Why the SEC Won’t Hunt Big Dogs • Hacker News Board

Re: Why the SEC Won’t Hunt Big Dogs

#61

Post by Daniel_Newby » Thu, Oct 27, 2011, 5:09 AM UTC

T_S_ wrote: post #47

The crisis was fueled by people showing up and doing their jobs. Think about that. The hunt for the criminals is a waste of time. People were acting aggressive, not criminal--with notable exceptions that could happen in any era. In fact, finding scapegoats will make the problem worse. It leaves the system intact and fools everybody into believing the problem is fixed. Credit and risk has always been a problem of info…

> People were acting aggressive, not criminal ...

Suppose a hair dresser buys a house for $750k, the interest payments alone consume 50% of family income, clear title has not been established for the house, and the signed mortgage document is filed into a dumpster. Suppose hundreds of similar mortgages are piled together into a mortgage-backed security.

The criminals were rating that festering bond as AAA (highest rank) and stuffing it into pension funds. The rating fee was on the order of $500k, but the raters did not even pick a single private eye out of the phone book to verify that the house even exists, nor a CPA to see that if the paperwork exists.

The whole thing was a fraud from beginning to end. Thousands of people need to go to prison, and pay trillions in restitution.

> Just tell me the the end-of-day positions of every "large" participant.

Bernie Madoff Investments had stellar numbers. The whole point of a financial fraud is that the numbers are cooked.

Re: Why the SEC Won’t Hunt Big Dogs

#62

Post by wr1472 » Thu, Oct 27, 2011, 10:55 AM UTC

Daniel_Newby wrote: post #61

T_S_ wrote: post #47

The crisis was fueled by people showing up and doing their jobs. Think about that. The hunt for the criminals is a waste of time. People were acting aggressive, not criminal--with notable exceptions that could happen in any era. In fact, finding scapegoats will make the problem worse. It leaves the system intact and fools everybody into believing the problem is fixed. Credit and risk has always been a problem of info…

> People were acting aggressive, not criminal ... Suppose a hair dresser buys a house for $750k, the interest payments alone consume 50% of family income, clear title has not been established for the house, and the signed mortgage document is filed into a dumpster. Suppose hundreds of similar mortgages are piled together into a mortgage-backed security. The criminals were rating that festering bond as AAA (highest ra…

> but the raters did not even pick a single private eye out of the phone book to verify that the house even exists.

Can you cite a specific example(s) of mortgages being approved for houses that didn't exist?

Re: Why the SEC Won’t Hunt Big Dogs

#63

Post by cobrausn » Thu, Oct 27, 2011, 2:53 PM UTC

scott_s wrote: post #28

cobrausn wrote: post #19

Earlier quoted context omitted.

Never really said I did. But the fact is a lot of people still use cash, and would continue to do so (regardless of actual value) after a banking system crash. At least, I perceive it would, unless governmental authority also broke down. Then we are back to a barter economy.

Where would this cash come from? Right now, banks get it from the mints, which print it on a demand basis. And even if you use cash for most of your transactions, if you keep your money in the bank...

My best guess to this would be the government would have to temporarily (or permanently) set up a federal bank that would get the cash out, perhaps giving back a larger amount than normal that year in tax returns that have to be picked up in cash from said bank. New problems would need new solutions.

Re: Why the SEC Won’t Hunt Big Dogs

#64

Post by Daniel_Newby » Fri, Oct 28, 2011, 8:38 AM UTC

wr1472 wrote: post #62

Daniel_Newby wrote: post #61

Earlier quoted context omitted.

> People were acting aggressive, not criminal ... Suppose a hair dresser buys a house for $750k, the interest payments alone consume 50% of family income, clear title has not been established for the house, and the signed mortgage document is filed into a dumpster. Suppose hundreds of similar mortgages are piled together into a mortgage-backed security. The criminals were rating that festering bond as AAA (highest ra…

> but the raters did not even pick a single private eye out of the phone book to verify that the house even exists. Can you cite a specific example(s) of mortgages being approved for houses that didn't exist?

http://mortgagefraudblog.com/perp-walk/item/11454-ga_man_sen...

Re: Why the SEC Won’t Hunt Big Dogs

#65

Post by essayist » Fri, Oct 28, 2011, 2:17 PM UTC

T_S_ wrote: post #47

The crisis was fueled by people showing up and doing their jobs. Think about that. The hunt for the criminals is a waste of time. People were acting aggressive, not criminal--with notable exceptions that could happen in any era. In fact, finding scapegoats will make the problem worse. It leaves the system intact and fools everybody into believing the problem is fixed. Credit and risk has always been a problem of info…

William Black, who was a lead investigator/prosecutor for the 1990's savings and loan crime spree, would disagree.

http://www.pbs.org/moyers/journal/04232010/profile.html

When an investment bank packages up securities to sell and doesn't communicate material information to potential buyers (e.g. "the bonds are junk"), that's fraud. People committing fraud as part of doing their jobs are criminals.

When an S&P manager tells one of his professional credit raters not to request information on the loans underlying the instruments he's supposed to rate, what would that be?

http://www.huffingtonpost.com/william-k-black/the-two-docume...

Re: Why the SEC Won’t Hunt Big Dogs

#66

Post by T_S_ » Sun, Oct 30, 2011, 7:14 PM UTC

essayist wrote: post #65

T_S_ wrote: post #47

The crisis was fueled by people showing up and doing their jobs. Think about that. The hunt for the criminals is a waste of time. People were acting aggressive, not criminal--with notable exceptions that could happen in any era. In fact, finding scapegoats will make the problem worse. It leaves the system intact and fools everybody into believing the problem is fixed. Credit and risk has always been a problem of info…

William Black, who was a lead investigator/prosecutor for the 1990's savings and loan crime spree, would disagree. http://www.pbs.org/moyers/journal/04232010/profile.html When an investment bank packages up securities to sell and doesn't communicate material information to potential buyers (e.g. "the bonds are junk"), that's fraud. People committing fraud as part of doing their jobs are criminals. When an S&P manager…

I think you have a point even though it is a gray area. However, I think that having the government focus on Real Transparency (TM) as a prevention instead of criminal enforcement would be a far more effective systemic reform. Not that I believe it likely to be implemented anytime soon.