Slashdot Mirror
Email Trails Show Bankers Behaving Badly
An anonymous reader writes "The New York Times is running a pair of stories about U.S. financial institutions being investigated by the Federal government and courts for alleged systemic and illegal activities that helped bring about the housing crisis and collapse of the world economy in 2008. Emails produced during courtroom discovery reveal that insiders at JP Morgan Chase knew that the bundles of securities they were marketing to investors were rotten with bad loans. And emails show the credit rating agency Standard & Poor's (a division of McGraw-Hill) was determined to stop losing deals to its competitors by being too tough on the banks whose products they were evaluating."
Corruption is corruption.
Hang them from the trees on Wall Street as a warning to others.
And stop creating government regulations that give them lots of loopholes to exploit.
Futurist Traditionalism
It mentions email, and email is very techy. You need computers and stuff.
rewriting history since 2109
Now we can see who sits in the cockpit of the "invisible hand". When the people at the top of our complex financial system, with the trust and responsibility placed on them to safeguard the well-being of the whole community, behave in such an anti-social manner they belong behind bars. Overt anti-social behaviour is to be punished, that's the whole point of laws. That these people will get of scot-free or with only small (for them) fines is fresh evidence that the structure of our society needs mending. News at 11'!
This reminds me of the "Barry Bonds took steroids, reports everyone who ever watched baseball" story from The Onion. I'm shocked, simply shocked at how unsuprised I am.
And I wouldn't blame a few individual bankers, I think this was coordinated a bit higher up. American banks had been selling way too many loans, and when they saw this was becoming a huge problem that might bring down the entire American economy, they made the brilliant move of packaging these loans in nice AAA investment vehicles and selling them to the rest of the world. Now it became a global crisis instead of an American one.
Not a very moral or honest thing to do, but it sure was ingenious.
As someone who has been through an E-Discovery process (lawsuit by a patent troll we were fighting) there is amazing forensic analysis technology that goes into collecting and collating emails, IM's, and documents.
Suppose you were an idiot and suppose you were a member of Congress
Look, anybody who wants to see anything different has got to tell me how we de-centralize.
I'd be for creating banks in the other 49 states (beside North Dakota), and returning all of the 10th Amendment violations like Sallie May, Freddie Mac, and the education loans to the states where the people/places in question reside.
The federal government could then assume a more legitimate oversight role.
Are you going to alter the net corruption of the overall system? Unlikely. Can you ACTUALLY DO SOMETHING OTHER THAN THROW WORDS AT 'TOO BIG TO FAIL'? I daresay you can.
But your Ruling Class Overlords will not be separated from power by less than a crowbar, and maybe a little heavy PETN.
Get thee glass eyes, and, like a scurvy politician, seem to see things thou dost not.--King Lear
Obviously you don't appreciate how many nerdy quants there were on Wall Street painting over these bag-of-shit securities packages with a fresh coating of technical bullshit to make them look like roses.
What political party do you join when you don't like Bible-thumpers *or* hippies?
Why only decimate them?
Are you sure you want to kill only 1 in 10?
You have 5 Moderator Points!
Which Helpless Linux zealot/MS basher do you want to mod down today?
Standard and Poor may not have acted quickly on downgrading these bad loans (they ALL were reluctant to downgrade them, S&P were losing business because they weren't keen to give them good ratings!). The reason S & P are currently under attack is simple:
They downgraded the dollar because Congress wouldn't tackle the government debt. As soon as they did that, the Fed started threatening them with prosecution over bad ratings.
The current deal with the Republicans in Congress includes a raising of the debt ceiling, and is really a half deal. S&P might have downgraded the dollar again over this botch half deal. That's a problem, it would drive down the dollar and force more money printing.
So suddenly all the talk is about prosecuting S&P and ONLY Standard and Poor, not the other ratings agencies. It's a shot across their bows, a warning to them to let this debt ceiling slide.
But S&P need to *recover* their rating confidence, and that means making some tough ratings that are extremely unpopular. The deficit hasn't been tackled, the debt ceiling raised yet again, they have to lower the rating on the dollar and to hell with the Fed and it's threats.
Given that the dumb fuckers who get caught passing a few thousand in bad checks tend to do more time than the smart fuckers who get caught passing a few billion in bad securities tend to do more time, I'd say that the quants are on to something...
(Can you imagine what would happen to sentencing guidelines if we decided 'fuck this shit' and started punishing large scale fraud with the same sorts of time-per-thousand-dollars-stolen that we do for blue-collar economic crimes?)
I'm with you here, but the lack of shock, surprise, and outrage is a terrible indication that we've become so comfortable with the misdeeds of our political and financial leaders that we expect no better from them. They egregiously abuse their positions for monetary gain, quite often with consequences no more severe than the obligatory 50 lashes with a wet noodle, when a federal sentence with a side of prison rape seem much more appropriate.
Happiness in intelligent people is the rarest thing I know.
Ernest Hemingway
Look, at the height of madness, these derivatives which no one could possibly understand, derivatives so complex even God Almighty could not understand were given the same rating as US Treasury bonds or just a microscopically lower ratings. If these banks really believed the ratings by S&P they would have bought them at the same yields as US Treasury bonds, (or microscopically higher yeilds). But these derivatives were yielding a full percent, and then they were shooting up.
Why? These bastards knew, no matter, what lipstick S&P and Moody's slap on these beasts they are pigs. If small investors were taken in, that lone retiree conserving his/her nest egg, despairing at the ridiculously low interest rates they were getting, buying one lone bond for 12000$ and losing it all, they have my full sympathies, and wish they would be able to take on these bastards and send them to jai.
But, the buyers were the big guys. Why are they buying bonds, whose rating was paid for by the sellers?. Why can't they come up with a plan to pay for the ratings themselves? The bankers could have decided the buyers of bonds would chip in a few dollars and create an agency that will never be paid by the sellers of bonds and would be totally funded y the buyers of the bonds. They still have not done it.
What is playing out in the courts is something like a lovers spat or falling out between the thieves.
sed -e 's/Chuck Norris/Rajnikant/g' joke > fact
Someone who sells ratings should not also be buying and selling these products. Of course there is a huge perverse incentive here.
Those "bag-of-shit" securities were, in very large part, guaranteed by the US Gov't. That Wall Street Banks offered crap investment opportunities that no one understood is nearly as bad as the so-called investors who bought them with an equal lack of understanding, and don't get me started on people who "bought" homes they could never, ever make the payments on that formed the basis for the "bag-of-shit" investments no one understood.
That they were "highly-rated" by the security analyst firms means very little - I'll leave you with this sage advice from that classic film "Tommy Boy"
Ken
I don't think I've seen anybody who isn't a head of state moving around in public with an armed guard, much less an actual army. They hire ex police to patrol their private driveway, and maybe the chauffeur carries a pistol. There is next to nothing to stop some crazed nutbag, or a concerted group, from offing one of them in broad daylight except the rule of law.
FWIW, I think that would be a tragedy. They should be tried in court for felony larceny, stripped of their assets and holdings, and imprisoned. I would be happy if this was tried in the ICC at The Hague, as what they did was an international crime.
Finally had enough. Come see us over at https://soylentnews.org/
Let's remember, these "smoking gun" emails are the result of exhaustive, comprehensive searches of EVERY ingoing and outgoing email from the respective organizations. In a large enough company I can guarantee you I can find emails that "prove" almost anything relating to thier business, their customers, etc.
That some employees expressed doubts or questioned the value of the products or services their company offers means very little if they are not the decision-makers.
Anyone surprised that a salesman at an investment house might be selling something they either don't understand or personally see the value in shouldn't be investing in the stock market. Would you be surprised to find out the guy selling you a Chevy Volt doesn't believe it is the best car in the world? What a salesman says to a customer is not neccessarily what he believes in his heart or in his mind.
Ken
The thing is, if we allowed the free market to work, then AIG, JP Morgan, Morgan Stanley, and all the big banks who participated in this would have evaporated overnight and regional banks who acted responsibly would have stepped in to fill the void. But the free market was not allowed to do its thing and we have a doubling down on crony capitalism that will fail again, bigger.
A lot of people like to pretend there's an all-powerful government out there that can suppress any dissent, but we've all seen the last 5 years just how little the people need to do for that illusion to vanish. Just look at how incompetent the government was at handling Hurricane Katrina, which was predicted well in advance and which they knew about for days before. Imagine if something unforeseen were to occur.
And at this point that's what's required to correct this situation.
If not us, who? If not now, when?
I'm not sure if you're mentally deficient, or just evil. But the world is now stupider for having your words in it. Bravo, Orc... bravo.
Look, if I lend a thousand dollars to a homeless guy on the street corner, and he never pays me back, whose fault is it really? I mean, I can start jumping up and down and getting mad about it, but when it comes down to it it's the lender's responsibility to evaluate the debtor's ability to repay.
Or, I guess, you could lend money to people who you know full well can never repay it, and then sell off the debt to somebody else after obfuscating it as "AAA-rated investment grade CDO tranches"; that sounds really sustainable, too.
The sad truth is people are corrupt. We all are. It's a part of human nature. What we need to start doing is accepting that people in power are going to abuse it, and put in blocks, checks to keep that from happening. The truth is, people need to be regulated. They need to be checked that they are doing what they are supposed to.
Too big to fail? Not to big to jail.
This also shows what the government thinks of everyone but the rich and corporations. They will bend over backwards to bail out the rich and the corporations while fucking the rest of us in the ass. The economy has been in the shitter but the people the caused it live like kings.
Wish some good would come of this, but our government won't do anything about it.
Be seeing you...
It is very common in 3rd world countries, but even in first world nations there are people that have armed guards.
However I suspect the "banker's well trained soldiers" the GP is referring to are the police forces and armies of the United States. As in, bankers buy politicians, which craft laws and direct their military forces to protect the bankers.
I'm a good cook. I'm a fantastic eater. - Steven Brust
Even in the *best* case, if true - it indicates a *HUGE* issue.
The FBI should be professional no matter if you cooperate or not. Sure, they *can* be a dick if they want, but it's bad all the way around if they are.
It is, essentially, a violation of the constitutional rights of the accused - in that they are treated differently under the law. [Some nicely, some not.] Proving it in court is a far more difficult matter, however.
That law enforcement doesn't see it as a problem, indicates a serious flaw in their understanding of their responsibilities and have thrown away their honor.
It is, IMO, because of this kind of mind-set that the public starts to lose their respect for law-enforcement and see them as opportunistic thugs. Then the system breaks down - people feel they'll just do whatever they can, if they can get away with it. When people start shooting cops, they don't care much because the cops only care for their "friends" ... and since the cops aren't their friends, whatever bad things happen are just too bad - they're getting back what they did to the public.
It's not right for the public to feel that way - any more than the cops are right to do what they do - but it certainly makes the breakdown of respect more understandable.
So, being thugs and treating some defendants nicely and others like crap really, ultimately costs law enforcement a lot. It also costs society a lot too.
But I really, really hate "explanations" like the parent, because they seem to justify that kind of behavior. IMO, if you can't treat all your "customers" with respect you need to find another job. That doesn't mean you have to love them all - that's pretty hard - but you can at least do your job well and with respect for those you work around/ or with, and interact with.
This ^^ +1000
And tell me, who is likely to *know* who is able to afford the loan better?
A) The bank who has collective experience in the thousands of man-years in making loans and seeing the trends of who pays and who doesn't and what kind of debt load is reasonable. An institution who has NO OTHER job than to manage money, cash-flow and manage risk from loans and investment?
or
B) Sammy Homeowner who simply wants a house. He's not very sophisticated - he couldn't even calculate how his loan should work out in interest and principle. He works hard, but also wants all the good stuff, and his loan officer is telling him - "This is a great deal! You'll love it. It will be great. Here, just sign right here."
If you pick B, can I have what you're smoking - it's really incredible stuff.
The banks knew who was likely to not repay - they are vastly more sophisticated than virtually *ANY* home-owner getting a loan.
I'd agree the person taking the loan should have used more diligence - but the disparity is staggering. Blame ought to be apportioned 10:1 to the Bank.
Can you imagine what would happen to sentencing guidelines if we decided 'fuck this shit' and started punishing large scale fraud with the same sorts of time-per-thousand-dollars-stolen that we do for blue-collar economic crimes?
I'd imagine that they'd come up with a less-than-ten-word mantra to make it sound like a very bad idea to enough people. Actually, it seems like two word catchphrases are bigger these days. Death panels, job creators...
There are also probably real reasons why that would be a bad idea, ones that would not be brought up in the campaign to defeat such a bill. Such as "some scapegoat would always take the fall rather than the real criminals, as already happens, because our justice system sucks compared to what we think it should be, especially when it comes to rich people."
So I don't think that magic bullet would ever come to pass, nor do I think it would be a magic bullet.
Oy, this canard again?
Sorry, no: http://www.ritholtz.com/blog/2009/06/cra-thought-experiment/
"What the American public doesn't know is what makes them the American public." -Ray Zalinsky (Tommy Boy)
Yes government has the power to do a lot of bad stuff.
However that doesn't mean they were the prime actors here. Not at all.
FAR MORE of that toxic sludge was sold to private investors (aided by a corrupt ratings process) than ever went to F&F. If it was just F&F Lehmann and Wachovia and Countrywide and Merrill Lynch and Bear Stearns etc etc etc would still be in business and TARP and TARF would not have been necessary at all.
Then there was the whole thing about CDS, naked CDS, and the entire deal with ratings agencies (which still are rotten to the core BTW), SIVs and all the multifarious derivatives based on them that F&F had absolutely nothing to do with.
Trying to blame this on government is about as naive as is imaginable.
Unregulated derivatives are at the root of this crash. What is scary to me is that nobody is seriously considering regulating OTC derivatives. It means we are wide open to future episodes because the root causes are still in place.
A and B.
If you buy a home, it's worth doing your homework. I delayed buying a home for well over 5 years, because the market was obviously a bubble. When everyone is talking about flipping X, and making "money for nothing", get out of that immediately. Doesn't matter if it's stock, houses, bonds, whatever. If you buy a house, you know you are going to pay X. If you can't pay X realistically on a long term basis, don't buy it. And there is a reason for the old rule of thumb of buying a house at 2.5 times your annual income. I knew people that when with interest only mortgages, ARMs, etc. They knew they were not making the best decision. But they couldn't see any other way to "get the house they always wanted".
Everyone involved went full retard. Consumers bought mortgages they knew they couldn't afford. Banks issued mortgages they knew were bad ideas. Investment companies packaged those bad idea mortgages into bundles of "really bad idea, now in bulk". Investors bought those bad idea mortgages. And then the government bailed them out. Which again, bad idea.
Only folks that got a beating were the ones that were reasonably smart and stayed within their means.
Magic bullets are expensive and unnecessary; regular bullets will do just fine.
Snowden and Manning are heroes.
Add to that the hatred of the rich and distrust of banks, with a bit of conspiracy theory for flavor
Not hatred of the rich, hatred of greed and selfishness (and there is no groupthink about this, there are a lot of slashdotters who are fine with greed and selfishness, let alone obscene amounts of money). It's rage about the fact that bankers defrauded America, almost brought he entire economy down, and were rewarded for their evil deeds. Rage against the fact that CEOs get huge multimillion dollar bonuses for running their companies to the ground and destroying working folks' 401Ks in the process. Rage that corporations get away scott-free for what an ordinary person would spend decades in prison for. Rage that you pay a higher percent of your income in federal tax than a rich stockbroker does. Rage against unfairness. Rage against the fact that 40 years ago the CEO earned 10 times as much as the janitor but now earns 400 times as much.
None of the rage is unfounded. There needs to be more rage and constructive rage.
Nobody's surprised that bankers screwed up.
Hanlon's razor doesn't apply when the person "screwing up" benefits from the "mistake". There was no screwup, the bankers got just what they wanted. It was indeed malice, fueled by greed.
They had a nice little racket, a no-lose situation. They would let anyone take out a mortgage, and would buy insurance for it. The insurance was dirt-cheap because housing prices were ballooning. They loan Joe Sixpack $200k for a small house, and three years later when he's laid off, they not only forclose, but do their damndest to make sure once he's a single payment late he'll never catch up. Then they forclose, keeping all the payments he's made on the house, then selling he house for far more than Joe paid for it. In the unlikely event the house was worth less than $200k, insurance covered the loss. There was absolutely no risk to the bank whatever.
Until, of course, their greed destroyed them. They forclosed on so many houses when the economy soured (hard to make your payments when gasoline has gone up in price 400% in four years and you got laid off or your hours cut) that the housing market tanked, and the insurance companies went broke, then the banks.
And not a single rich person was harmed in the least. many middle class people were ruined. And you wonder where the rage comes from? A lot of rich sons of bitches should have gone to prison for that fraud, but nobody did.
At the same time, the actual loans covered by the CRA were not a problem. Many sources back this up, including this:
[director of the Federal Reserve’s consumer and community affairs division Sandra Braunstein] cited a Federal Reserve Board analysis which found that, in 2006, CRA-covered banks operating in CRA-targeted neighborhoods accounted for just six percent of the risky, high-cost loans largely responsible for the housing crisis.
So what you're saying is, the CRA made loans not covered by the CRA to default. Does that make any sense? I don't think it does. It sounds more like the "wishful blaming" that those responsible began doing once their expensive lies were exposed.
No. If I buy a home, I'm paying a broker or a real-estate agent to do my homework for me. That's why I pay him the big bucks - because he knows the laws and regulations already. I shouldn't be the one calculating how much down payment I will need to avoid mortgage insurance, and how much interest I will owe over the life of the loan - that's why I'm paying thousand of dollars in fees to the other guy to do it!
I'm sorry, but at the point a broker or loan officer is giving out NINJA loans, he's engaging in fraud and he damn well knows it. It's not the borrower's job to know laws and regulations, it's the lender's.
I mean, if you went to a lawyer and paid him for legal advice, would you turn around and totally ignore his advice and do your own homework instead?
:(){
Joe Sixpack: Yanno guy, I don't think I can afford a $500,000 house on a police officer's income.
Scamming Broker: Don't worry about it. Housing prices keep going up. Sure, the interest payments on this mortgage are going to balloon in five years, but that's why you refi in four years instead.
Joe: Are you sure about this? I'm a little worried. What if I can't refi?
Broker: Don't worry about it. We've been doing this for years. I'm a certified professional. You're paying me thousands of dollars because I know what I'm doing. Trust me, you will be okay.
---
Is it still Joe's fault for believing the certified professional from which he sought advice?
And by the way, the security ratings mean quite a lot, actually. Many investors, such as pension funds, are only legally allowed to buy AAA-rated debt. The demand for AAA-rated debt is quite large, which is why they were able to sell so many toxic MBS/CDO. The demand for less-than-AAA-rated debt is MUCH smaller, and certainly not big enough to absorb all those toxic mortgages. Had the ratings agencies done their job (all of them, not just one or two), Wall Street would have been unable to sell toxic CDOs, which means they were unable to buy/sell toxic MBS, which means they were unable to buy toxic mortgages from scammers, which means the scammers were never able to lend money to people for toxic mortgages.
Investors should be able to count on the debt ratings. They're baked into laws, after all. The problem is that the people bundling the CDOs were the ones who paid for the ratings agencies to rate their debt. This creates a conflict of interest - the ratings agencies don't want to rate the debt too low or they'll lose market share to their competitors when all the firms on Wall Street go there for the better ratings. Instead, ratings should be paid for by investors, not the people peddling the debt.
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