Obama turned Justice Department into his own extortion machine

[Darwin333]

One last thing. People here harping about the bundling of mortgages into various exotic securities can do so now because we all saw the outcome. Before the crisis, everyone thought CDOs were revolutionary. Now we know the math was imperfect. Hindsight is 20/20 but, before the autopsy of the financial crisis, no one suspected the quants of being on the wrong side of history. You absolutely cannot blame finance for that. As with most things, the mistakes were never intentional. For example, bundling a bunch of high risk loans with some low risk ones were, according to the math, sound over the long run. If the bankers or the quants knew these were going to blow up they would've stopped selling them. The true blame lays at the foot of stupid borrowers, inept regulators and greedy/selfish politicians. Bankers simply did what they've always done, make money for their owners. They owe no one any apology whatsoever. If anyone should be remorseful, it's government for laying the groundwork for what became a catastrophe. I understand that we are only 7 years removed from the crisis so people here are bias in their thoughts and think with only emotions. But, let's not forget that, today, most economic historians blame government for the mess that was the Great Depression. History will prove the bankers right again.

It is very clear that you have no idea of what really happened....

 

[werepossum]

That was my point, the bad loans themselves would have hurt the economy a fraction of as much. It was the MBS that they leveraged through their asses. And yes, I didn't mention it but the repeal of Glass-Stegal was also a huge factor, had that not been repealed then this huge detonation of our economy wouldn't have been possible. We could have let the investment firms go under and not have to deal with "too big to fail" bullshit, bullshit that we not only didn't fix but in fact made even worse. It's amazing how short Glass-Stegal was and how very freaking long Dodd Frank is yet the former would prevent another similar FUBAR situation and the latter doesn't even come close.

With all that, I agree completely. We all played our part, and many factors had to come together to make a recession of this magnitude.

It is very clear that you have no idea of what really happened....

Nah, he knows. He just prefers to focus on those factors outside his own profession. The lax regulators are to blame, sure, but the lenders still made the unsound loans, bundled the shit loans together, and created derivatives whose value stemmed from those bundled bonds. Sure, the GSEs began buying bogus loans, but they didn't require bogus loans, nor the bundling of those bogus loans. The bankers deserve their share of pain too. The smaller banks have already felt it, but for the truly huge banks, the 2007-2008 crash was just scary but happy times of bonuses and bailouts and growth. Punishing them to the tune of millions of dollars on ridiculous charges is like getting Al Capone on tax evasion: it's ridiculous, but it still feels pretty good. I suspect they are (mostly) folding because they don't want the scrutiny to instead fall on an individual level, on fiduciary or even criminal grounds.

The only people who aren't being punished are the government employees. One hopes the lax regulators are quietly forced out. The elected officials can only be held accountable by voters. And it's worth remembering that things like the CRA were at least created to do good, not out of greed. If something done for the right reasons gets used for the wrong reasons, you fix it, but you don't punish the people who did it in good faith.

 

[fskimospy]

It is very clear that you have no idea of what really happened....

I do like how he's found a way to convince himself that the banks' massive failures were the fault of literally everyone BUT the banks.

What I don't think he realizes is that his 'who could have known' argument is even worse for the banks than ours is. If the banks are just greedy and filled with fraud (as they were/are) we know how to solve that problem if we want to and these banks can largely go on. If the banks nearly imploded the world economy purely through their own massive incompetence that couldn't be foreseen then that means they could very well explode the world economy again without warning. The only sane answer in that case is to dismantle them.

 

[Darwin333]

Tarring and feathering has the unfortunate downside of leaving them alive.
They need to be made dead.

I vote for keelhauling them........ from an aircraft carrier.

 

[Moonbeam]

I do like how he's found a way to convince himself that the banks' massive failures were the fault of literally everyone BUT the banks.

What I don't think he realizes is that his 'who could have known' argument is even worse for the banks than ours is. If the banks are just greedy and filled with fraud (as they were/are) we know how to solve that problem if we want to and these banks can largely go on. If the banks nearly imploded the world economy purely through their own massive incompetence that couldn't be foreseen then that means they could very well explode the world economy again without warning. The only sane answer in that case is to dismantle them.

The catch word being sane. I don't think there is a door on the inside of werepossum's Progie Paper Bag that is clearly marked, "Exit to Sanity This Way".

 

[werepossum]

The catch word being sane. I don't think there is a door on the inside of werepossum's Progie Paper Bag that is clearly marked, "Exit to Sanity This Way".

lol He was actually referencing Dari. But hey, we all look alike if we aren't marching in lockstep, eh?

 

[IronWing]

I vote for keelhauling them........ from an aircraft carrier.

Part of me wants to search to see if any of our brightest luminaries have, with the aid of beer and maybe more beer, tried to keel haul their buddy only to learn that the practice predated propellers. Part of me think the outcome might be icky so I'm not going to search on this topic.

 

[Moonbeam]

lol He was actually referencing Dari. But hey, we all look alike if we aren't marching in lockstep, eh?

I was referencing this: "With all that, I agree completely. We all played our part, and many factors had to come together to make a recession of this magnitude."

 

[ivwshane]

That was my point, the bad loans themselves would have hurt the economy a fraction of as much. It was the MBS that they leveraged through their asses. And yes, I didn't mention it but the repeal of Glass-Stegal was also a huge factor, had that not been repealed then this huge detonation of our economy wouldn't have been possible. We could have let the investment firms go under and not have to deal with "too big to fail" bullshit, bullshit that we not only didn't fix but in fact made even worse. It's amazing how short Glass-Stegal was and how very freaking long Dodd Frank is yet the former would prevent another similar FUBAR situation and the latter doesn't even come close.

I disagree, most economist I've read said that glass steagall wouldn't have prevented the underlying causes of the recession.

http://www.npr.org/sections/thetwo-...lass-steagall-cause-the-2008-financial-crisis

But others, like former Treasury Secretary Tim Geithner, have said the focus on Glass-Steagall is misguided. They argue other factors were more important in causing the 2008 crisis, such as bad mortgage underwriting, poor work by the ratings agencies and a securitization market gone crazy. All of that would have happened no matter the size of the big banks.

In fact, some of the financial institutions that fared the worst, such as Bear Stearns, AIG, Lehman Brothers and Washington Mutual, weren't part of large bank holding companies at all.

 

[agent00f]

Sure they did. Previously, there was no incentive to make bad loans because non-conforming loans were unsaleable. Since the GSEs would not buy the loans, banks charged higher interest rates. But once the GSEs began buying loans without rigid compliance, banks were able to make such loans and immediately hand the risk to the GSEs - at a profit - while avoiding those awkward dressing-downs in front of Congress for not meeting their HUD targets. I wouldn't argue it was THE cause, but it was a piece of the puzzle.

If only these dummies are smart enough to realize that the solution to these ostensibly lazy gubmint regulators are ever vigilant ones, which I'm sure the folks who pay for the news they read will love.

 

[Darwin333]

I disagree, most economist I've read said that glass steagall wouldn't have prevented the underlying causes of the recession.

http://www.npr.org/sections/thetwo-...lass-steagall-cause-the-2008-financial-crisis

Seperating commercial banks from investment banks would have meant that we had much smaller banks so we potentially wouldn't have been in the bullshit "too big to fail" arena. Ironically one of the banks you listed, Lehman Bros was both a commercial and investment bank and it's been argued, quite well I might add, that WAMU was in fact solvent and was the target of insider trading. Don't get me wrong, the huge run on Wamu definitely hurt them and would have still put them into chapter 11 but not into receivership to be sold to JP Morgan for pennies on the dollar. JP Morgan also purchased Bear Stearns for 1/3 the price it was worth just two days prior and 1/9 the price it was worth a month prior with the most sweetheart terms you could ever hope for.

So two of 3 of your examples were allowed to actually fail with a 3rd being propped up and still sold off. So we went from "too big to fail" to "really really too big to fail".

Don't get me wrong, it would still have hurt if it was just the investment banks that blew up but we wouldn't have had the "great recession". And now something that was a really bad problem is a much worse problem with virtually no way to solve it in our current, and foreseeable, political climate. I'm not talking about party either, I'm talking about money. Potentially as few as one but definitely a few companies literally have the country by the short and curlies and now it's just a matter of when they decide to squeeze and how hard they decide to squeeze. No one in their right mind should be comfortable with that in any, shape or form. The absolute biggest tragedy is that none of the asshole banksters went to jail, it's akin to legalizing bank robbery and expecting banks not to get robbed. At worst if you get caught robbing a bank you have to pay a fine that is less than the amount you stole.

From your own link:

By bringing "investment and commercial banks together, the investment bank culture came out on top," Stiglitz wrote in 2009. "There was a demand for the kind of high returns that could be obtained only through high leverage and big risk-taking."

PS: Fuck Turbo Tax Timmy, I wouldn't trust him to balance a cash register much less take financial advice from or trust what he says could have or wouldn't have happened in the economy. The list of fuckups is way too long to get into in this thread but that's about the least credible source on the planet as far as I am concerned.

 

[Darwin333]

If only these dummies are smart enough to realize that the solution to these ostensibly lazy gubmint regulators are ever vigilant ones, which I'm sure the folks who pay for the news they read will love.

So..... fewer government regulators would have prevented the great recession? Are we talking like zero government regulators in the financial sector would lead to economic boom or half or what? Please share your wisdom on how regulators should properly regulate the financial industry!

BTW his post was concerning regulation not regulators, I was going to assume that you were just smart enough to realize that but then thought better of it.

 

[werepossum]

I disagree, most economist I've read said that glass steagall wouldn't have prevented the underlying causes of the recession.

http://www.npr.org/sections/thetwo-...lass-steagall-cause-the-2008-financial-crisis

Two points here. First, those same economists were advocating for the repeal of Glass-Steagall, so they certainly aren't coming out to say "Wow, we really screwed up, huh?"

Second, the purpose of Glass-Steagall was never designed to prevent a financial crisis. It was designed to limit the scope of a crisis, to throw up a firewall so that any such crisis would affect only half of our banks. So arguing that its repeal did not cause the crisis misses its original point.

Under Glass Steagall, the investment banks would have been sound. And the crisis would have been much less than half it's actual magnitude. The actual bad mortgages are limited in damage, since the houses retain substantial value. Much worse were the derivatives, whose value depended solely on the profitability of the bundled securities. Once the bundled mortgages were shown to be worth much less than represented, the derivatives were worthless; the loss is 100%.

 

[ivwshane]

Two points here. First, those same economists were advocating for the repeal of Glass-Steagall, so they certainly aren't coming out to say "Wow, we really screwed up, huh?"

Second, the purpose of Glass-Steagall was never designed to prevent a financial crisis. It was designed to limit the scope of a crisis, to throw up a firewall so that any such crisis would affect only half of our banks. So arguing that its repeal did not cause the crisis misses its original point.

Under Glass Steagall, the investment banks would have been sound. And the crisis would have been much less than half it's actual magnitude. The actual bad mortgages are limited in damage, since the houses retain substantial value. Much worse were the derivatives, whose value depended solely on the profitability of the bundled securities. Once the bundled mortgages were shown to be worth much less than represented, the derivatives were worthless; the loss is 100%.

Your first point isn't a point at all so you'll have to do better than that. Just because they advocate its repeal doesn't automatically invalidate their points.

Your second point is invalidated by the fact that the activities the banks engaged in that lead/contributed to the crisis, existed prior to glass-steagalls repeal (repeal is actually a misnomer as the act was never repealed but only had parts of it invalidated by the gramm-leach-bliley act). You'll need to back up your claim that the investment banks would have sound because as I mentioned, their activity really hadn't changed since the 80's due to other deregulation.

 

[werepossum]

Your first point isn't a point at all so you'll have to do better than that. Just because they advocate its repeal doesn't automatically invalidate their points.

Your second point is invalidated by the fact that the activities the banks engaged in that lead/contributed to the crisis, existed prior to glass-steagalls repeal (repeal is actually a misnomer as the act was never repealed but only had parts of it invalidated by the gramm-leach-bliley act). You'll need to back up your claim that the investment banks would have sound because as I mentioned, their activity really hadn't changed since the 80's due to other deregulation.

Of course my first point is a point. If someone advocates for an action, they have a vested interest in not admitting and/or trivializing the negative effects of that action. And you need to read up on Glass-Steagall; what parts were invalidated in the 90s were the last substantial parts of the original Act. Had those parts remained in effect, the investment banks would have remained prohibited in investing in mortgage bonds and dirivatives.

 

[WHAMPOM]

and now down is up and up is down. Villains become victims and vice-versa. For Obama, nothing has to make sense. No consistency is needed so long as banks pay up. January 20th can't come soon enough...

http://www.wsj.com/articles/baracks-last-bank-bash-1482793373

Barack’s Last Bank Bash
Former villains are now victims in a final round of official larceny.

The Obama Justice Department is pulling up to the ATM for one last withdrawal from banks. Having blamed U.S. financial firms for the 2008 mortgage crisis and squeezed them for more than $100 billion in settlements, the feds are now gashing foreign banks. Cases against such unsympathetic targets are sure to please progressives, but don’t expect the feds to prove any of these cases in court.

Last week Credit Suisse agreed to fork over more than $5 billion and Deutsche Bank agreed to pay more than $7 billion. Barclays refused to settle and was sued by Justice on Thursday. Good for Barclays.

Here’s hoping the British bank takes its case to trial, because Justice’s complaint is a 198-page flight from logic. The government’s lawsuit accuses Barclays of defrauding investors who bought its mortgage-backed securities in the years leading up to the financial crisis. The allegation is that the bank didn’t disclose how bad the underlying loans were. But the government acknowledges in its complaint that Barclays was also an investor in most of the securities at issue, and that it was often buying some of the riskiest slices of the deal. Was Barclays defrauding itself?


The suit goes downhill from there. The statute of limitations has run out for bringing a typical case under securities law. But the government is still able to sue Barclays under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (Firrea).

Prosecutors like this law because it requires a low burden of proof and can result in huge penalties. The catch, since Firrea was created to punish savings-and-loan executives, is that it can only be used against those who have allegedly harmed a federally insured financial institution. So instead of presenting mom-and-pop investors who lost money, prosecutors have to present other banks as victims and describe how they allegedly suffered at the hands of the defendant.

For the purposes of extracting cash from Barclays, guess who the government is now calling a victim? Yes, Citibank.

For those who don’t appreciate the humor in this Beltway scam, recall that two years ago the feds used Firrea to claim that during the run-up to the same financial crisis the bank’s parent Citigroup was the villain that had misled investors in mortgage-backed securities. Justice extracted a $7 billion settlement from Citi.

In announcing that deal, then Attorney General Eric Holder called Citi’s conduct “egregious.” Mr. Holder said the bank had “contributed mightily to the financial crisis that devastated our economy” and spoke of shattered lives allegedly caused by the villainous firm. But that was so 2014.

Now we are asked to believe that this mastermind of an international plot to defraud investors was simultaneously taken in by a nearly identical plot cooked up by a rival rogue organization. Amazing. Will Citi now get some of its $7 billion back to reflect its new victim status?

There’s more. The government says Barclays had many other institutional victims, such as Fannie Mae and Freddie Mac. Even the partisan Financial Crisis Inquiry Commission, created by the 2009 Pelosi Congress and chaired by a former state Democratic Party chairman, had to acknowledge the destruction caused by these reckless “kings of leverage.” But lately the government finds them more useful as alleged victims when suing other firms.

Another alleged victim in the civil case against Barclays is IndyMac, the California liar-loan factory that used to brag about all the “nontraditional” mortgages it was originating before failing in 2008. According to Justice, IndyMac is now a victim not because it bought mortgage-backed securities from Barclays, but because it sold to Barclays lots of risky loans that were bundled into securities. Justice claims that Barclays harmed IndyMac by “creating demand” for its products. Were IndyMac executives powerless to offer anything but poorly underwritten mortgages?

Justice seems to be saying that shoddy products are the responsibility of the consumers who order them. It might be entertaining to watch government attorneys try to argue this point in court. Carried to its conclusion, this suggests that President Obama’s beloved Consumer Financial Protection Bureau has been protecting the wrong side of a financial transaction.

The worst financial abuses are these bank raids by the Obama Department of Justice. Repairing this agency and its reputation begins with an end to evidence-free money grabs against unpopular defendants.

Why are you so hot over a piddling Fine in the $Billions when the banks made $Trillions in profit in their junk mortgage scam? None of these fines will come out of the pockets that made money from the scam.

 

[ivwshane]

Of course my first point is a point. If someone advocates for an action, they have a vested interest in not admitting and/or trivializing the negative effects of that action. And you need to read up on Glass-Steagall; what parts were invalidated in the 90s were the last substantial parts of the original Act. Had those parts remained in effect, the investment banks would have remained prohibited in investing in mortgage bonds and dirivatives.

Its clear you don't know what you are talking about. Glass steagall prevented commercial banks (you know, those that are FDIC insured) from investing in anything other than government bonds and low risk vehicles), investment banks were not prevented from investing in risky products, in fact that's one of their purposes, to increase their returns above the return rates of the low risk commercial banks offer.

The crisis was not a result of commercial banks merging with investment banks, which was what the repeal of glass steagall was supposed to bring because very few such mergers happened.

Investment banks, you know the ones that failed, weren't prevented from their bad investments before steagall was repealed, so I still fail to see how steagall would have prevented anything.

 

[Dari]

I really don't think so. Certainly government has its share of the blame. We all do. But everybody knows why the GSES stopped requiring those "outdated metrics", just like everyone knows that once lenders stopped such basic measures, there were no low risk loans. Remember that government never required these measures, or even recommended them. Had lenders used them only when necessary, there would have been no crash.

Let's also not forget that much of what government did was in response to big banks spending millions lobbying for government to do those things. Greedy/selfish politicians? Banks spent millions getting those politicians elected. Inept regulators? Banks spent millions lobbying politicians to regulate with a hands off light touch. Abolish Glass-Steagall? Banks spent millions lobbying for just that. Same with stupid borrowers. People did not just one day decide to take out ruinous interest-only loans or balloon payment loans or adjustable rate loans that even without interest hikes adjusted to non-feasible payment levels; lenders convinced them that these things were prudent, sensible, common practice. Borrowers paid way too much for houses because lenders used tame appraisers to certify that false worth.

I would not argue that bankers were THE cause of the collapse, and I dislike the ridiculous charges being used. But bankers were certainly A cause for the collapse, and compared to most of us, got off pretty darned lightly. Now it's time to pay the bill for your share.

Nobody put a gun to these people's head and told them to act a certain way. If they were compromised then it's their lack of morals and ethics. At the end of the day these people put their short-term interests ahead of their long-term. They failed.

 

[fskimospy]

Nobody put a gun to these people's head and told them to act a certain way. If they were compromised then it's their lack of morals and ethics. At the end of the day these people put their short-term interests ahead of their long-term. They failed.

I love how you apparently don't realize this applies exactly to the banks. They were either greedy or incompetent and either way you have to pay the piper.

 

[Dari]

I love how you apparently don't realize this applies exactly to the banks. They were either greedy or incompetent and either way you have to pay the piper.

How does it apply to a bank? Do firms have morals and ethics? No, they only have laws that they have to abide by. Everything else is fair game. What the president is doing here is just wrong. It's obvious that you feel differently but, then again, you probably cast yourself as a victim as well. I despise professional victims.

 

[fskimospy]

How does it apply to a bank? Do firms have morals and ethics? No, they only have laws that they have to abide by. Everything else is fair game. What the president is doing here is just wrong. It's obvious that you feel differently but, then again, you probably cast yourself as a victim as well. I despise professional victims.

Haha I love it. Individuals are constrained by ethics but groups of individuals (banks) aren't. They thought short term instead of long term and ended up getting screwed by their own massive fraud and incompetence. A good system punishes incompetent or fraudulent people.

By the way I also despise professional victims who try and convince themselves that being held to account for massive fraud somehow equals being picked on by the government. Maybe you should try being less of a professional victim, as that's totally you. I have no idea what bank you work for but the people in finance I know would never try and pass the buck for their failures like you are. Pathetic.

 

[Dari]

Haha I love it. Individuals are constrained by ethics but groups of individuals (banks) aren't. They thought short term instead of long term and ended up getting screwed by their own massive fraud and incompetence. A good system punishes incompetent or fraudulent people.

By the way I also despise professional victims who try and convince themselves that being held to account for massive fraud somehow equals being picked on by the government. Maybe you should try being less of a professional victim, as that's totally you. I have no idea what bank you work for but the people in finance I know would never try and pass the buck for their failures like you are. Pathetic.

I'm not passing any buck. I just don't like what the president is doing here. Have you read the article? The DoJ is claiming that Barclay's the aggressor because it bought other banks' (what turned out to be) fraudulent loans. That's not unlike Obama going after me because I bought a lemon of a car from a dealership, implying that it's somehow my fault and the dealership was an innocent victim. If you find nothing wrong with that scenerio then I have nothing to say to you.

 

[Jhhnn]

Yeah? Well it was a Democratic Congress that forced these banks to give loans to people undeserving of them. Also, I'm glad you like them getting these fines because the shareholders aren't paying for them. These hefty extortions are being passed directly to consumers. That's Obama's "Fuck you very much" gift to consumers.

Repubs held both houses of Congress & the White House from Jan 2003 until Jan 2007. Mere fact.

It was the Bush Admin who induced the GSE's to buy those loans from the originators & as securities issued from underwriters as well. Executive compensation was based on meeting targets for so called affordable loans so the executives whipped the troops into shape to do it.

 

[Jhhnn]

I'm not passing any buck. I just don't like what the president is doing here. Have you read the article? The DoJ is claiming that Barclay's the aggressor because it bought other banks' (what turned out to be) fraudulent loans. That's not unlike Obama going after me because I bought a lemon of a car from a dealership, implying that it's somehow my fault and the dealership was an innocent victim. If you find nothing wrong with that scenerio then I have nothing to say to you.

Barclays & the rest all bought the riskier stuff to puff up projected earnings which pumps up both the stock price & executive bonuses. Their gaussian cupola models told them it was safer than it looked which was what they wanted to hear in the first place.

 

[fskimospy]

I'm not passing any buck. I just don't like what the president is doing here. Have you read the article? The DoJ is claiming that Barclay's the aggressor because it bought other banks' (what turned out to be) fraudulent loans. That's not unlike Obama going after me because I bought a lemon of a car from a dealership, implying that it's somehow my fault and the dealership was an innocent victim. If you find nothing wrong with that scenerio then I have nothing to say to you.

Of course you are, you've been doing nothing but whining about how the banks were too naive and incompetent to be held responsible for their own actions. You reap what you sow.

Frankly as I said before if your description is correct then the banks should be disbanded simply to save the economy from future disasters caused by their incompetence. So which one is it?