Comment by lmm | Hacker News Reader

Comment by lmm | Hacker News Reader

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> Since mortgages are often linked to Libor (in some countries) that means all this probably means a bunch of people saved a few pennies (literally) on their mortgage payments a few years back, mostly at the expense of large investors. Yeah, I know, that doesn't mean it's either moral or legal but...stealing an almost immeasurably small amount of money from a hedge fund and giving it to a home owner is not exactly "robbing widows and orphans" territory.

Many of those large investors are mutual funds and pension funds. Some of which do fund widows and orphans. E.g. I think CALPERS was involved in one of the lawsuits?

Stealing a penny each from a million people surely must be just as evil bad and wrong as stealing a million pennies from one person (any sensible way of relating money and harm comes up with that result). I think the reason it seems less bad is that our monkey brains aren't good at comprehending the concept of millions of people, so when we say "a million people" our moral intuition just interpreters that as "lots of people", i.e. "a couple of hundred people".

True, it was also pension funds. Okay, so...at a big picture level, a million people borrow money to buy houses, and save for their retirement via a pension fund that invests in mortgages, and then nefarious activities at the bank causes mortgage rate to shift 0.05% down for a month, causing them in aggregate to gain thousands of dollars as homeowners, but lose thousands of dollars as savers, for a net change too small to really measure?

It's not really the crime of the century, is it?

> Stealing a penny each from a million people surely must be just as evil bad and wrong as stealing a million pennies from one person

Arguable. Declining marginal value of money says that I'd be much more upset about losing the millionth penny than the first, so in some ways stealing a million pennies from one person is worse. (This is the moral justification for progressive taxation.) But okay, let's accept that for now. In which case...

...Libor manipulation still doesn't seem that bad? As you point out, there was a lot of overlap in the beneficiaries and the losers. Because even if stealing a penny each from a million people is the same as stealing a million pennies from one person, giving the pennies back again is still pretty different. :)

I honestly don't get how you can be all smiles while apologizing for white collar crime, all the while knowing that white collar crime of this variety, or of wage-theft variety, has so many more second-order effects than "regular crime".

Maybe not you, but I've met other people who don't end up with the corollary that such things don't matter, but who instead seem to set out from the get-go to "not be one of those people hating on the 1%". It's like the hipster "I don't like music that's popular" but transposed to "I'm so learned that I actually rationalize white collar crime".

> Okay, so...at a big picture level, a million people borrow money to buy houses, and save for their retirement via a pension fund that invests in mortgages, and then nefarious activities at the bank causes mortgage rate to shift 0.05% down for a month, causing them in aggregate to gain thousands of dollars as homeowners, but lose thousands of dollars as savers, for a net change too small to really measure?

Well, the bankers took their cut. If, using the numbers from the article Hayes made $70 million (and sure, some of that was probably acquired honestly, but let's assume maybe 10% came from this fraud), then on the one hand he's taken a tiny fraction of the $350 trillion he's been meddling with - most of the "collateral damage" moving one way or another balances out, sure (though at the individual level it's still unfairly damaging some people (those who don't own houses) even as it unfairly benefits others - stealing a bunch of money and giving it all away would still be a crime). On the other hand, buried in the middle of those mostly-netted-out effects he's had when you look at each one individually, he's stolen a total $7 million, which is nothing to sniff at.

   Libor manipulation still doesn't seem that bad?

Actually, it does seem pretty bad. It was collusion by people who should be transparently honest, in/near the core of a system that is fundamentally based on trust. If that trust is weakened to much really, really bad things happen.

This isn't about the measurable effects of the dishonesty, it's about the integrity of the system.

Agree. But the libor scandal is dwarfed by how much the Fed has robbed the widow and the orphan to give to the "struggling borrowers" (i.e. over-leveraged property speculators), through artifically low rates and massive money printing.

It's far more complicated than that. At a first pass, the drop in interest rates helped debtors who were on variable rates or able to refinance, and creditors who held fixed-rate assets. Conversely, fixed-rate debtors and variable rate creditors got hurt.

The drop in rates arguably raised asset prices, which helps e.g. people who currently own houses. This comes at the expense of people who need to purchase houses in the future. So there are generational implications there.

However, it can also be argued that the drop in rates catalysed an economic recovery, without which there would be fewer jobs for the younger generation.

All of this is arguable. But to say that the fed is robbing widows through artificially low rates and money printing is just emphatically wrong.

>The drop in rates arguably raised asset prices, which helps e.g. people who currently own houses. This comes at the expense of people who need to purchase houses in the future.

>However, it can also be argued that the drop in rates catalysed an economic recovery, without which there would be fewer jobs for the younger generation.

trickledown houseinomics?

I don't disagree. But that's by and large what the public voted for, and those regulators are at least as far as we know acting in good faith, not trying to earn fees for personal gain.

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