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Why have no executives gone to jail for their roles in the financial crisis? Because risk-taking...

Why have no executives gone to jail for their roles in the financial crisis? Because risk-taking and stupidity aren't criminal, Roger Lowenstein writes. "To look for criminality as the supposed source of the crisis is to misread its origins badly."
Comments (48)
  • Neil459
    , contributor
    Comments (2644) | Send Message
     
    For once someone got it right. This was all sanctioned by the government either through willful planning, ignorant policy making, or blind ideology. The problem is with the politicians not the executives. We have lax enforcement, laws to reward certain ideology in voters, and we have greed and theft. But the voters continue to believe the politicians when they lie to blame others. Politician's are professional liars, why anyone believes them is a mystery to me. Will not really, they believe them so they can get their own handout.
    13 May 2011, 05:55 PM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4845) | Send Message
     
    Neil459

     

    Agree to a large degree but you will not get much love from the "paranoid" who were perfectly described in this article and have their own narrative to describe all events and serve as prosecutor, judge and jury. And politicians who own the microphone are pointing the pitchfork crowd at executives because they don't want them at their doorstep.

     

    Nobody wants to hear this but this is the stampede of the crowd being manipulated by populist button pushers.

     

    Expect a lot of thumbs down but no comments.
    14 May 2011, 12:01 AM Reply Like
  • bbro
    , contributor
    Comments (9309) | Send Message
     
    Here is a good list to blame...www.time.com/time/spec...

     

    Note # 5...
    13 May 2011, 06:04 PM Reply Like
  • Neil459
    , contributor
    Comments (2644) | Send Message
     
    "Here is a good list to blame...time.com/time/spec..."

     

    Sorry but Time is about the worst source for any facts. A number of people that really should be blamed are completely missing on the list. Not that I necessarily disagree with #5, its just that the list overall is heavily biased.
    13 May 2011, 06:22 PM Reply Like
  • Duude
    , contributor
    Comments (3358) | Send Message
     
    Yeah, thats a good start of the culprits, but some don't really deserve to be there and other critical players are missing. Not really deserving to be there is, Lew Ranieri who started the securitization of mortgage backed bonds. It wasn't the securitization that is at fault rather the later securitization of sub-prime bonds which he had nothing to do. On the other hand, Fannie and Freddie wouldn't have become nearly the problems they later became if one half the house banking committee wasn't so ignorant and unwilling to heed the whistleblowers. We've all seen the house banking committee hearings on youtube. We all the congressmen involved.
    13 May 2011, 06:25 PM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4845) | Send Message
     
    That lineup in Time Magazine is pretty irresponsible but sensational which I guess is what they want.
    13 May 2011, 09:48 PM Reply Like
  • Fr33f0rm
    , contributor
    Comments (300) | Send Message
     
    The problem is that the financial power players skirt the line between amorality and immorality.

     

    Anyone that has seen Trump speak has probably observed him bragging about how he ruined one of his enemies or conned someone he thought deserved to be conned.

     

    Among financial players, Trump has one of the biggest mouths but not the biggest pockets. Powerful men like those pictured in the article know when to keep their mouths shut and have learned to profit from malfeasance without being connected to it.

     

    I don't care if a CEO runs his company to the ground but when he can legally do it with government guarantees...there is something horribly wrong with the system.

     

    There is one simple solution...break up the banks...they have formed a very powerful oligopoly and are armed with the TBTF guarantee.

     

    I say...break them up and you've shattered TBTF.
    13 May 2011, 06:31 PM Reply Like
  • mike mohr
    , contributor
    Comments (451) | Send Message
     
    A shill for Goldman.
    13 May 2011, 07:10 PM Reply Like
  • mike mohr
    , contributor
    Comments (451) | Send Message
     
    "Prosecutors investigated Mozilo but didn't charge him. Their decision was disappointing at an emotional level, but indictments cannot be geared to repairing feelings of frustration. Lanny Breuer, head of the Justice Dept.'s criminal division, told NPR he sought to bring cases only where guilt could be proved beyond a reasonable doubt, and without filtering decisions through the screen of public opinion. This statement was remarkable only in that Breuer felt it had to be said. "

     

    Average person will be in jail but the untouchables are always innocent. These guys have politicians and judges in their back pocket they always go free.
    13 May 2011, 07:15 PM Reply Like
  • jstratt
    , contributor
    Comments (2201) | Send Message
     
    So the author suggests that the following are not criminal acts.

     

    1) Blatent Mortgage fraud including certifying to a court that all records were reviewed when in Millions of cases they were not.

     

    2) Ratings agencies selling fraudulent ratings for additional business

     

    3) Flash trading which allows special advantages including viewing your trade to trade ahead of you

     

    4) Picking the worst available Mortgage risk securities to package and sell to Pensions and institutions to bet heavily against and make huge profits

     

    I could list more but the point is the author of this post has become so desensitized to fraud that he doesnt even recognize it anymore. It wasnt just fraud it was outrageous in your face fraud meant to seriously cripple its victims.
    13 May 2011, 07:27 PM Reply Like
  • Nyarlathotep
    , contributor
    Comments (19) | Send Message
     
    So we're not criminal but STUPID? That's the latest excuse now?
    Its no wonder we are falling behind other nations RAPIDLY.
    Hopefully we'll get our second wind and CLEAN SHOP.
    13 May 2011, 07:53 PM Reply Like
  • rubberoptions
    , contributor
    Comments (400) | Send Message
     
    Roger Lowenstein's: When Genius Failed, is a highly riveting book about the LTCM bailout by Lehman, Bear, Merrill, Goldman etc2. having read first about the 2008 crash (as a cascade of events from Bear; culminating in Lehman) I'm left wondering why Bear, Lehman, Merrill, Citi never learned their lesson from the LTCM bailout? the reader can appreciate that LTCM was a precursor of nastier things to come. it's that 40-1 leverage that killed LTCM & Lehman.
    13 May 2011, 08:16 PM Reply Like
  • mike mohr
    , contributor
    Comments (451) | Send Message
     
    Yeah, Blankfien is stupid to take $26 million home for the year. He knew what he was doing.
    13 May 2011, 08:26 PM Reply Like
  • tigersam
    , contributor
    Comments (1711) | Send Message
     
    Only criminals were who bought these expensive assets which they can not afford. That caused the financial crises.
    13 May 2011, 09:02 PM Reply Like
  • Tom Armistead
    , contributor
    Comments (5219) | Send Message
     
    The article glosses over the definition of criminal fraud, which varies by jurisdiction, with specific definitions for securities, banking and insurance, among other activities, as well as general definitions.

     

    A broad assertion that intent is hard to prove is about as far as the author goes in terms of discussing the actual principles of law involved.

     

    Federally insured financial institutions are required to file SAR's (suspicious activity reports), which are collected by FinCEN (The Financial Crimes Enforcement Network). There have been around 70,000 such reports per year in recent years. That would be about mortgage fraud, which is a big part of the criminal activity that caused the financial crisis. in 2010, the FBI secured 970 convictions of mortgage fraud.

     

    Part of it is power, prestige and connections. And part of it is that everybody was doing it. But the fact remains that a determined prosecutor could easily prove fraud on many high level employees of big banks. They told lies so they take other people's money and put it in their pockets. That would be fraud.
    13 May 2011, 09:03 PM Reply Like
  • Jesse99
    , contributor
    Comments (127) | Send Message
     
    Setting aside the issue of jail for a moment, can we at least recognize that although possibly not illegal, stupidity should at least not be rewarded.
    13 May 2011, 09:51 PM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4845) | Send Message
     
    What do you suggest?
    13 May 2011, 09:57 PM Reply Like
  • Fr33f0rm
    , contributor
    Comments (300) | Send Message
     
    The biggest problem is that the system has so many gray lines that the cost of prosecution and the likelihood of success make most of these potential lawsuits useless.

     

    Glass-Stegall was a step in the right direction. There need to be more concrete definitions of acceptable and unacceptable activities if there is to be any expectation of adherence to any kind of code of conduct.
    16 May 2011, 01:34 PM Reply Like
  • Tom Armistead
    , contributor
    Comments (5219) | Send Message
     
    The bankers see very pale shades of grey where others see black.
    16 May 2011, 01:36 PM Reply Like
  • Rookie IRA Investor
    , contributor
    Comments (2537) | Send Message
     
    It is interesting that the feds are going after online poker companies even though there is an argument to be made that this is suppression of legal international trade. Generally the routine is that a country cannot make it illegal for its residents to do something overseas that is legal at home, and there is legal poker in Las Vegas and on Indian reservations in the US.

     

    Still, I guess the harm done by online poker is so great relative to the minor irritation caused by bankers securitizing mortgages and building credit default swap Ponzi schemes, that it justifies the effort to bring the culprits to justice.
    16 May 2011, 01:48 PM Reply Like
  • neutrinoman
    , contributor
    Comments (700) | Send Message
     
    No, they're not criminal. But politicians encouraging them, bailing them out, and then demagoguing the issue is -- or ought to be.
    13 May 2011, 10:50 PM Reply Like
  • buyitcheap
    , contributor
    Comments (1848) | Send Message
     
    If not, then why are the taxpayers covering it? Aren't these the same stupid risk takers that had to be retained to "workout" all of these complex trades and securities?

     

    Sorry, but if you securitize an underlying that you know is fraudulent for any reason, you're not just stupid, you're a criminal.
    13 May 2011, 11:41 PM Reply Like
  • Roger Erickson
    , contributor
    Comments (187) | Send Message
     
    So Benedict Arnold was just stupid?

     

    It's impossible not to wonder which lobby Lowenstein works for. Is there an AOCF lobby yet? Perhaps by some other name?

     

    AOCF = Association of Organized Control Frauds?

     

    Engineering of Consent has now moved to engineering of plausible diversions.

     

    www.youtube.com/watch?...

     

    How long until we see a similar video on Lowenstein's activities?
    13 May 2011, 11:52 PM Reply Like
  • davidbdc
    , contributor
    Comments (3141) | Send Message
     
    I find the article to be basically saying - "Yes, fraud occurred but it was but a small piece of what was wrong so lets just forget about it".

     

    He outlines Lehman's fraud but tries to put it in "context".

     

    Fraud is fraud. I don't care if Lehman had 500 Billion total and only 50 Billion of fraudulent activities - so you see 90% was legal??? Throw Fuld in jail for the 50 billion fraud!!!! What the hell is wrong with our country?

     

    If you don't prosecute the blatant fraud, how do you think you'll ever clean up all the stuff that "is in the gray area"??? The only way to keep some people from crossing the line is to scare them into realizing that one more step and they run the risk of going to jail. If you don't prosecute what everyone and their brother knows is fraud, then all the stuff thats just "kind of fraud" is deemed totally ok and you'll get a lot more of it!!!!

     

    The real problem is that we've developed a triumvirate of the financial elite, bureaucrats, and politicians that believe they are the "rightful" people - rightfully paid better if your the bureaucrat - rightfully making the laws and taking bribes if your the politicians - and rightfully pocketing millions irregardless of performance if your the financial elite. To prosecute any of these folks for fraud would be an attack on the crony capitalism we now have in the USSR.
    13 May 2011, 11:57 PM Reply Like
  • Sleestakk
    , contributor
    Comments (121) | Send Message
     
    Lowenstein's argument is a sack of horse manure and he has straw for brains.

     

    So what he wants us to buy is that 12 to 20 trillion in losses that had to be backed by the fed reserve and treasury was mere stupidity.

     

    Sorry but that level of "stupidity" deserves the chair.
    14 May 2011, 01:57 AM Reply Like
  • Tack
    , contributor
    Comments (12717) | Send Message
     
    It's become a societal necessity in our culture to have someone else to blame, loudly and publicly, so nobody has to accept their own responsibility and can instead assume their rightful position of "victim."
    14 May 2011, 03:58 AM Reply Like
  • davidbdc
    , contributor
    Comments (3141) | Send Message
     
    Tack,

     

    This isn't about "blame". I'm all for prosecuting both the large and small fraud that has taken place. Blatantly lied to get a mortgage - prosecute. Blatantly changed mortgage forms to get them approved - prosecute. Blatantly hid $50 Billion off the balance sheet - prosecute.

     

    And I'm for zero bailouts. Borrowed 500K and you can't pay the mortgage - move out. Borrowed 100K and you can't pay the mortgage - move out. Ran your firm into the ground and can't pay the rent - declare BK.

     

    Until we both enforce the law, and allow failures to fail we'll continue having nothing but a truly corrupt system. Right now the USA is no better than the banana republics and 3rd world dictators we used to regularly make fun of. We are now the USSR!
    14 May 2011, 02:06 PM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4845) | Send Message
     
    David:

     

    If stupidity was an offense we would have most of the population behind bars and a minority on the outside feeding them 3 meals a day.

     

    There are a lot of consumers who don't have good math skills that were told by their mortgage broker that they could afford the house and this was their golden chance and if they wanted to sell again in 6 months it would probably be worth more so jump in with both feet. Given that they are adults they really don't have an excuse for entering into a contract without understanding the terms the same as they could not be an accomplice in robbing a grocery story and say it was not their idea. Ignorance provides no relief from clear and provable violations of the law.

     

    It is just as dumbfounding to look at the management of Bear Stearns, Merrill Lynch and Lehman Brothers and wonder how they could not see the massive risk they carried on their balance sheets which they could not afford. Jimmy Cayne was so oblivious he was playing Bridge as the company melted down. If you look at the stock options they all held and especially at Bear and Lehman there is no reason they would intentionally run the company in the ground so they were basically stupid and irresponsible.

     

    You are right that there are plenty of people who falsified documents and made false claims at all levels or were just plain stupid. I am not sure we have enough courtrooms and jails to hold them all.

     

    But I agree it would not hurt to throw people in jail if they can be proven guilty because too many people are too relaxed about breaking the law. It is a worthwhile effort just to draw a line in the sand and remind people that there are consequences.
    14 May 2011, 10:49 PM Reply Like
  • Joe Morgan
    , contributor
    Comments (1500) | Send Message
     
    Tack, very true....people don't have the courage to say they were at fault.....they should ask themselves; why I bought a home knowing I couldn't paid it? Why always I need a nanny(government) telling me what it is right for me?

     

    The biggest culprit of all the housing mess was the politicians who put pressure to make home loans affordable to everyone. Wall Street just took the opportunity to make profits......
    14 May 2011, 07:39 AM Reply Like
  • tigersam
    , contributor
    Comments (1711) | Send Message
     
    90% Fault, who bought the houses, went on Cruz by taking loans, bought expensive cars etc.(these are adults not children)
    5% Fault, politicians who put pressure
    4% Fault, broker who convinced to buy
    1% Fault, Financial companies

     

    99% on this board are blaming financial companies.
    14 May 2011, 07:56 AM Reply Like
  • Tom Armistead
    , contributor
    Comments (5219) | Send Message
     
    There are a lot of us who owned our homes free and clear. I am one of them.

     

    There are also a lot of people who had affordable mortgages on right sized houses.

     

    Needless to say we are aggravated that the banksters and a bunch of small time liars and crooks whom they enable managed to bring the financial system and the economy to the brink of disaster.

     

    Yet once more: they told lies in order to get other people to part with their money. That is fraud.
    14 May 2011, 11:03 AM Reply Like
  • Tom Armistead
    , contributor
    Comments (5219) | Send Message
     
    So I was not at fault. And there are a lot of us who were not at fault. As such we are innocent victims.

     

    Here's a areal easy answer. Put enough banksters in jail serving long and hard time and that will be an example for the rest of them: don't enable people who want to flip houses. Don't enable people who expect to make a fortune by claiming to owner occupy multiple houses. Don't just go along with totally fraudulent mortgages under the theory you can pass the loss down the line.

     

    The reason not to do that would be: you will spend the rest of your life in jail, and not a country club type of white collar facility.
    14 May 2011, 11:08 AM Reply Like
  • Nyarlathotep
    , contributor
    Comments (19) | Send Message
     
    Great, tigerscam, blame the victims and not the aggressors.

     

    You should be our next drug czar.
    14 May 2011, 04:47 PM Reply Like
  • tigersam
    , contributor
    Comments (1711) | Send Message
     
    Nyarlathotep:
    I already have a czar names Azathoth. Your a just the messenger. I guess you are belong to 95% who bought the expensive assets. You will manage since your are deceptive and manipulative.

     

    Good luck with wiping the earth!
    15 May 2011, 08:10 AM Reply Like
  • Nyarlathotep
    , contributor
    Comments (19) | Send Message
     
    I am the heart, soul and mind, not just a mere messenger.

     

    Look, English does not appear to be your native language,

     

    and it doesn't seem like you live here. Your opinion does not matter.
    15 May 2011, 09:27 PM Reply Like
  • tigersam
    , contributor
    Comments (1711) | Send Message
     
    Nazi Nuarlathotep:
    Cut your squid legs and feed to your family as calamari. At least you will recover some money.
    16 May 2011, 06:09 AM Reply Like
  • Ken Hasner
    , contributor
    Comments (427) | Send Message
     
    Here are the realities....perhaps they did not break the law (although as a former registered financial professional I believe they broke boke fiduciary and fraud statutes in regard to their shareholders and debt holders, respectively), but perhaps the laws are not adequately framed because of the influence of the financial lobby. So instead of re-focusing on the past we need to focus on the future and the only way to do that is to purge the system of corrupt lawmakers who should be working for us and not Wall Street.
    14 May 2011, 08:31 AM Reply Like
  • lower98th
    , contributor
    Comments (1420) | Send Message
     
    Risk-taking and stupidity....the bankers took the same risk Madoff did: That they could take the risk, cook the books, cover-up and replace before anyone was the wiser. And no homeowner ever compounded the problem by phonying up MBS packages and passing them off to supposed clients.
    14 May 2011, 09:11 AM Reply Like
  • Rookie IRA Investor
    , contributor
    Comments (2537) | Send Message
     
    The fact that bankers have not been prosecuted and have been allowed to escape with the loot has done a great deal to undermine law and order in general.

     

    When the Mortgage Bankers of America defaulted on their $75 million dollar mortgage, they opened the door for every homeowner in the US with an underwater mortgage to stop making payments and spend a couple of years debt proofing themselves for an impending bankruptcy.

     

    online.wsj.com/article...

     

    When the big bankers got away with their credit default swap Ponzi scheme the fact that the Free Market is a Big Lie was exposed. The message broadcast to the general public was that finance is not like medicine, it is a field in which anything goes and the very rich can always buy their way out, even if it means buying politicians or Supreme Court judges.
    14 May 2011, 10:29 AM Reply Like
  • Rookie IRA Investor
    , contributor
    Comments (2537) | Send Message
     
    For a start the FBI could investigate whether big banks paid bribes to the credit rating agencies to give their instruments higher ratings than they deserved or to not properly investigate them.

     

    If a connection was found between higher ratings and higher payments to the credit rating agencies, this would be prima facie evidence of activity that could be prosecuted under RICO laws that would permit the confiscation and freezing of the assets of the offenders even before they could hire lawyers.

     

    The original drafter of the RICO Bill Robert Blakey said that although its primary intent was to deal with organized crime, that Congress never intended it to merely apply to the Mob. He once told Time Magazine, "We don't want one set of rules for people whose collars are blue or whose names end in vowels, and another set for those whose collars are white and have Ivy League diplomas." [Wikipedia]
    14 May 2011, 12:46 PM Reply Like
  • Rookie IRA Investor
    , contributor
    Comments (2537) | Send Message
     
    "Because risk-taking and stupidity aren't criminal, Roger Lowenstein writes. "To look for criminality as the supposed source of the crisis is to misread its origins badly." "

     

    One more point and then I shut up. Is BP allowed to use this defense over the Gulf of Mexico fiasco?

     

    "Look, yes we were stupid and we took some big risks because we were going to get large bonuses if we could get the Macondo well finished by a certain date. Yes, the oil rig blew up and a number of men were killed, and yes a few million fish died, and of course thousands of fishermen were thrown out of work for the summer. But, hey, we were stupid and we took big risks, but don't act like we are criminals. Criminals are black guys in projects selling drugs. That's not us. So cool it."
    14 May 2011, 01:26 PM Reply Like
  • dividend_growth
    , contributor
    Comments (2878) | Send Message
     
    Maybe they can be spared prison times, but their fortunes, especially their golden parachutes, should be utterly wiped out.
    14 May 2011, 03:02 PM Reply Like
  • Tom Armistead
    , contributor
    Comments (5219) | Send Message
     
    I was thinking maybe everybody could get two weeks per incident.

     

    They guy who fudged his income by 10,000 in order to qualify for a house he actually intended to live would get two weeks.

     

    The guy who claimed he was going to owner occupy 6 houses that were speculative investments would get 90 days.

     

    The bank executive who signed off on bogus RMBS containing 2,572 fraudulent mortgages would get 98 years.

     

    Anybody with more than 1 strike against him could also make restitution, to the limit of his means.
    14 May 2011, 04:40 PM Reply Like
  • Rookie IRA Investor
    , contributor
    Comments (2537) | Send Message
     
    "There are a lot of consumers who don't have good math skills that were told by their mortgage broker that they could afford the house and this was their golden chance and if they wanted to sell again in 6 months it would probably be worth more so jump in with both feet."

     

    There were also a lot of people called appraisers who are supposed to have reasonable math skills, who were licensed by the state of Florida (and other states) as professionals whose job was to determine how much homes were worth using a variety of measures such as what similar homes sold for and how much it would cost to build such a home from scratch.

     

    These so-called experts told people that the properties had certain values and people assumed they knew what they were talking about. They didn't assume that these licensed appraisers just pulled a number out of their ass to make sure a deal went through.

     

    The point is this. Ordinary people used to think that people like real estate brokers and appraisers and bankers are professionals in the same kind of way that medical providers are professionals--that they have a duty of care to provide the best possible advice to clients.

     

    However the truth is now out that this is not so. Real estate professionals and appraisers and bankers are not much different from organized crime. There is really no difference between Meyer Lansky and Lloyd Blankfein.
    15 May 2011, 08:40 AM Reply Like
  • Ken Hasner
    , contributor
    Comments (427) | Send Message
     
    "There is really no difference between Meyer Lansky and Lloyd Blankfein."

     

    I think Loyd probably paid more for his suits....
    15 May 2011, 09:12 AM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4845) | Send Message
     
    A fool and his money are soon parted.........16th century English proverb. A fool is someone who is to lazy to do the homework and wants someone to tell them what to do.

     

    My father in law only graduated the 8th grade but he did his homework on everything and he was never burned by anyone.

     

    Ignorance is not an excuse.
    15 May 2011, 05:02 PM Reply Like
  • tigersam
    , contributor
    Comments (1711) | Send Message
     
    Your father comes from old school where homework is important. Now a days even guys from Hayward or MIT are not smart like your father.
    16 May 2011, 02:05 PM Reply Like
  • marpy
    , contributor
    Comments (683) | Send Message
     
    Maybe everyone should try that excuse the next time they get caught! Judge - you can not fine me for speeding or send me to jail for drunk driving as I was stupid and engaged in risk taking. Plain and simple, IMO some scum bags broke a lot of different laws and should go to jail.
    15 May 2011, 05:11 PM Reply Like
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