Chase fraud and the Mortgage Crisis

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Yeah. Rolling stone. That's a good news source.

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I do question why this "outlet" is the one that got the story. But it doesn't take a rocket scientist to know that some bad, bad stuff was going down in the banks, and they way they are getting off without criminal liability is a joke.

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and they way they are getting off without criminal liability is a joke.

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As of late August of last year banks had paid $103B in legal costs since the financial crisis, more than they have paid in dividends since the financial crisis. Since then off the top off my head I think we've seen an additional $10-$15B paid, in addition to banking salaries effectively being capped and profits squeezed for the short-term, intermediate, and likely longer-term future by regulation...

Not sure what else you want?

ETA: Forgot about BofA's mortgage settlement for $17B, so it's more around the $30B area so far this year.

Read "The Big Short" by michael Lewis, the "Money Ball" author.

It's very enlightening.

All those billions paid and the companies roll along.

That money came from employees and shareholders.

Billions in mistakes, people get bonuses and keep their jobs.

If you or I committed fraud like this would we personally pay a price?

At the very least scores of these bankers should have gotten life bans from the banking industry. That's what happened at central progressive bank so why not the bigger banks??

I think you may have a skewed view of what happened to the financial sector following the financial crisis. I get into these debates a lot, because unfortunately the media's ignorance to the financial industry has skewed public perception so bad regarding 2008 (not saying you, just saying in general).

Following the crisis, thousands of people lost their jobs. The headlines in 2008 read "BANKERS KEEP BIG BONUSES".... but the problem with that headline is that these bonus pools were legally finalized months before. Bonuses across public financial institutions have been shot across the board since '09, just read DealBreaker's annual "Bonus Watch" threads, they are absolutely hilarious (especially the UBS ones from '09/'10). The idea that bankers are keeping their jobs and bonuses are just racking up is completely inaccurate.

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If you or I committed fraud like this would we personally pay a price?

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Yes... and these banks have paid hundreds of billions? Criminal action against individuals is a waste of time, a single individual didn't cause the financial crisis. I've stated this a million times, the cause of the financial crisis goes WAY back, from Clinton wanting to raise the homeownership rate, regulators loosening standards, the Fed missing the housing bubble, homeowners borrowing more than they could actually afford, rating agencies having completely misaligned incentive structures, the housing agencies guaranteeing products they had no idea the risk structures, private lenders engaging in "predatory" practices with borrowers... the list goes on and on.

All the large financial institutions did was package these products and issue them to investors, which they couldn't have done unless a person borrowed more than they could afford with too low of an interest rate in a mortgage with lender-friendly covenants due to very lax regulation that were rated AAA by corrupt rating agencies and guaranteed by government housing agencies. Banks would package these, sell them to investors, and often times hedge their books with CDS because that's what banks SHOULD do, its called hedging your book. Dealers have to hedge their books otherwise they would take on WAY too much risk, the funny thing is so many banks didn't hedge their books and had huge mark-to-market losses on their securitized books (because they were greedy), but the one's that did their jobs correctly and hedged their credit risk with CDS get lambasted by the media for "betting against investors"?

Listen, I'm not saying banks were angels in this process by any means. They understood the risk of these products more than any other component of this process because that's their job, but it's also their job to package products because that's how money flows back to the original lender so a person can buy a house. But you want to send individuals to prison or ban them from the industry? Banks have been the only ones post crisis fitting the bill, because most of the private lenders went out of business and were bought by the banks (which they essentially had to because the government forced their hand, especially in the JPM --> Countrywide / BofA --> Merrill deals). What about the rating agencies, or government housing agencies, or how about the frickING REGULATORS.

Sorry for the rant, but my point is what good would it do to send an individual to jail? As society we want someone to blame, but the financial crisis of 2008 is a perfect example that perhaps the general population should take a look at themselves for blame first. Everyone involved, not just those "big bad bankers". The standard response is "WELL THEY GOT BAILOUTS AND WE DIDN'T!!!!"... without also mentioning that when the banks signed up to borrow from the deposit window they also signed up for depository regulation. And boy have they been regulated... honestly to the point the street liquidity is severely drained and likely will be for at least the next 5-10 years. This drains profits, compensation, and hurts the end investor. Has this solved the moral hazard issue? In a scorched earth way I'd say possibly, but it also hurts other entities.

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At the very least scores of these bankers should have gotten life bans from the banking industry. That's what happened at central progressive bank so why not the bigger banks??

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Are you comparing 2008 to a guy that set up a shell company to buy a repossessed yacht and funnel political contributions?

ETA: Also for the "TAXPAYERS ARE FITTING THE BILL" response, TARP has been paid back in full early plus interest. Name one government spending program where that has happened recently...

Benny - do you mind telling us what you do for a living? No company name or anything, just a general idea. I only ask because you seem unusually defensive of the banking industry.

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Yes... and these banks have paid hundreds of billions?

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Exactly. The "banks" have paid, not anyone responsible at the banks. Compare these bank scandals (they are scandals) to the accounting/book cooking scandals a few years ago. There, people went to jail, people paid huge fines, people were banned from the profession.

You blame a lot of other entities for problems, and you are right. But that doesn't remove the bankers from blame. There's a lot of government regulators and credit ratings people that need to be held accountable as well. Again, that doesn't remove the bankers from blame.

The whole gist of the original quoted article in this thread was that individuals at banks were purposefully misleading others of the quality of these loans. If that occured, then that is fraud. Fraud needs to be punished.

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Rewind back to 2005, if an institution said "We believe the collateral on this loan isn't represented by the available statistics, and the accredited rating agencies are incorrect (although we do not have authority to publicly rate these securities), and the federal housing agencies guaranteed this without knowing what the actual risk characteristics are (even though we do not have authority to federally guarantee these loans)".... couldn't that be considered unethical at that point in time? At the minimum it would cause that bank to not get anymore business.

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Didn't the credit rating companies get their info from the banks? If the banks gave bad info, of course the ratings are going to be bad. Should the credit agencies (and the Fannies/Freddies/etc) have done more due dilligence? Absolutely, but, that doesn't absolve the bankers either.

I work in portfolio management (on the trade floor) for a large asset manager. This firm was in no way connected to the securitization, etc. that the large public financial institutions were involved in. However, I do talk to traders for those firms often and I have friends that were on the street throughout 2008.

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Compare these bank scandals (they are scandals)

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So which individuals should be punished. Saying "banker" doesn't mean anything.

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Again, that doesn't remove the bankers from blame.

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I've stated multiple times that financial institutions were no angels by any means during 2008. My whole point is that the perception is that the financial institutions got off clean from 2008, when in fact they are they only people that are actually paying the price, even for things they didn't do (see Countrywide --> JPM, which by the regulators even guaranteed Dimon they wouldn't be penalized for anything Countrywide did as motivation for JPM to take the failing lender over).

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The whole gist of the original quoted article in this thread was that individuals at banks were purposefully misleading others of the quality of these loans. If that occured, then that is fraud. Fraud needs to be punished.

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Then show me where fraud existed. If the average FICO score of the underlying loans was x, and the prospectus states y, then that's fraud. But the problem with the article is it's all either a) word-of-mouth after the fact b) headline grabbing but in reality a non-story. With b I'm specifically referring to Dimon's alleged quote of "we need to sell a lot of our positions.?.?.?.?This stuff could go up in smoke". Phrases like that are thrown around so often on trade floors, that's relatively calm and all he is saying is to trim risk. Everyday on the street someone will say something along the lines of "I can't believe some stupid mother fricker bought this worthless piece of fricking paper", etc.. That doesn't mean it's actually worthless, traders just cuss a lot. And often times those "worthless pieces of fricking paper" give very nice returns. I love hearing traders say that because that means they're likely undervaluing it.

Again, I'm not saying bankers deserve no blame, they deserve plenty from 2008. But so does everyone else, yet no fines have been levied by any other institution or entity except banks, whose legal costs continue to rise... yet people think they got off scot free? That's what I don't get and what I'm arguing against. That article sucks for a couple reasons,

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Didn't the credit rating companies get their info from the banks? If the banks gave bad info, of course the ratings are going to be bad. Should the credit agencies (and the Fannies/Freddies/etc) have done more due dilligence? Absolutely, but, that doesn't absolve the bankers either.

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Rating agencies get information from the banks as well as the lenders and everyone else involved in the process. If you want to prosecute the banks for information given to rating agencies then you have to prosecute the home borrowers for falsifying information, the rating agencies for giving information to the housing agencies, the housing agencies for putting their guarantee on it, etc., etc.. My beef isn't that banks are innocent, it's that the media is trying to sell headlines and spreading further ignorance on the workings of the financial system to keep a witch hunt going for entities that have, are, and likely will be the only people that will ever pay for 2008.

Matt Taibbi is quite dangerous, because despite being full of shite for the most part, he really is a very interesting and engaging writer.

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the financial crisis of 2008 is a perfect example that perhaps the general population should take a look at themselves for blame first. Everyone involved, not just those "big bad bankers"

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Have an upvote. Fraud existed at every level, from homebuyers lying about their income all the way to insurers selling more CDS's than they could possibly cover. Everyone thought they could shift the risk on to someone else ... until it blew up for everyone.