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View Diary: The Obama Administration Protection of Wall Street Criminals - A Possible Explanation (326 comments)

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  •  The SEC (18+ / 0-)

    and various states Attorneys-General are still jointly investigating many of the large banks connected to the mortgage-backed securities meltdown. I worked as a contract attorney doing document review for a big firm representing one of the big banks for most of last year. Discovery phase is just now wrapping up and has been going on for years. These things take time, the banks have a ton of money and resources to keep investigators bogged down.

    Will there be criminal charges? I don't know, but after reviewing literally tens of thousands of internal documents (kill me now) I would venture a guess as to why there haven't been more prosecutions: Many of the so-called Masters of the Universe didn't know what the fuck they were doing. They didn't understand the extent of the weakness in the real estate market, but more importantly, they didn't understand how exposed their own hedged positions were.

    They understood for the most part that subprime mortgages were junk, so they shorted those positions (bet against them). They then gambled on higher-rated (non-subprime) mortgages, not realizing that these mortgages were also worthless (as investments), hence the enormous losses when the entire real estate market took the plunge.

    So unlike the S&L Crisis, which was an actual ponzi scheme perpetrated intentionally, the 2008 crisis was primarily the product of various degrees incompetence. The banks themselves lost huge, enormous sums of money when everything went south. In order for there to be criminal liability, there needs to be intent, which really seems to be lacking in many of these cases, and that may be why there haven't been hundreds of bankers brought up on charges - though those charges could still be coming, as I mentioned above.

    This is just my perspective having had an inside look at the inner workings of at least one of the big players. I'm not an expert on Securities law by any stretch, so maybe others have more context they can add.

    •  Thank you, cato. (10+ / 0-)

      That confirms what I've been reading the last couple of years. Flim-flam trumps competence to the extent that sometimes, there's no there there. (I saw that firsthand with so-called "healthcare." The practice of medicine wasn't lucrative enough for the ignoramuses who took it over in the '80s.)

      Do you think the CEOs incompetence is partly driven by gamblers lust? (Don't know what else to call it, but I've seen it; even felt it briefly.)

      Just curious, at this point ;)

      "Let each unique song be sung and the spell of differentiation be broken" - Winter Rabbit

      by cotterperson on Thu Jan 24, 2013 at 07:25:46 AM PST

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    •  Nice try. I don't buy that for a second. n/t (2+ / 0-)
      Recommended by:
      Jim P, blueoasis
    •  Still, "liar's loans," telling investors (17+ / 0-)

      the liar's loans all packaged together were sound investments (while betting against those investments themselves), the robo-signings, ...

      ...these were endemic in the business.

      It's hard to imagine that a multitude of low-level employees in a hierarchical enterprise spontaneously took it upon themselves to say to Mr & Mrs New Mortgage Applicant "hey, let's get this done. Let's say you make ... heck, $10,000 a month." Like 200,000 times.

      When people were systematically deceived, when financial data is deliberately falsified, when titles are falsely assigned... there's laws about that.

      And we've not even touched on the drug-money laundering, the terrorist-money laundering, the rate-fixing, and myriad other things.

      "Gosh we didn't know what we were doing" is no excuse. These people weren't possessed by demons while they were sleep-working.


      Markos! Not only are the Gates Not Crashed, they've fallen on us. Actual Representatives are what we urgently need, because we have almost none.

      by Jim P on Thu Jan 24, 2013 at 08:36:20 AM PST

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    •  Didn't some Judge once say, (5+ / 0-)

      "Ignorance is no excuse for breaking the law"?  They can claim they didn't understand, but they are still the ones who DID IT.  No?

      •  Yes, but what crimes are you alleging? (4+ / 0-)

        Fraud? This is the definition of fraud:

        Noun
        Wrongful or criminal deception intended to result in financial or personal gain.
        A person or thing intended to deceive others, typically by unjustifiably claiming or being credited with accomplishments or qualities.
        You can't be guilty of fraud if you weren't intentionally misleading investors. Like I said above, I'm not an expert, or even very well versed in securities law. I am a lawyer, however, and I understand the requirements for criminal responsibility. Losing money, even the amounts we're talking about, is not necessarily a crime. I know everyone wants to put these creeps in jail, but you still need things like probable cause to do so, and the SEC and State AG's are reviewing the evidence as we speak.
        •  From the Senate Sub committee on Investigations (4+ / 0-)
          WASHINGTON – Senate Permanent Subcommittee on Investigations Chairman Carl Levin, D-Mich., issued the following statement on the Department of Justice’s announcement regarding Goldman Sachs:

          “Our investigation of the origins of the financial crisis revealed wrongdoing and failures among mortgage lenders, banking regulators, credit rating agencies and investment banks. One of those investment banks, Goldman Sachs, created complex securities that included “junk” from its own inventory that it wanted to get rid of. It misled investors by claiming its interests in those securities were “aligned” with theirs while at the same time it was betting heavily against those same securities, and therefore against its own clients, to its own substantial profit. Its actions did immense harm to its clients, and helped create the financial crisis that nearly plunged us into a second Great Depression.

          I am not going to sit here and be an idle spectator to the diminution, the subversion, the destruction, of the Constitution. Barbara Jordan

          by Lcohen on Thu Jan 24, 2013 at 11:13:01 AM PST

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    •  I can easily believe that these greedy idiots (8+ / 0-)

      were meddling with forces--and financial instruments--they didn't understand.

      I don't much care.

      They had a responsibility--to their own shareholders if no one else--either to understand or not to play.

      When did ignorance of the law or of the market become a get-out-of-jail excuse?

      When you triangulate everything, you can't even roll downhill...

      by PhilJD on Thu Jan 24, 2013 at 09:03:13 AM PST

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      •  They're Free to Use that as a Defense (6+ / 0-)

        Prosecutors routinely charge people with writing bad checks when perhaps the defendant made an accounting error instead. Doesn't stop them from having to defend themselves at trial. Of course, you have to actually indict someone first.

        "The problem with posting quotes off the Internet is you never know if they're genuine."--Gen. George Washington at the Battle of Gettysburg, February 30, 1908

        by Aspe4 on Thu Jan 24, 2013 at 09:23:04 AM PST

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      •  Ignorance of what law? (2+ / 0-)
        Recommended by:
        cotterperson, Mr Robert

        Is making bad investments against the law? Is selling assets which don't perform a crime?

        Of course if they purposefully misled investors, then they should be held criminally liable. At least in the investigation I was a part of, it wasn't clear to me that they did mislead the investors who purchased these securities. Other banks may have been intentionally pushing toxic assets at investors - I don't know.

        My original point was that there were ongoing investigations contrary to the diarists (and many commenter's point), and that it's taking a long time because in order to prove that these banks were acting intentionally, you have to piece together millions of pieces of evidence over the span of several years.

        It takes a lot of time, and based on my experience it would be very difficult to prove. Like I said above, it wasn't clear to me that (at least this bank in particular) misled its investors, and you need probable cause to charge someone of committing a crime. This is clearly another reason that so many of these cases have been settled without trial. The trials would take years and years, and the chances of a conviction would've been questionable at best. Like I mentioned, discovery on the investigation I was working on just wrapped up. In 2012. That's four years for one investigation of one bank.

        I mean, this is part of what makes these banks too big to fail, too big to prosecute, and too big to exist. The failure to break up these behemoths was perhaps the biggest missed opportunity of Obama's first term.

    •  So I was a banking (4+ / 0-)

      lawyer during the S&L crisis.  Beyond the criminal, though, many of the S&L's went down due to falling property values in certain regions (eg Texas) and others bought instruments that they did not understand.

      The difference: the S&L crisis was not nearly as systemic as this one was.

      The bitter truth of deep inequality has been disguised by an era of cheap imported goods and the anyone-can-make-it celebrity myth - Polly Toynbee

      by fladem on Thu Jan 24, 2013 at 10:02:47 AM PST

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