Banks Bundled Bad Debt, Bet Against It and Won

[Proton Soup]

I'm a fan of justice, and even the occasional bloody revenge, but spending money to put people in jail who are already banned from trading seems like... a waste of money.

i think it is wrong to treat white-collar crimes as something less than acts of violence.

Well, I see no problem in simply letting the public at them... or maybe banishment from the country?

Anyway, the kind of justice I'd want would never occur (BlutRache) in the form of bloody revenge, so... forget it. Still, it would be a lot of fun to use Enhanced Interrogation to get money out of them! Classify them as economic terrorists...

if things get bad enough financially in the US, i think you will see violence, same as in other parts of the world. I'm just not sure it will be anything more than random. the people hurt the most will be the ones most ignorant of who did it to them, and of the least means if they did.

 

[russ_watters]

There is an irony to all this that I didn't see before:

While the article uses hyperbole to draw a wide chasm between who actually went to jail ("no one...except Madoff", they claim) and who they wanted to go to jail ("[everyone who works on] Wall Street"), the reality is that they really aren't interested in all that many people. They are only really interested in the leaders.

For example, people are generally pretty happy with the resolution to the Madoff scandal: The leader and a one or two (not actually sure how many) of the high level execs went to jail and much of the money is going to be recovered, so people are happy. But Madoff almost certainly had quite a bit of help from people much lower down: twenty-something number-crunchers who did virtually all of the actual fraud on his behalf. These people are almost never jailed and for all the hyperbole of the article's title, almost never given much thought.

 

[WhoWee]

There is an irony to all this that I didn't see before:

While the article uses hyperbole to draw a wide chasm between who actually went to jail ("no one...except Madoff", they claim) and who they wanted to go to jail ("[everyone who works on] Wall Street"), the reality is that they really aren't interested in all that many people. They are only really interested in the leaders.

For example, people are generally pretty happy with the resolution to the Madoff scandal: The leader and a one or two (not actually sure how many) of the high level execs went to jail and much of the money is going to be recovered, so people are happy. But Madoff almost certainly had quite a bit of help from people much lower down: twenty-something number-crunchers who did virtually all of the actual fraud on his behalf. These people are almost never jailed and for all the hyperbole of the article's title, almost never given much thought.

EVERY EMPLOYEE with a securities license should have known better. The lawyers and paralegals should have also been able to identify a problem. The accountants (CPA's especially) should have known and MBA's have no excuse. We'll pretend that secretaries, assistants, and receptionists mind their own business - never hear a thing? These people were not hired at the corner for day-labor.

 

[WhoWee]

Going back to the bad debt for a moment.

One way to soften a market correction might be to re-structure all troubled loans - by lengthening. Why not extend to 50 years at a low fixed interest rate - perhaps 3.25%? A mortgage of $250,000 financed at 3.25% for 50 years would have a payment of under $850 per month (60 years under $800). The banks would keep the loans at face value (unlike the plan being kicked around DC now) and foreclosures would be reduced.

Who might takes a hit - not the Government, not the banks, not the homeowners, and not the loan originator - most likely companies that purchased the re-bundled portfolios. The investors in the pools would be secure - but realize lower rates of return.

This type of market re-set would restrict the in-flow of cheap product (less foreclosures) and the re-surgance of building could begin sooner - probably smaller, more affordable homes?

 

[edward]

Inside the Meltdown video is still online

http://www.pbs.org/wgbh/pages/frontline/meltdown/view/

 

[mugaliens]

Given the nature of the responses, it appears PF has been overrun by financial gurus trying to affirmm their right to whatever.

 

[WhoWee]

Given the nature of the responses, it appears PF has been overrun by financial gurus trying to affirmm their right to whatever.

Fair enough? As details emerge about the President Obama plan to have banks write down the loan amounts - for select loans - it makes me wonder how their "guru's" plot strategy - is it political or economic?

 

[nismaratwork]

Fair enough? As details emerge about the President Obama plan to have banks write down the loan amounts - for select loans - it makes me wonder how their "guru's" plot strategy - is it political or economic?

It would seem that at least one study about beating or even matching the market indicates they, "perform about as well as a chimpanzee throwing darts." (SciAm, Michael Shermer quoting study author)

 

[WhoWee]

It would seem that at least one study about beating or even matching the market indicates they, "perform about as well as a chimpanzee throwing darts." (SciAm, Michael Shermer quoting study author)

Hey, don't laugh - in 1986 (to relieve stress during the crash) we actually ran a comparison chart to our portfolio and some public funds - against our "DART FUND". We took turns throwing darts at a newspaper and tracked the results.

After about 90 days, both our portfolio and the "DART FUND" beat the public funds. Unfortunately, we only "capitalized" the DART FUND with a small amount - again, it was to relieve stress.

 

[nismaratwork]

Hey, don't laugh - in 1986 (to relieve stress during the crash) we actually ran a comparison chart to our portfolio and some public funds - against our "DART FUND". We took turns throwing darts at a newspaper and tracked the results.

After about 90 days, both our portfolio and the "DART FUND" beat the public funds. Unfortunately, we only "capitalized" the DART FUND with a small amount - again, it was to relieve stress.

I'm not laughing, more and more studies make it clear that if you want to match the market, you should throw darts; I was deadly serious, as was that quote from the study author.

 

[OmCheeto]

Looks like another radical hippy read that Rolling Stone article:

http://english.aljazeera.net/indepth/opinion/2011/02/2011226131635826806.html#"
Wall Street crime goes deeper: The system means prosecutors fail to jail corporate criminals.
Danny Schechter
Last Modified: 26 Feb 2011 17:16 GMT
Opinion section of Al Jazeera

... Hats off to Matt Taibbi for staying on the Wall Street crime beat...

"Financial crooks," he argues, "brought down the world's economy — but the feds are doing more to protect them than to prosecute them."

True enough, but that’s only part of the story.

...

Ten problems

You could see that when television host Bill Mahrer pressed Taibbi to name the biggest Wall Street crooks, on his weekly political comedy show, he didn't fully understand what we are really up against.

...

It's a bit of a read, so here is my synopsis of Danny's enumeration:

First: Banksters decriminalized what they were about to do, via Washington of course.
Second: They then invented, um, I can't remember what they were called, but I believe Alan Greenspan said he didn't understand them.
Third: They then waved their hands in front of everyone and said; "It's scientific economics!"
Fourth: Foxes were put in charge of the hen house. (Wall Streeters go to Washington!)
Fifth: Wall Street advertised that there was nothing wrong
Sixth: Lawyers got involved
Seventh: I don't understand this one. I'll let http://www.whitecollarfraud.com/" sum it up; "We have no respect for the laws. We consider your codes of ethics, and your laws, weaknesses to be exploited in the execution of our crimes."
Eighth: Washington is not willing to accept that America is no longer the center of the universe.
Ninth: Excuse for the above; "Everyone did it!"
Tenth: We sit around PF discussing this like it's something out of a classroom homework assignment.

I'll finish off with Danny's summary paragraph:

When will we call a crime a crime? When will we demand a jail-out, not just more bail-outs. Unless we do, and until we do, the people who created the worst crisis in our time will, in effect, get away with the biggest rip-off in history.

bolding mine

contact information:
http://www.senate.gov/general/contact_information/senators_cfm.cfm"
http://www.house.gov/house/MemberWWW_by_State.shtml"

 

[nismaratwork]

Looks like another radical hippy read that Rolling Stone article:


It's a bit of a read, so here is my synopsis of Danny's enumeration:

First: Banksters decriminalized what they were about to do, via Washington of course.
Second: They then invented, um, I can't remember what they were called, but I believe Alan Greenspan said he didn't understand them.
Third: They then waved their hands in front of everyone and said; "It's scientific economics!"
Fourth: Foxes were put in charge of the hen house. (Wall Streeters go to Washington!)
Fifth: Wall Street advertised that there was nothing wrong
Sixth: Lawyers got involved
Seventh: I don't understand this one. I'll let http://www.whitecollarfraud.com/" sum it up; "We have no respect for the laws. We consider your codes of ethics, and your laws, weaknesses to be exploited in the execution of our crimes."Eighth: Washington is not willing to accept that America is no longer the center of the universe.
Ninth: Excuse for the above; "Everyone did it!"
Tenth: We sit around PF discussing this like it's something out of a classroom homework assignment.

I'll finish off with Danny's summary paragraph:


bolding mine

contact information:
http://www.senate.gov/general/contact_information/senators_cfm.cfm"
http://www.house.gov/house/MemberWWW_by_State.shtml"

Re: bolding mine: That is one of the purest expressions of relatively organized sociopathic thinking I've read or heard in a very long time.

Last time I've heard such a blatant expression of pure ASPD

"Ich fahren die Weise Geschick hat spitz mich, gefällt ein bemannen gehend in sein schläfst."(Adolf Hitler)
"I go the way that fate has pointed me, like a man walking in his sleep." (Adolf Hitler)

 

[OmCheeto]

Re: bolding mine: That is one of the purest expressions of relatively organized sociopathic thinking I've read or heard in a very long time.

Last time I've heard such a blatant expression of pure ASPD

"Ich fahren die Weise Geschick hat spitz mich, gefällt ein bemannen gehend in sein schläfst."(Adolf Hitler)
"I go the way that fate has pointed me, like a man walking in his sleep." (Adolf Hitler)

Since you've only been here less than a year, I will forgive you this one my friend.

Godwin's law
(also known as Godwin's Rule of Nazi Analogies or Godwin's Law of Nazi Analogies)
is a humorous observation made by Mike Godwin in 1990 which has become an Internet adage. It states: "As an online discussion grows longer, the probability of a comparison involving Nazis or Hitler approaches 1." In other words, Godwin put forth the hyperbolic observation that, given enough time, in any online discussion—regardless of topic or scope— someone inevitably criticizes some point made in the discussion by comparing it to beliefs held by Hitler and the Nazis.

Though I agree completely with your analysis that that the Wall Street environment appears to encourage sociopathic behavior.

 

[nismaratwork]

Since you've only been here less than a year, I will forgive you this one my friend.



Though I agree completely with your analysis that that the Wall Street environment appears to encourage sociopathic behavior.

I should be clear on a couple of points... first, other than historical figures, and some contemporaries such as Stalin... nobody has anything on Hitler. My comparison wasn't the behavior in any way, but rather the pure expression of sociopathy. It's rare to find a reflective sociopath, or rather, one capable of even modest (if fleeting) insight... Hitler's quote is a fine example.


I can think of little in the world that compares with Nazi Germany, or Stalin's Russia; they are not singular, but very nearly so.

 

[OmCheeto]

I should be clear on a couple of points... first, other than historical figures, and some contemporaries such as Stalin... nobody has anything on Hitler. My comparison wasn't the behavior in any way, but rather the pure expression of sociopathy. It's rare to find a reflective sociopath, or rather, one capable of even modest (if fleeting) insight... Hitler's quote is a fine example.


I can think of little in the world that compares with Nazi Germany, or Stalin's Russia; they are not singular, but very nearly so.

I should point out that my mother was in the German Luftwaffe during WWII, so I am aware of how simple humans can be swayed and swallowed by events surrounding them. Seeing the black and white photograph of her, with the swastika on her broach, and that proud glowing smile in her uniform when she was sixteen, I often reflect on what I would do in other peoples shoes.

So I can kind of see your analogy. Wall Street is no different. It is an entity filled with such people. There are leaders, followers, clerks, technicians, etc. etc.

Power, wealth, and googly eyed poor people looking up in awe, thinking that they'd like to be there too, and hence, letting it all happen.

Going over the http://en.wikipedia.org/wiki/Antisocial_personality_disorder#Signs_and_symptoms", it looks as though we have rules and regulations that keep this kind of behavior in check in normal society. Unfortunately, the language of Wall Street has been bastardized to the point where when they tell congress, "This will make the market more efficient if we do this.", congress, and the public, hears something totally different from what is actually meant.

 

[nismaratwork]

I should point out that my mother was in the German Luftwaffe during WWII, so I am aware of how simple humans can be swayed and swallowed by events surrounding them. Seeing the black and white photograph of her, with the swastika on her broach, and that proud glowing smile in her uniform when she was sixteen, I often reflect on what I would do in other peoples shoes.

Intersting... my grandfather fought for the USA in the Pacific theatre... still, neither of us are our parents. I think it's very important to draw a distinction between a child or even a young person swept up in events without having any real exposure to their consequences, and a sociopath. I don't know your mother obviously, but there's a world of difference between... and really, I meant nothing in general about Nazis; it was specifically the utter lack of self restraint and the predatory "sleepwalker" analogy.

So I can kind of see your analogy. Wall Street is no different. It is an entity filled with such people. There are leaders, followers, clerks, technicians, etc. etc.

I think you're right, but that's not the analogy I was drawing... it was a comparison between two organized sociopaths.

Power, wealth, and googly eyed poor people looking up in awe, thinking that they'd like to be there too, and hence, letting it all happen.

Going over the http://en.wikipedia.org/wiki/Antisocial_personality_disorder#Signs_and_symptoms", it looks as though we have rules and regulations that keep this kind of behavior in check in normal society. Unfortunately, the language of Wall Street has been bastardized to the point where when they tell congress, "This will make the market more efficient if we do this.", congress, and the public, hears something totally different from what is actually meant.

We have rules and regulations which pick up the minnows; the sharks find a way throught he nets, often because they're the ones making them to begin with.

In general, I wouldn't compare the endevour of fraud to mass murder and genocide. It is possible to compare the mental dysfunction of two people, who while they hurt the world in different ways, have the same non-ethos.

It's rare that a predator tells you how it hunts, and it's wise prey that listens carefully.

 

[WhoWee]

Looks like another radical hippy read that Rolling Stone article:


It's a bit of a read, so here is my synopsis of Danny's enumeration:

First: Banksters decriminalized what they were about to do, via Washington of course.
Second: They then invented, um, I can't remember what they were called, but I believe Alan Greenspan said he didn't understand them.
Third: They then waved their hands in front of everyone and said; "It's scientific economics!"
Fourth: Foxes were put in charge of the hen house. (Wall Streeters go to Washington!)
Fifth: Wall Street advertised that there was nothing wrong
Sixth: Lawyers got involved
Seventh: I don't understand this one. I'll let http://www.whitecollarfraud.com/" sum it up; "We have no respect for the laws. We consider your codes of ethics, and your laws, weaknesses to be exploited in the execution of our crimes."
Eighth: Washington is not willing to accept that America is no longer the center of the universe.
Ninth: Excuse for the above; "Everyone did it!"
Tenth: We sit around PF discussing this like it's something out of a classroom homework assignment.

I'll finish off with Danny's summary paragraph:


bolding mine

contact information:
http://www.senate.gov/general/contact_information/senators_cfm.cfm"
http://www.house.gov/house/MemberWWW_by_State.shtml"

Are you sure this wasn't another of Charlie Sheen's rants?

 

[chiro]

What banks are you referring to and what do you mean by "busted"? Besides the institutions that have been fined or bought-out, here's a list of roughly 400 banks that were taken over by the government in the past 3 years: http://www.fdic.gov/bank/individual/failed/banklist.html
I'll echo my previous point: hyperbole doesn't make for a convincing point here. It simply isn't true that "Nothing, nada, zip" happened.

After doing a little research I am glad that you are correct about investigations into Goldman Sachs, which is what is needed.

I'm am however still concerned that nothing will be done, or more correctly not enough will be done.

I would compare a "successful" outcome would be on the order of what happened in the Savings and Loans Crisis a while back in the states: that is the people that break the law go to jail instead of getting a small fine and/or a slap on the wrist.

 

[nismaratwork]

Are you sure this wasn't another of Charlie Sheen's rants?

Ooooh, wasn't that just a priceless bit of oratory from Sheen? I could hardly tell that he was out of his mind on coke!

 

[WhoWee]

We have rules and regulations which pick up the minnows; the sharks find a way throught he nets, often because they're the ones making them to begin with.

In spite of the the rhetoric about the evils and greed of "Wall Street", I trust the US system to protect me from harm more than the Asian and European capital markets.

 

[OmCheeto]

Intersting... my grandfather fought for the USA in the Pacific theatre... still, neither of us are our parents. I think it's very important to draw a distinction between a child or even a young person swept up in events without having any real exposure to their consequences, and a sociopath. I don't know your mother obviously, but there's a world of difference between... and really, I meant nothing in general about Nazis; it was specifically the utter lack of self restraint and the predatory "sleepwalker" analogy.

I think you're right, but that's not the analogy I was drawing... it was a comparison between two organized sociopaths.

Ok. I think I know where you are coming from now. But I still consider it a tenuous comparison.

I go the way that fate has pointed me, like a man walking in his sleep.

I interpret this as; "Don't blame me. Destiny makes me do what I do."

Whereas, Wall Street CEO's seem to be saying; "Don't blame me. This is what everyone is doing."

We have rules and regulations which pick up the minnows; the sharks find a way throught he nets, often because they're the ones making them to begin with.

In general, I wouldn't compare the endevour of fraud to mass murder and genocide. It is possible to compare the mental dysfunction of two people, who while they hurt the world in different ways, have the same non-ethos.

It's rare that a predator tells you how it hunts, and it's wise prey that listens carefully.

Yes. And it's even more fun when they come clean, and try and point out the thorns of the "machine".

To put the matter simply, market forces, if they are given complete authority even in the purely economic and financial arena, produce chaos and could ultimately lead to the downfall of the global capitalist systemhttp://www.leftbusinessobserver.com/Soros.html"

circa 1998

Guess the author!

 

[edward]

In spite of the the rhetoric about the evils and greed of "Wall Street", I trust the US system to protect me from harm more than the Asian and European capital markets.

For some reason I don't find that statement very reassuring.

 

[nismaratwork]

Ok. I think I know where you are coming from now. But I still consider it a tenuous comparison.

I interpret this as; "Don't blame me. Destiny makes me do what I do."

Whereas, Wall Street CEO's seem to be saying; "Don't blame me. This is what everyone is doing."





Yes. And it's even more fun when they come clean, and try and point out the thorns of the "machine".

circa 1998

Guess the author!

I can see your point, but again, it's more to do with the way that a sociopath is thought to perceive the world. Remember, lacking the kind of executive functions you'd expect in others, you find that the more organized ones tend to feel guided. At some point they need to explain their success, and in rare moments of what passes for their reflection, you get a sense of just how deeply lost they are in a world of morals.

More than that, these are two people talking about their own complete lack of responsibility in a way that only a psychopath can after doing so much harm. It's certainly not my best comparison ever, but I think it holds.

@WhoWee: We have more of a safety net, the behavior is essentially the same. I think we'd both agree we've burned that net by now too, and much of it is now appearance and habit that the world may decide to break one day.

Anyway, the kind of sharks I'm talking about always find a way; not all of them, but you ALWAYS have sharks in your nets if you fish long enough (sub large sample size).

 

[nismaratwork]

For some reason I don't find that statement very reassuring.

Probably because it's a choice between Scylla and Charibdis...

 

[edward]

The DVD of the documentary Inside Job will be available in stores starting on March 8th.

It won the Academy Award for best documentary last night.

http://www.insidejob.com/video/inside-job-official-trailer-in

 

[nismaratwork]

The DVD of the documentary Inside Job will be available in stores starting on March 8th.

It won the Academy Award for best documentary last night.

http://www.insidejob.com/video/inside-job-official-trailer-in

No doubt it will be labeled as some kind of "leftist hollywood elite... blah blah". Too bad, because it really is quite god, and very informative. Conclusive... no, but quite damning.

 

[WhoWee]

@WhoWee: We have more of a safety net, the behavior is essentially the same. I think we'd both agree we've burned that net by now too, and much of it is now appearance and habit that the world may decide to break one day.

Anyway, the kind of sharks I'm talking about always find a way; not all of them, but you ALWAYS have sharks in your nets if you fish long enough (sub large sample size).

Not sure of 100% agreement - some people have only themselves to blame. Rule of thumb when making an investment - don't pretend you understand a market (derivatives for instance) that you don't understand - because of potential returns.

 

[nismaratwork]

Not sure of 100% agreement - some people have only themselves to blame. Rule of thumb when making an investment - don't pretend you understand a market (derivatives for instance) that you don't understand - because of potential returns.

Some people should have been more responsible, but that still makes the blame more than your own. I have no sympathy for predators of human nature, only contempt and a cold desire to see them gone. Population size means that you will always find marks, and I find it hard to believe that you'd blame many other crimes on the victim.

 

[russ_watters]

Aprops: USA Today published a far more honest and even-handed article on exactly the same topic as the Rolling Stone article:

Why aren't more meltdown moguls indicted?

Should Americans be outraged that the meltdown moguls aren't headed for the slammer, as director Charles Ferguson suggested Sunday night when his documentary, Inside Job, won an Academy Award? Perhaps. But, nearly three years after the financial crisis hit, a better way to look at the lack of high-level indictments is as an indictment of the entire financial system — a system that was rife with avarice, ignorance and double-dealing. How do prosecutors find the bad apples in a putrid landfill?

...Why hasn't the financial crisis resulted in more criminal charges? It's possible that the Justice Department, focused on terrorism and short on financial-fraud experts, has dropped the ball in its investigations.

But a more likely explanation is that outright fraud was concentrated at the bottom of the food chain, with mortgage brokers who wrote up falsified loan applications. The big fish at the top were guilty mainly of greed, shortsightedness and mass delusion— which did far more damage.

http://www.usatoday.com/news/opinion/editorials/2011-02-28-editorial28_ST_N.htm

In the middle is a list of people we'd like to see go to jail but won't.

 

[Al68]

To put the matter simply, market forces, if they are given complete authority even in the purely economic and financial arena, produce chaos and could ultimately lead to the downfall of the global capitalist system.

circa 1998

Guess the author!

I'll guess it's a left wing nut-job like George Soros. Especially given the strawman tactic/faulty logic used in suggesting that anyone advocates "market forces" being "given authority". The statement makes no logical sense.

George Soros. Final answer.

 

[nismaratwork]

I'll guess it's a left wing nut-job like George Soros. Especially given the strawman tactic/faulty logic used in suggesting that anyone advocates "market forces" being "given authority". The statement makes no logical sense.

George Soros. Final answer.

Left wing "nut-job"? He's definitely left, but in what way is he a nut? He strikes me as extremely bright, but overly ideological... not an uncommon theme it seems...

 

[WhoWee]

Left wing "nut-job"? He's definitely left, but in what way is he a nut? He strikes me as extremely bright, but overly ideological... not an uncommon theme it seems...

 

[Al68]

Left wing "nut-job"? He's definitely left, but in what way is he a nut? He strikes me as extremely bright, but overly ideological... not an uncommon theme it seems...

I consider the inability to comprehend how depriving people of their liberty is harming them to be "nutty". That was my technical word for http://en.wikipedia.org/wiki/Sociopath" , ie a disregard for, and/or violation of the rights of others, and/or an associated lack of remorse/empathy for others.

 

[edward]

I'll guess it's a left wing nut-job like George Soros. Especially given the strawman tactic/faulty logic used in suggesting that anyone advocates "market forces" being "given authority". The statement makes no logical sense.

George Soros. Final answer.

The quote was an excerpt from Soros' book, The Crisis of Global Capitalism, and a bit off topic.

 

[Proton Soup]

Aprops: USA Today published a far more honest and even-handed article on exactly the same topic as the Rolling Stone article:
http://www.usatoday.com/news/opinion/editorials/2011-02-28-editorial28_ST_N.htm

In the middle is a list of people we'd like to see go to jail but won't.

the problem is a system that allowed it to happen in the first place. that is, Greenspan and other chiefs at the Federal Reserve actively opposed federal oversight.

the corruption, even if you want to say it is only corrupt thinking, is at the heart of government.