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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)

#101

Post by [deleted] »

6gvONxR4sf7o wrote: post #88
AlexandrB wrote: post #14

Earlier quoted context omitted.

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?

[deleted]

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

#102

Post by axguscbklp »

pope_meat wrote: post #86
axguscbklp wrote: post #39

Earlier quoted context omitted.

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…

It does seem gross and I do not think I would feel good about the idea of working in the industry. That said, I wonder - is it worse than the loans not being available at all?

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

#103

Post by anigbrowl »

bpodgursky wrote: post #38
AlexandrB wrote: post #14

Earlier quoted context omitted.

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.

If the "property damage" is to your own shareholders, that's a fuckup, not a crime (on its own). If that starts a market rout, or bank collapses, that sucks, but it's still not a crime If that leads to the collapse of the US dollar, it's a catastrophe, but it's still not a crime. US policymakers are responsible for the stability of the US economic system. CEOs are responsible for their own companies. Congress calling…

Sure, but write a bad check or mess up your cash flow such that you fail to meet some court-ordered financial obligation and watch how much finger-wagging accountability and social opprobrium rains down upon you. You can get in much worse trouble for some transgression involving a thousand dollars than a million or billion.

There's a guy in the US Senate who used to be CEO of a healthcare company until he was forced out by the board, and the company had to pay out billions in settlements and fines for defrauding medicare. https://en.wikipedia.org/wiki/Rick_Scott#Columbia/HCA

I agree with you that many in legislative and executive positions are negligent and or corrupt, but let's not pretend that the private sector doesn't aggressively lobby for its own financial interests or that it is populated by angels brought down by wicked politicians.

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

#104

Post by NovemberWhiskey »

Aunche wrote: post #94
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…

That "low level fall guy" made $1.7 million in 2007. Unless if there was evidence that the higher ups at Goldman knew that Tourre was defrauding investors, but chose to ignore that evidence, I don't see how they can convicted of a crime.

N.B. Fabrice Tourre himself was not convicted of a crime.

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

#105

Post by nickff »

NovemberWhiskey wrote: post #70
nickff wrote: post #30

Earlier quoted context omitted.

I would agree that the self-deceiving fiduciary should be held financially responsible for the impact of their blindness, but I’m not sure all these cases are actually crimes.

I'm sure you know this but a broker-dealer (which is what we're primarily talking about in the context of Wall St banks) doesn't have a fiduciary duty to their counterparty.

I was still addressing Enron case where many of the people charged were fiduciaries, but you're right re: the investment banks.

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

#106

Post by kasey_junk »

actually_a_dog wrote: post #75
kasey_junk wrote: post #48

Earlier quoted context omitted.

I probably would but proving that they acted _criminally_ would be hard. You can’t just wave your hands and make up a law they broke. Meanwhile, that number likely means that the borrowers lied on those same applications. That’s where the fraud actually occurred. And would be easy to prove.

I told you the law: RICO. > The Racketeer Influenced and Corrupt Organizations (RICO) Act is a United States federal law that provides for extended criminal penalties and a civil cause of action for acts performed as part of an ongoing criminal organization. The RICO Act focuses specifically on racketeering and allows the leaders of a syndicate to be tried for the crimes they ordered others to do or assisted them in…

You’d need to prove that a “Wall Street CEO” told someone to commit mortgage fraud. That almost certainly didn’t happen.

Quite the opposite you’ll find all manner of examples of the CEO’s enabling things like anti-fraud and risk management teams.

The issue was the implicit organizational pressures between those parts of the companies and the lending/revenue arms.

Making a new class of law that makes those implicit conflicts a criminal responsibility of company CEOs seems extremely fraught, but more importantly those laws didn’t exist at the time.

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

#107

Post by nickff »

ryandrake wrote: post #74
nickff wrote: post #53

Earlier quoted context omitted.

> "If none of the actions that caused all that misery are actually crimes, that's the problem. " Why? Why should the stock market be further de-risked? Why should the government's poor impulse control be encouraged? Why should mistakes be criminalized?

I didn't say anything about the stock market. Reckless decisions made by rich banks and financiers should not effect anyone but themselves, let alone cause economy-wide crises that hurt regular people. Could you imagine if I went off to Macau to play a high stakes game of poker, lost, and as a result, you lost your job and the government staked me in my next poker game? That's pretty much what happened.

You said "401(k)s", so I assumed you meant investments in publicly traded equities; my apologies if I was mistaken.

>"Could you imagine if I went off to Macau to play a high stakes game of poker, lost, and as a result, you lost your job and the government staked me in my next poker game? That's pretty much what happened."

I understand what happened, I just don't see it the same way you do. It's not your fault if I lose my job because it relied on your gambling, and it's also not your fault that my government makes stupid bets.

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

#108

Post by jcranmer »

actually_a_dog wrote: post #75
kasey_junk wrote: post #48

Earlier quoted context omitted.

I probably would but proving that they acted _criminally_ would be hard. You can’t just wave your hands and make up a law they broke. Meanwhile, that number likely means that the borrowers lied on those same applications. That’s where the fraud actually occurred. And would be easy to prove.

I told you the law: RICO. > The Racketeer Influenced and Corrupt Organizations (RICO) Act is a United States federal law that provides for extended criminal penalties and a civil cause of action for acts performed as part of an ongoing criminal organization. The RICO Act focuses specifically on racketeering and allows the leaders of a syndicate to be tried for the crimes they ordered others to do or assisted them in…

RICO requires as predicate acts other laws to be broken before it can even kick in. So if there's no fraud in the first place, then there can be no RICO.

More importantly, there's a specific sequence of connections between the original predicate acts of racketeering and the control of the enterprise that has to be established for it to happen. 18 USC §1962 has the gory details, but I just don't see how the CEO can possibly be guilty of RICO.

As Ken White says, it's never RICO: https://www.popehat.com/2016/06/14/lawsplainer-its-not-rico-...

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

#109

Post by jcranmer »

kasey_junk wrote: post #106
actually_a_dog wrote: post #75

Earlier quoted context omitted.

I told you the law: RICO. > The Racketeer Influenced and Corrupt Organizations (RICO) Act is a United States federal law that provides for extended criminal penalties and a civil cause of action for acts performed as part of an ongoing criminal organization. The RICO Act focuses specifically on racketeering and allows the leaders of a syndicate to be tried for the crimes they ordered others to do or assisted them in…

You’d need to prove that a “Wall Street CEO” told someone to commit mortgage fraud. That almost certainly didn’t happen. Quite the opposite you’ll find all manner of examples of the CEO’s enabling things like anti-fraud and risk management teams. The issue was the implicit organizational pressures between those parts of the companies and the lending/revenue arms. Making a new class of law that makes those implicit co…

> You’d need to prove that a “Wall Street CEO” told someone to commit mortgage fraud.

For it to be RICO, no you do not need to prove that. You need to prove more. You'd need to prove that the "Wall Street CEO" told someone to commit mortgage fraud, and then used the proceeds of that mortgage fraud to take control of an enterprise (which would presumably have to exclude the company of which he is CEO).

(https://www.law.cornell.edu/uscode/text/18/1962, for reference)

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

#110

Post by nickff »

mojomark wrote: post #90
taway2021s wrote: post #36

Earlier quoted context omitted.

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 CE…

The problem is that it is impossible to delegate authority, but no responsibility. Realistically, the CEO of a large company cannot know everything that happens under the umbrella, much like the President of the USA cannot know what every government employees does. In both situations, some subordinates will inevitably commit crimes in the name of the organization (eventually), and holding the person at the top completely responsible is totally unreasonable.
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