No execs (or anybody else) go to Jail
Continues to do business as usual
Pays a small fraction of its profits in fines (but gets to keep the multi-billions of tax-payer money under various govt. programs)
Admits to no wrong doing
Basically a speeding-ticket that gets dismissed when you pony up the cash after being caught drunk driving with dead body stuck on your fender.
According to wikipedia, Citi and Merrill were both fined for this. I don't know who was held legally accountable for misusing shareholder money but there was the worldcom fraud which ended in jail sentences.
It's quite tacky to name individuals who "should be in prison" without the benefit of all the facts that Gov investigators have. But it's safe to say if a "mid level" guy like Tourre was found guilty, that he was just an actor (w/knowledge) but there must be others more responsible for the fraud.
2) banks jump on the wagon, just as any other business would do having similar chance in their field
3) plenty of folks are plain math-stupid, lending as much as they can and trying even more for outright stupid reasons (ie TV, cars etc.) on top of other loans they already have, usually for housing
4) SHTF, since economy is never stable and we have cycles and whatnot
5) blame the banks, who cares about Clinton's administration allowing and pushing for this in first place. easy part.
the topic is of course more complex, ie derivative trading is/was in some cases pure evil, but that's another topic.
Btw, correct me if I am wrong, but wasn't the money just lended and now it's (being) paid back, maybe even with interest?
How government encouraging something free a business of their responsibility of lending money following good business practices?
How is derivatives another topic? Is not this the real problem?
The money could be paid back, but, as in any investment we should take into account the opportunity cost of that investment. Instead of helping people they are saving banks. Is not there a very strong moral hazard?
Instead of saving big private entities because their fall would crash the world, what if we follow the fashion and start implementing micro-services?
GS uses the capital to buy government bonds with governments own money to make literally riskless profit."
I have zero sources for this, so if I'm wrong please say
If only they would have put you on the case instead of Federal investigators, I'm sure all of these alleged crimes would have been proven to a legal standard, I suppose?
Business as usual? The banking sector has shed hundreds of thousands of jobs, paid billions in fines, faces increased scrutiny and the executives have been pilloried without crimes being proven.
I wish I could go back in time to 2001 when Hacker News was calling for the heads of VC firms and tech-stock CEOs for perpetuating a fraud on the people and causing a financial crash. But that didn't really happen; instead many people when to work for them.
Honest question: do reasonable really look at the The Great Recession and think that there are "individuals" wholly responsible for what happened?
I realize this might be what you are saying already, but to be clear: tt should be /multiples/ of the bonuses they made, if you want to discourage this kind of behavior.
Things are priced at what they will sell for. It's more that they were hiding information about the risk (which of course would have drastically lowered the value and the price people would be willing to pay). I think the difference is significant, however.
BUT - and this is pretty important - the ratings agencies were negligent in their rating methodology. Intelligent buyers could see the problems.
The book The Big Short covers this in some detail.
Maybe this topic isn't fit for "quick" refreshers. Some problems are more nuanced and complex.
>these guys sold CDOs that they knew weren't priced correctly, obfuscated the mispricing
What does that even mean?
>then profited on short positions against the securities.
What is the crime?
Brokers don't owe you shit other than not lying to or defrauding you. But people don't realize this. Brokers are salesmen, pure and simple.
Worse, now brokers often have bullshit titles that hide their nature. For example, financial advisers sound like someone who has a fiduciary duty to you, but really they are just brokers. Trying to sell you on investments.
You should treat anyone who doesn't have an explicit fiduciary duty to you as you would a car salesman.
Strangely enough, it is both a kind of freedom ideal to some, and an unfair, immoral and violent dog-eat-dog society for other.
If you rip off "widows and orphans" though you will get punished severely.
They've had eight years to literally make bank on the proceeds.
Suppose that when you caught a thief the sentence were to return 60% of whatever he has stolen, nothing else. The result is quite obvious. Even if it where 100%, it will still be a good business as you will get away with all the money when you are not caught.
Lloyd said it quite clear "We are pleased to have reached an agreement in principle to resolve these matters,". Of course they are pleased! We are not.
"Overall, Goldman Sachs received a $12.9 billion payout from the government's bailout of AIG, which was at one time the world's largest insurance company." [1]
Now, these might be related, but [not] identical - or indeed not connected - but on the face of it it seems rather outrageous... perhaps someone who's a bit more up on the details can comment?
[1] http://usatoday30.usatoday.com/money/industries/banking/2010...
We seem to revisit the crisis on HN. Someone should do a write up. We seem to rehash a lot of this. Basically , history just repeating itself. TARP, for example, being a loan:
https://en.m.wikipedia.org/wiki/Troubled_Asset_Relief_Progra...
That's a pretty sweet deal for Goldman?
Does remind me to keep "Swimming With Sharks" on my reading list:
http://www.amazon.com/Swimming-Sharks-Journey-World-Bankers-...
(I assume the Book has more along the lines of what's in this interview/promo-piece):
http://www.theguardian.com/business/2015/sep/30/how-the-bank...
"Two Goldman traders, Michael Swenson and Josh Birnbaum, are credited with being responsible for the firm's large profits during the crisis.[18][19] The pair, members of Goldman's structured products group in New York, made a profit of $4 billion by "betting" on a collapse in the sub-prime market, and shorting mortgage-related securities."[1]
Two tradesmen made this in less than one year. I wouldn't be surprised if it's an order of magnitude less that the whole firm made through the whole period of the crisis.
[1]: https://en.wikipedia.org/wiki/Goldman_Sachs#Actions_in_the_2...
Convict them of 4 similar crimes and you wipe out a year's profit! I don't think GS takes a 25% drop in profits lightly.
Now in this case it sounds like they caused a lot of damage for what they did.
Edit to add:
For a specific Goldman Sachs context, see for example: http://www.theguardian.com/business/2014/sep/26/us-regulator...
Maybe there's some reason I missed that this didn't make a bigger or longer-lasting splash.
> "The consumer relief will be in the form of principal forgiveness for underwater homeowners and distressed borrowers; financing for construction, rehabilitation and preservation of affordable housing; and support for debt restructuring, foreclosure prevention and housing quality improvement programs, as well as land banks."
The principal forgiveness had to happen anyway in the normal course of business, one way or another. If underwater homeowners and distressed borrowers owe you a billion dollars, that does not mean that those mortgages and loans are worth a billion dollars in reality. At best you can realistically hope to eventually be repaid 60% of that (to pick an arbitrary number), given that these are distressed borrowers we're talking about. So writing down those assets in your books to e.g. $600 million dollars does NOT constitute a penalty or consumer relief of $400 million, since your assets were not really worth a billion to begin with and probably haven't been for years.
Same for the rest of the "relief", for example foreclosure prevention is almost always a net positive for the lender. Finding a way for the owner to stay in the house, look after it, and keep repaying whatever they can afford, will usually recoup more money for the bank than a distressed sale at auction (how foreclosed properties are usually sold).
Principal relief for homeowners who are above water and up to date with mortgage payments, now that would be an actual penalty
I'm hardly a defender of Goldman, but that's a bizarre characterization.
What do you think Goldman did to cause RBS's failures, exactly?
RBS (along with most buyers) didn't realize that the AAA-rated securities they bought were actually subprime-backed (because of completely stupid rules by the ratings agencies, which Goldman exploited)
When people suddenly discovered what a disaster these were, RBS wrote down £5.9bn, and was forced to seek additional capital[2].
RBS was responsible for heir own fate of course. But Goldman sure made money out of it.
[1] http://www.telegraph.co.uk/finance/recession/5025115/RBS-tra...
Where is that $3.26 billion of cash going? I know you're going to say the SEC, the DOJ, or some other [combinations of] government entity. I get that. But then where does it go? It seems that people often forget that when this happens, there's still a human that sees a $3.26 billion uptick in the amount of money he controls (though it's possibly divided between branches/depts).
What does that guy do with it? Build a (few dozen) new office building(s)? Hire 10k more employees for the agency that employs him (only 50 of which are his family and friends collecting 250% of their market rate)? Does he keep it in a bank account and collect interest on it? Send it into a black hole somewhere in the Treasury so that it can help pay off "the national debt"? Spend it on contractors? Bonuses for himself and the other people who helped "take the bad guys down"? Motorboats? Yachts?
People act like it's just an inherent truth that fined money is better off on a bureaucrat's desk than a banker's. Is that really real life?
I think almost any idea is a better idea than that.
>It sounds like you're trying to make a "taxes are theft" argument against fines for committing theft which is pretty hard to take seriously.
I'm not making an argument that taxes are theft. I'm really just trying to illustrate that while there may not be an institutional profit motive for governmental bureaus, there is a personal and/or professional profit motive for whoever gets to spend that money. A lot of young people seem to think that it's always better to have the government providing a service because "they care about more than just profit" or something similar.
Moving the money between a third-party contractor that provides a service bought by the government into the actual government itself doesn't necessarily mean anything good is going to happen. You don't have to look very far, either into the past or into the map, to see that; in many countries, the absolute richest people are politicians and bureaucrats.
It's a lot easier to fire a contractor that does a bad job than it is to replace a government bureau that does a bad job. I think it's important to convey that bureaucrats can and sometimes do still get a large amount of money, and that can affect their motives and decisions just as easily as it can for anyone else. These positions deserve scrutiny and oversight too. The people running the private sector are not that different from the people running public services.
>"We are pleased to have reached an agreement in principle to resolve these matters," said Lloyd C. Blankfein...
All you really need to know.
Why isn't this insurance fraud?
(1) home loans (2) rating agencies like Moodies (3) AIG
I expect a similar amount of change in the underlying behavior.
[1] http://web.archive.org/web/20090110184334/http://www.uiowa.e...
[2] http://web.archive.org/web/20090207100935/http://cop.senate....
The government got back more money than it loaned out? Does that qualify as an accounting trick now?
