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Confidence in the market, and preventing panic was the highest priority, which is why no bank executive was punished in any meaningful way.

Frontline did a great piece on this, which I watched years ago. Not sure if this is it: https://www.pbs.org/wgbh/frontline/film/meltdown/

I believe it also explains why the election hacking of 2016 wasn't and isn't being addressed fully. If the US were to admit actual votes were changed it would create panic and instability. It also doesn't help that one side literally invited the hacking, and refused to investigate because it helped them. I'm sure there were tons of people who made good money in 2008, who weren't eager for investigation or actual reform.

Throwing the bad guys in jail would have spurred even more confidence in the market. The same guys are still in charge.

"The same guys are still in charge"

The problem is, there are no "other guys".

That’s not true

There are shit tons of other "guys". The industry is making new "guys" every year.

Maybe they don't have as much experience as the current guys, but does that matter when those people use their experience to rush after profit for themselves when they know it will cause problems like this?

There are always other guys.

It degrades the rule of law when lawbreakers not only don't even get a slap on the wrist, but in fact get rewarded for their lawbreaking.

Since the confidence in the markets only exists because people believe the laws governing it will be enforced, not punishing anyone degrades the confidence in the market.

When people who know what they're talking about talk about "election hacking," they know that no actual hacking took place. They were Facebook ads. That's it.

"They were Facebook ads. That's it."

If you think Russian "election interference" (does that term make you feel better?) was limited to "Facebook ads" you either haven't been paying attention, or are just trolling. I'm going to guess the latter.

I've been checked out for a bit. Did they finally come up with concrete evidence? Are you saying they actually altered vote tallies?

That's a straight up lie.

I agree that we shouldn't claim votes were changed without evidence, but you are forgetting about the DNC hack and subsequent email leaks.

You're kidding, right? There is an unsealed speaking indictment from the Department of Justice [1] that details the GRU hacking operation that released the DNC emails.

[1] https://www.justice.gov/file/1080281/download

We do have evidence that the voter databases of at least 20 states were targeted and a few successfully accessed. At least publicly, it is uncertain as to whether data was changed in any way.

And not only is there absence of criminal responsibility, but the regulation that made banking stable for 100 years and was taken away in 90s (like the Glass-Steagall Act) cannot be put back in place. Seems like people that caused the GFC are the ones in charge of 'fixing' it.

Glass Steagal didn’t make banking stable. Most countries (including those who weathered the storm much better than the US) don’t have a similar law.

In fact, marrying investment and commercial banks during the crisis was a key part of stopping a banking collapse.

And the whole crash started by investment only banks failing.

I hope this doesn't come across as me trying to justify what happened but can anyone be explicitly about what laws were broken and who should have gone to jail? I know there was a bunch of outrage but want to cut through all that and get at exactly the issue.

A lot of lower level mortgage brokers clearly committed fraud in the applications they processed. There may be some criminal or civil negligence by middle management by ignoring the fraud in an attempt to meet quotas. Unfortunately, it's hard to pin much of anything on the higher level executives.

There was a time when fractional reserve banking [0] was considered simple fraud (it wasn't called "fractional reserve banking" at the time, it was "bankers using for personal gain assets that were owned by another and stored for safe keeping at their bank.")

So, as banking gets complex, the laws get complex. Once we decide fraudulent (fractional reserve) banking is legal, most of the rest can be whitewashed with enough handwaving.

[0] https://en.wikipedia.org/wiki/Fractional-reserve_banking [1] https://www.mises.ca/the-economic-benefits-of-ending-the-fra...

I know the assertion that fractional reserve banking == fraud is extremely contentions, and most disagree with me. Feel free to explain why you disagree!

By that logic anyone who gave out a loan should be thrown in jail. After all there was a time when charging interest of any kind was considered usury and was illegal. Once we decided that usury banking is legal, most of the rest can be whitewashed with enough handwaving.

Well that's an argument between the letter of the law and the spirit of the law it sounds like.

It's pretty obvious, actually. If you tell people you're doing it, and they still choose to give you money in exchange for the good or service you're actually performing, it cannot possibly be fraud.

Banks are very up-front about the fact that they're doing fractional reserve banking. You set up accounts in full knowledge of the fact that some of your deposit will be used for investments and that - if too many people try to withdraw the full value of their account at once - the bank may run out of reserves and you will be unable to withdraw.

Even an outright Ponzi scheme wouldn't be fraud in any moral sense if it specifically and openly said you would be investing in a Ponzi scheme and that any returns entirely depended on the extremely unlikely gamble that you would be among the first, rather than last, people to invest. (In fact, there are quite a lot of Ponzi schemes like this in cryptocurrency; at one point they made up a fairly significant proportion of all Ethereum transactions. They were treated - correctly, I think - as basically just a form of gambling for entertainment.)

And whatever your opinion of fractional reserve banking, even if you do think it's fraud you have to admit that it's clearly much less fraudulent than an outright Ponzi scheme.

I challenge the relevance of your point of view. Always bringing up federal reserve banking is not relevant.

World has changed and narrow money under fractional reserve is less relevant today. Crypto or gold coin can't change the system when the system does not run on narrow money. That's why federal banks have less control today than ever before.

Capital ratio requirements limit banking more than reserve requirements. Do you agree or disagree?

Swiss people had a change to quit fractional reserve banking few months ago using popular vote. When the facts were presented, many people were surprised to learn that only 20% of the money assets in Swiss banks were under fractional reserve banking system and only thing abandoning it would do is that normal people would have to have to keep more cash in their account. Massive financial industry in Switzerland is not running on narrow money.

Financial crises don't start with narrow money. There are more and more assets that are almost as liquid as money under normal circumstances[1] but they are not money. Within just few hours you can turn them into cash [1].

----

[1]: Normally very money-like liquid assets separate from broad and narrow only during crisis. Other asset types stop being liquid but central banks provide money so that shops can stack their shelves and people can buy food and gas and not to loot to survive.

You seem to be defining fractional reserve banking to be fraudulent (in your second paragraph). That's not a useful perspective for trying to get real answers to your questions.

When banking was "I'll store your money for you in a safe place for a small fee", fractional reserve banking was fraud, because it was not doing what you told people you were doing, and in a way that could cost them their money. Once fractional reserve banking became the normal way banks operated (that is, became both legal and expected), it's no longer fraud. It may still be immoral and/or unwise, but it's not fraud.

Now, there was plenty of fraud in the run-up to the 2008 crisis. ("Liar loans", anyone?) But that's distinct from fractional reserve banking itself being fraud.

Those who repackaged toxic assets while misrepresenting the contents and the risk.

The credit rating agencies knowingly and fraudulently mislabelled the loans as "AAA" when they were in fact, junk:

https://en.wikipedia.org/wiki/Credit_rating_agencies_and_the...

[Edited to add] also perjury:

https://www.rollingstone.com/politics/politics-news/the-peop...

> They masked everything with a mixture of stacking the regulators with their ilk, stacking the universities with their ilk (economics as a field has zero credibility to me since I discovered how many theses "greenlighting" CDOs were written in clear conflict of interest), stacking the government with their ilk.

I understand that you're angry, but this is several steps beyond "tinfoil hat" territory.

complete absence of criminal responsibility that's inexcusable

This is what gets me- and they were even given relative anonymity in the press so they could duck some social repercussions of their horrid behavior. I want Brad Pitt to carve a dollar sign on their foreheads.

tithing part of our work to reimburse their losses

I'm stealing this.

> not ONE of those criminals (with the blood of millions across the globe on their hands, make no mistake) was prosecuted or in any way made to answer for their actions

I found this yesterday and it shows there were many convictions in Europe and North America: https://www.channel4.com/news/factcheck/factcheck-how-many-b...

Here's a direct quote from that page for the U.S.: "The US: Hundreds of criminal and civil cases brought against people and banks, with over 200 leading to prison sentences"

Do you have alternative evidence that supports none of them were prosecuted?

That article talks about charging bankers for LIBOR rigging (a European index) and fining Europeon banks for MBS fraud. The only US charges are for TARP fraud, which was after the crisis started.

The article does not show any US banker or US Bank was charged for MBS fraud done before the crisis.

This times 100 - in my mind it is the major failure of the Obama administration. There should have been heads on pikes - then maybe we'd see better behavior.

Could you dig up a few of those CDO washing theses?

The Inside Job documentary showcased a few economists that had conflict of interest, but haven't mentioned anything concrete about CDOs.

> Much to the contrary, they went on enjoying the same mind-boggling luxurious elite lifestyle they always did.

The culprits had money and they will have money. They own the banks, and of course they opposed regulation.

But they are not the same as those who know what's going on.

"It is well known and documented that the financial crisis was no accident; everybody who headed the financial services industry to the state it was in did so knowingly, knowing full well the inevitable consequences, but not giving a damn because the arrangement let them to become handsomely wealthy, beyond our imagination."

This is incorrect. Some knew and bet on it. (See the Big Short for example.) Some knew and exploited it. (See Goldman Sachs selling shit to clients, for which it paid 550M USD, and the guy got charged with fraud, etc.)

It was an emergent phenomenon. It's not an accident as a car accident, where you look away for a sec and you rear end someone because someone stepped before the car before you, but it's very much not a conspiracy.

It was a systemic breakdown, fueled by the very much gutted oversight and misaligned incentives created by money in politics. And that's something very hard to escape.

The lack of jail-time verdicts is not surprising, after all the laws are very much set by those who have the most money, and they usually don't like to go to jail if caught.

So we're left with DPAs ( https://www.penningtons.co.uk/news-publications/latest-news/... ) and they are pretty effective from time to time ( https://www.osler.com/en/blogs/risk/december-2017/the-long-a... ) but it needs investigators, staffing, and cooperating legislators.

Banks (and the financial industry) listen to incentives. Jail time is meaningless if all you can get is some middle manager. For that the reporting and compliance regulations help - as higher ups have to sign off on certain stuff, so they can't deny knowing this or that - but this means that really shady things will turn into compliance issues, and into fines. (Which is a lot better than remaining in the dark without any consequences, as it was before compliance regulations.)

> It's feudalism with extra steps.

Agreed.

https://www.theguardian.com/business/2012/aug/06/financial-c...

>"Let's hope we're all wealthy and retired by the time this house of cards falters."

Thats just what people put in email. Given that being told to not talk about certain topics via any recorded medium is not unheard of in companies, there is likely far more than this one notable example.

Even if there's not, the fact that even this person, who outright stated that this was going to collapse and kept at it anyway, has not gone to jail is just an extreme breakdown of the rule of law.

When you start making rules for thee and different rules for me, then people start wondering why they follow the law to begin with. It's a basic tenant of political science

>Then while we (working class) were dealing with the fallout

On the ground, parts of the financial services and the "working class" were responsible.

This story that it was simply a bunch of innocent people trying to fulfill the American Dream of owning a home is hogwash. People were knowingly buying property beyond what they could afford because prices would "always go up" and they could flip it to a greater fool. Greed, pure and simple, and both parties were complicit.

Don't believe me? Go watch one of the multitude of flipping shows from the era.

>Much to the contrary, they went on enjoying the same mind-boggling luxurious elite lifestyle they always did.

Let me guess, you don't work in the financial industry? Would it surprise you to learn that not everyone in it (and responsible) is a CEO? The industry was gutted, and many in it paid the price with their jobs. Why do you desire a pound of flesh?

I really feel like this is just victim blaming. When financial advisors are telling people they can afford something because prices will always go up and will give them those loans, working out a payment plan they say that is affordable, how on _earth_ is it the fault of the people who believed financial experts on financial matters?

credentialed or not, if somebody told you you could afford something because "prices will always go up", would you believe them?

Do you have a pension? A lot of us do, and a lot of them are just specifically structured investment schemes with some tax incentives, which means they're a seventy year bet that the stock market will "always go up". Historically, that's been broadly true, given decent time scales - just as it was with house prices.

I suppose it would be logically consistent to then say that people with pensions are "asking for it", too, but you get to a certain point where we cannot blame the layman for not looking at a field where all the experts are saying the same thing and not believing them.

In financial markets, the idea that "prices will always go up" is not just reasonable, but one of the founding principles of our economy. Everything must grow, all of the time. If prices _aren't_ going up, then something is wrong, and if prices are going _down_ we call it a recession, give it a grand name with capital letters, and try to make it not happen again.

in the context of an investment strategy, it is reasonable to assume that the overall market will always eventually rebound after a crash. it might not sometime in the future, but if the entire world market collapses and never recovers, we have bigger problems on our hands than asset allocation for retirement.

that said, there's really no reason to assume that a specific type of asset will continue to appreciate indefinitely, even if it has done so for a very long time.

but we're not even talking about betting hard on a particular asset class. we are talking about massively levered loans whose viability depends on the value of a single building. literally zero diversification. I honestly don't know how anyone could see this as anything but wishful thinking.

Never trust someone who's trying to sell you something.

One person asks for the loan, another person approves and gives it.

Lenders were giving NINJA loans left and right, and stacked credit rating agencies to give them fake scores to sell off bad mortgages before the grenade went off.

Being able to find shady people on one side of the fence doesn't absolve, in any way, the behavior of people on the other side of the fence.

Whataboutism is not a proper argument or defense.