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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)

#31

Post by taway2021s »

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 civil case (https://www.theguardian.com/business/2013/aug/01/fabulous-fa...) and a low-level fall-guy in his 20s, and conveniently French, did face civil charges.

Note, non-connected, poor people go to jail for $500 thefts. Lets be honest about what happened here.

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

#32

Post by jollybean »

colpabar wrote: post #15
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…

If I "deceive myself" by thinking I can drive with my eyes closed, and I crash my car and destroy someone's property, aren't I then required to pay the damages or face jail time? It's odd that we can all agree on cases where the number of participants is small, but for some reason, if an entire economy is affected, we have to pretend that the people responsible weren't actually responsible and shouldn't be punished i…

"we can all agree on cases where the number of participants is small,"

It was definitely not small, the fraud was top to bottom including the home owners lying on their loan applications, the loan officers, the managers of the loan operations, the VPs, the ratings agencies, those not doing their due diligence and just assuming that the ratings agencies were perfect etc..

It was a mania more than anything, where regulations were bent and the system lost all of it's checks and balances.

It's illegal to drive blindfolded, it's not illegal for Bear Stearns to make most kinds of stupid bets in real estate.

This was not 'executives do fraud, or at least something like it and banks fall'.

It was more like a bad housing bubble where all the limiting parameters were bent out of shape.

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

#33

Post by jcranmer »

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 closest general-purpose crime I can think of would be some variation of fraud. Except that to be criminally fraudulent, you have to meet the requirement of knowingly making false statements of fact. That's quite difficult for the prosecution to prove in a criminal trial, especially given that the bar is to prove it beyond a reasonable doubt (although I doubt that juries actually adhere to that standard in practice). And honestly, I'm not sure I even believe it to be true--a lot of the failures (especially by the time we're talking CEO-level here) feel a lot more like plain hubris rather than specific fraud.

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

#34

Post by ryandrake »

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…

I think the sentiment is more "The rich have created this financial system that's essentially a giant casino, where if they make a bet and are right, they profit, and if they make a bet and are wrong, the general public loses their jobs and 401(k)s while the government pays to bail them (the rich) out. The fact that none of it appears to even be criminal is just icing on the cake and shows who the law really protects.

If none of the actions that caused all that misery are actually crimes, that's the problem.

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

#35

Post by zigradett »

rspoerri wrote: post #23
actually_a_dog wrote: post #22

Earlier quoted context omitted.

Socialism is not when the government does stuff.

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.

Someone also needs to put to rest the "The Banks were bailed out using taxpayer money!" scandal.

Based on what I heard, TARP the Troubled Asset Relief Program, bought a small percentage of those hedge funds and investment banks that were in danger of going under, then let them slowly buy their own shares back over a number of years ... ..... and the "taxpayers" got all their money back.

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

#36

Post by taway2021s »

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.

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 they all go to the same country clubs as the folks at the SEC and NY Times

At the same time, convicting a low level work in his 20s as the ring leader (https://www.theguardian.com/business/2013/aug/01/fabulous-fa...) is disingenuous.

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

#37

Post by rspoerri »

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.

So goverment healthcare is not a socialistic system? The public infrastructure that is built using taxes and can be used by anyone and is owned by the goverment which represents the inhabitants is not socialistic?

wikipedia: While no single definition encapsulates the many types of socialism,[12] social ownership is the one common element.

what, if not a socialistic system, is it then in your opinion?

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

#38

Post by bpodgursky »

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.

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 for CEOs to be put in jail is in large part simply trying to deflect from the fact that they are not doing their own jobs, and are simply trying to offload responsibility for US economic policy onto the private sector.

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

#39

Post by axguscbklp »

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 you count the interest rates themselves as predatory. That said, I always paid the loans back pretty quickly so I do not know how the companies behave if people are slow in paying.

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

#40

Post by nickff »

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.

In many of these instances, it seems more like multiple layers of ‘rose-colored glasses’, than one person being willfully ignorant. This is somewhat similar to engineering situations where each reviewer adds some safety margin, and the end product becomes bloated.

Enron is a particularly interesting case, because the filings and statements were all truthful, but almost nobody ever read them. They also had one or two good businesses, but were dragged down by liabilities from the others, so it wasn’t a total fraud. That said, I do think the Enron CFO was guilty of criminal fraud, though I think Lay and Skilling should have only been held civilly liable.

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