Obama turned Justice Department into his own extortion machine

[shortylickens]

Are the people who lost their life savings getting anything back,?

Magic 8 ball says "No".

 

[Dari]

Has nothing to do with what caused the 2008 meltdown.

It was a major contributor. Government encouragement of home ownership (GWB's slogan for it was called the Ownership Society) and the finance industry's ability to spread risk lead to the crash. I even posted a thread here about it half a decade before the crash.

https://forums.anandtech.com/thread...t-on-the-global-and-personal-economy.1080863/

 

[shortylickens]

Just looked at that thread.
People were calling each other Chicken little, which is hilarious in retrospect.

 

[Dari]

$100B and counting. I wonder when Congress and the Executive branch are going to admit their role in the financial crisis. Not holding my breath on that one because if Congress starts any introspection and admits fault then the American people would have to admit the same. After all, Congress is full of representatives. Heaven forbid people should take personal responsibility for their own stupidity...

 

[agent00f]

Yeah, banks aren't exactly garnering any sympathies because of past behavior but this is nothing more than government extortion and bullying. The logic here is so convoluted and incredible that it beggars belief as to why no one has put them to the test. Hopefully, Barclays will. If the DoJ was doing this to any other industry there'd be an outcry. Wrong is wrong.

That's how the long arm of the law works, a la why Al Capone was fell by the IRS, and the common prosecution by the feds under seemingly less relevant provisions under RICO. The gubmint uses the tools at their disposal to right whatever perceived wrong.

But I guess what you're really saying is that there should be laws that apply more directly to said "past behavior" you found unsympathetic. I think most people would agree, but your sort soon as they figure out what they're implying wouldn't for obvious reasons.

 

[fskimospy]

It was a major contributor. Government encouragement of home ownership (GWB's slogan for it was called the Ownership Society) and the finance industry's ability to spread risk lead to the crash. I even posted a thread here about it half a decade before the crash.

https://forums.anandtech.com/thread...t-on-the-global-and-personal-economy.1080863/

It was not a major contributor. Almost none of the major subprime lenders were even covered by the CRA.

 

[Dari]

It was not a major contributor. Almost none of the major subprime lenders were even covered by the CRA.

Government encouragement of home ownership was a major contributor. They laid the groundwork for decades and decades with various laws, GSEs and massive tax breaks for everyone that had a part in the process. To deny this is to be in denial. And, lest you think this is an Ameri-centric issue, housing bubbles are a common occurrence that destroy economies and can lead to massive recessions or depressions. We aren't special in this aspect and the blame should not be laid solely at the feet of bankers.

 

[agent00f]

Government encouragement of home ownership was a major contributor. They laid the groundwork for decades and decades with various laws, GSEs and massive tax breaks for everyone that had a part in the process. To deny this is to be in denial. And, lest you think this is an Ameri-centric issue, housing bubbles are a common occurrence that destroy economies and can lead to massive recessions or depressions. We aren't special in this aspect and the blame should not be laid solely at the feet of bankers.

And yet a certain set of processes led to the last bubble/collapse, to the exclusion of all previous history. Too bad we'll never figure out what those are because they might sure turn out inconvenient for the invisible hand ideology.

 

[fskimospy]

Government encouragement of home ownership was a major contributor. They laid the groundwork for decades and decades with various laws, GSEs and massive tax breaks for everyone that had a part in the process. To deny this is to be in denial. And, lest you think this is an Ameri-centric issue, housing bubbles are a common occurrence that destroy economies and can lead to massive recessions or depressions. We aren't special in this aspect and the blame should not be laid solely at the feet of bankers.

The blame shouldn't be laid solely at the feet of bankers but it should be laid substantially at their feet due to the absolutely massive fraud they were engaging in. There is never one cause to anything but there is often a primary cause and in this case that was the banks, and unregulated shadow banking in particular. To deny this is to be in denial.

One major group that is not blamed but should be is everyday normal, greedy people without great wealth though. What people often forget is that it takes two to tango in creating a fraudulent mortgage: the bank to supply it and the person to sign it. I'm sure some people who didn't understand what they were signing and were victims, but plenty more did know and signed it anyway because they thought they could flip the house.

The banks committed a lot of fraud, but so did a lot of regular citizens.

 

[werepossum]

Yeah, banks aren't exactly garnering any sympathies because of past behavior but this is nothing more than government extortion and bullying. The logic here is so convoluted and incredible that it beggars belief as to why no one has put them to the test. Hopefully, Barclays will. If the DoJ was doing this to any other industry there'd be an outcry. Wrong is wrong.

Agreed, but look at it this way. These mega banks were in large part responsible for the depth and severity of the crash. Instead of being held liable, they were judged "too big to fail" and bailed out, allowing them to snap up smaller players for a song and become even bigger. Now that they are safely funded - for which Obama deserves some credit - they finally are being punished as punishment for their part.

I cannot be comfortable using pseudo-Justice even for this, but I can certainly see the poetic justice.

 

[werepossum]

The blame shouldn't be laid solely at the feet of bankers but it should be laid substantially at their feet due to the absolutely massive fraud they were engaging in. There is never one cause to anything but there is often a primary cause and in this case that was the banks, and unregulated shadow banking in particular. To deny this is to be in denial.

One major group that is not blamed but should be is everyday normal, greedy people without great wealth though. What people often forget is that it takes two to tango in creating a fraudulent mortgage: the bank to supply it and the person to sign it. I'm sure some people who didn't understand what they were signing and were victims, but plenty more did know and signed it anyway because they thought they could flip the house.

The banks committed a lot of fraud, but so did a lot of regular citizens.

Agreed, but the mega banks were bailed out to a much greater extent than were everyday, normal greedy people. Now it's their turn to pay back. Those everyday normal greedy people mostly lost the homes they couldn't actually afford during the actual crash. Even those with safe, federal government jobs took a major hit in home value. They have (mostly) been punished already. Citibank and Barclay's, not so much.

 

[agent00f]

The blame shouldn't be laid solely at the feet of bankers but it should be laid substantially at their feet due to the absolutely massive fraud they were engaging in. There is never one cause to anything but there is often a primary cause and in this case that was the banks, and unregulated shadow banking in particular. To deny this is to be in denial.

One major group that is not blamed but should be is everyday normal, greedy people without great wealth though. What people often forget is that it takes two to tango in creating a fraudulent mortgage: the bank to supply it and the person to sign it. I'm sure some people who didn't understand what they were signing and were victims, but plenty more did know and signed it anyway because they thought they could flip the house.

The banks committed a lot of fraud, but so did a lot of regular citizens.

It's basically classic control fraud, where you align the greedy interests of people below to serve your own. The execs had compensation largely tied to growth, so they created policies for incentives however perverse to bring them more mortgages, and so it went down the chain. The last link is just the RE agents playing on potential owner's own greed or fear of never affording a home. It was all by design from the top.

 

[werepossum]

One thing to remember here is that while the GSEs pressured lenders to drop such "outdated metrics" as income verification, credit checks, and even employment verification to meet CRA targets for minority loan targets, there was absolutely no pressure to drop those metrics for all loans. Neither was there ever any pressure to artificially inflate home values using tame in-house appraisers - something that remained illegal - or to bundle shaky loans and rate them artificially high. Almost all aspects of the system bear some blame, from government setting foolishly high goals to regulators not regulating to banks and mortgage companies making bad faith loans to home buyers signing contracts they not possibly honor. None of that should protect banks from being punished now that they finally can be safely punished.

 

[werepossum]

It was a major contributor. Government encouragement of home ownership (GWB's slogan for it was called the Ownership Society) and the finance industry's ability to spread risk lead to the crash. I even posted a thread here about it half a decade before the crash.

https://forums.anandtech.com/thread...t-on-the-global-and-personal-economy.1080863/

Yup, you were spot-on. I don't think I saw it until 2003-2004. But again, the CRA and associated HUD targets only drove a small fraction of the loans. It's one thing to drop all common sense to make home loans in minority neighborhoods or to meet racial quotas, quite another to do so across the board. I don't think a lender can justify a non-conforming $500k bad loan to some white dude simply because he has an unreasonable target for low income and minority borrowers. And certainly a lender cannot justify an in-house appraiser valuing a $400k home at $500k because of CRA & HUD targets - that has the opposite effect to making houses affordable to minorities and poor people.

TL/DR Just because government encourages you to ocassionally do something stupid to achieve its laudable goal doesn't mean you have to do that stupid thing on every such transaction.

 

[HomerJS]

According to the OP just because banks committed a financial crime the correct borough of NY and the amount was large enough their crimes should go scot free?

Banks commit the worst financial fraud in history in Manhattan - eh.
Commit financial crime of selling untaxed cigarettes in Staten Island, lose your life.

As for the way Justice Department went after the banks, did you know Al Capone was finally arrested for tax evasion? Want to give him a pardon.

 

[IronWing]

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.

Repeating a lie doesn't make it true.

 

[agent00f]

One thing to remember here is that while the GSEs pressured lenders to drop such "outdated metrics" as income verification, credit checks, and even employment verification to meet CRA targets for minority loan targets, there was absolutely no pressure to drop those metrics for all loans. Neither was there ever any pressure to artificially inflate home values using tame in-house appraisers - something that remained illegal - or to bundle shaky loans and rate them artificially high. Almost all aspects of the system bear some blame, from government setting foolishly high goals to regulators not regulating to banks and mortgage companies making bad faith loans to home buyers signing contracts they not possibly honor. None of that should protect banks from being punished now that they finally can be safely punished.

Must be a coincidence it all led to a small set of people who had control over this process getting very rich. They probably don't even like money.

 

[Darwin333]

Not only that but the banks were never forced to make loans.

I'm guessing facts don't matter to the OP though. Just another brainless Obama hater.

That wasn't even the worst part. They then took those loans that they knew damn well were bad and they sliced them up into little pieces and bundled them all up in extremely complex investment vehicles. Then they got their good buddies to slap a solid gold, virtually impossible to lose money, AAA rating on them and sold them as the best investment you could buy to everyone and their grandma.

It's the equivalent of taking a dog turd, dipping it in chocolate, putting it in a box, slapping a label on it that says 100% Godiva chocolate and then selling it as such. It looks like Godiva, smells like Godiva and if you like it even tastes like Godiva but once you take a bite you find out it's really just a dog turd.

That's not even getting into the fact that anyone with a brain, and I'm going to assume that supposed professionals in the field have one, knew that there was no way in hell that the housing market wasn't in a bubble. Prices simply couldn't continue rising at anything close to what they were because people simply couldn't afford to buy them. Hell the only way they were selling them was with exotic interest only loans, liar loans with no verification of income and no down payments, and so on. They knew damn well it couldn't continue for long and would eventually blow up, it was a mathematical certainty. They also knew that they were "too big to fail" and the government would be forced to bail them out if things went tits up before they could offload everything. To top it off, the guys at the top who were responsible for all of the chaos and collapsing the economy got to keep their ill-gotten gains. Frankly, they should have been thrown in jail for breaking laws clearly on the books for a very long time so they are lucky as hell that it's only fines to the company.

 

[brycejones]

The OP and the opinion piece writer need to stop drinking during the day.

 

[dawheat]

The level of persecution complex that exists on Wall Street would astound most people not in the industry. I think the vast majority of people I work with still believe nonsense like the OP on the "real" reason for the Great Recession.

 

[norseamd]

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.

How fucking dumb are all of you people?

The problems with Deutsche Bank have been getting attention for years by now.

But .. but ... but ..... but ........ OBAMA!!!!!

 

[norseamd]

The OP and the opinion piece writer need to stop drinking during the day.

Booze cant cause stupidity that fucking bad.

It has to be drinking toilet cleaning liquid or some other shit.

 

[Darwin333]

Government encouragement of home ownership was a major contributor. They laid the groundwork for decades and decades with various laws, GSEs and massive tax breaks for everyone that had a part in the process. To deny this is to be in denial. And, lest you think this is an Ameri-centric issue, housing bubbles are a common occurrence that destroy economies and can lead to massive recessions or depressions. We aren't special in this aspect and the blame should not be laid solely at the feet of bankers.

Except that they committed a massive amount of fraud while they were in the process of massively fucking us and knew damn well that they would be bailed out. Funny not only did they get to keep the metric fuckloads of money that they made during the entire boom but then the companies they drove into the ground got made whole. Some companies that contributed to the destruction of our economy even got to buy up their competition for pennies on the dollar. This all in spite of the fact that the very idea of "too big to fail" is insanely dangerous to our country and should not be allowed to continue, the fuckers should have been broken up at the very least and a lot of big whigs should have gone to jail.

 

[norseamd]

 

[Darwin333]

Yup, you were spot-on. I don't think I saw it until 2003-2004. But again, the CRA and associated HUD targets only drove a small fraction of the loans. It's one thing to drop all common sense to make home loans in minority neighborhoods or to meet racial quotas, quite another to do so across the board. I don't think a lender can justify a non-conforming $500k bad loan to some white dude simply because he has an unreasonable target for low income and minority borrowers. And certainly a lender cannot justify an in-house appraiser valuing a $400k home at $500k because of CRA & HUD targets - that has the opposite effect to making houses affordable to minorities and poor people.

TL/DR Just because government encourages you to ocassionally do something stupid to achieve its laudable goal doesn't mean you have to do that stupid thing on every such transaction.

It's not even a question if the CRA was an issue because it flat out wasn't. The reason that so many bad loans were made was because the big banks were buying them up as fast as they could to print out more mortgage-backed securities. The loan originators got a fat ass fee and didn't have to keep the loan on the books for more than a few weeks or months. This meant the loan originator had zero risk and made more money the more loans they could make. The big boys knew they were selling shit but they sliced and diced it in such a way that no one could tell that it was shit.

This isn't my speculation or a guess, it is factual history.