional investors and these things are generally traded on a buyer-beware basis. Sure there may have been some actual wrongdoing that went unpunished, but the nature of these transactions is that the cases are likely be civil rather than criminal. The real reason for the lack of convictions is that there just weren't many cases of big bad wall street bankers defrauding…

You are right that ordinary people were not defrauded directly, but pension funds are basically ordinary people's money. There just happened to be a middleman (the pension fund admin.)

Plenty of pension funds lost plenty of money

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

#135

Post by TuringNYC »

gfiorav wrote: post #49

It's astonishing how banks (saved with your money) can go home scotch-free, and hedge funds (that will die for their recklessness) get all the blame. You see this through policy. Why ban short selling? It's really dumb if you ask me. The banker investors that are used to taking risk and not caring precisely becuase they get their comission and the bank is saved (too big to fail) are the irresponsible people here. A h…

>> It's astonishing how banks (saved with your money) can go home scotch-free, and hedge funds (that will die for their recklessness) get all the blame.

The rationale is (not saying I agree with it) that broker dealers' and banks' can cause systemic risk and cause a domino effect.

Note that one hedge fund was indeed saved -- AIG-FP, and was given a record $180 billion dollar bailout, albiet on initially punitive terms. Incidentally they were so large (1Trillion USD of exposures, much of it leveraged) that they fell under the category of systemic risk.

https://en.wikipedia.org/wiki/American_International_Group#2...

That $180B wasn't all though, one could argue that the QE buy-back program purchasing securities at arguably inflated prices was also an additional bailout, but the amount for that is difficult to quantify and difficult to segment beneficiaries for.

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

#136

Post by TuringNYC »

paulpauper wrote: post #68
gfiorav wrote: post #49

It's astonishing how banks (saved with your money) can go home scotch-free, and hedge funds (that will die for their recklessness) get all the blame. You see this through policy. Why ban short selling? It's really dumb if you ask me. The banker investors that are used to taking risk and not caring precisely becuase they get their comission and the bank is saved (too big to fail) are the irresponsible people here. A h…

but income taxes have continued to fall in spite of such bailouts, suggesting that no one actually had to pay for it. It was not anyone's money but rather printed off with 0 percent yielding bonds. The huge post-2009 bull market and economic expansion in hindsight makes the bailouts one of the most successful govt. programs ever even if maligned.

>> but income taxes have continued to fall in spite of such bailouts, suggesting that no one actually had to pay for it.

I would strongly disagree with this. Taxes would go up with fiscal bailouts, not directly with monetary bailouts. A huge amount of the bailout was via monetary policy -- i.e. "print money and buy bonds to drive bond prices up and rates down."

We all feel it in the form of asset bubbles. Some people benefit (asset holders) while others lose out (young people, those without assets, renters, fixed-income retirees with almost no yields on their 401ks.

Taxes are a very simplistic way of judging payment.

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

#137

Post by jakelazaroff »

bawolff wrote: post #131
jakelazaroff wrote: post #60

Earlier quoted context omitted.

The focus on whether specific crimes were or were not committed is weird to me — as if people from these companies didn't help write the laws that are supposed to regulate this stuff in the first place. These people gambled with the economy, lost trillions of dollars and destroyed the lives and savings of millions of people… and then got bailed out by the federal government. Who cares whether they committed specific…

> as if people from these companies didn't help write the laws that are supposed to regulate this stuff in the first place. So what instead? - just arrest people based on public sentiment? Or rewrite the laws later, ex post facto-ly? I'll take the rule of law, despite the failure case of regulatory capture, over just punishing people because they're unpopular, any day.

What is the point of respecting a system literally designed to oppress you?

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

#138

Post by npteljes »

rspoerri wrote: post #13

The worst thing is, that the core of capitalism had to be rescured by socialism. Not that socialism is bad, or capitalism is bad. But the core of capitalism stand on, what isnt profitable, isnt sustainable. The system hasnt been provitable, but had been rescured by all the goverments and the money they gather from the inhabitants.

That's not much of a problem, it just shows how capitalism is not a sustainable system on its own. It shows that capitalism is fine and dandy in some contexts, in others, it doesn't work well. So the conclusion is that a mixture of systems need to be in place: for example, strong social programs could take care of people while they are growing up or begin to fall out of the system, and capitalism can always step in on top of that, or as an alternative even.

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

#139

Post by npteljes »

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…

It can be both things at the same time. Maybe you go into a casino once, on your birthday, have some fun with $500, and never again. That doesn't mean that casinos don't fuel addiction for profit.

What's important here I think is that while saying that payday loans are bad, I don't mean to take away your positive experience with it. Just that looking at the bigger picture, they do more harm than good. That they exploit the desperation in the people, and that's immoral and should be regulated more.

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

#140

Post by pwned1 »

AnimalMuppet wrote: post #121
pwned1 wrote: post #77

Earlier quoted context omitted.

The problem was that everyone was in on it. I spoke to quite a few people in that time period, from mortgage brokers to borrowers to bankers. They all knew what was happening. A friend tried to sell me on getting a NINJA loan (No Income, No Job, No Assets) where, I was told "just tell them any number for your income on the application." It was all done with a wink and nod and everyone in the pipeline knew what was ha…

Who gets thrown in the clink? How about "as many as possible, and the higher up the better"? "We can't jail them all" does not imply "therefore jail none of them". Precedents matter. The precedent that was set is "widespread fraud is fine; if enough people are in on it, nobody can be jailed". Is that really the precedent we want?

The underlying question I ask is who set the precedent? Why was the system designed to allow this to happen?
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