Comment by rhino369 | Hacker News Reader

Comment by rhino369 | Hacker News Reader

Mortgage loan offices aren't quite "Wall Streeters." These are people in your local communities and they are defrauding the people loaning the money, who are wall street people. So not like Gordon Gecko or Leo in Wolf of Wallstreet. But the guy in the illfitted suit who pesters you about mortgages when you in line to deposit a check.

I make this point because these people aren't super rich wall street people above the law. And plenty more than one were caught and jailed for it, I've found 4 examples on the first page of my bing search. Stewart is saying only one bank exec went to jail, but bank execs weren't the ones doing this mortgage fraud.

Some "Wall Street" banks do sell mortgages directly and would employ these mortgage offices, but a lot banks don't like Goldman Sachs, the former Lehman Bros.

The question is whether big commercial banks were complicit in the fraud of their lower level employees. You'd need to find an email or someone willing to testify that the banks knew that the loan offices in podunk were encouraging fraud. That is an extremely tough case to prove without solid evidence.

Also, this kind of document fraud was only a minor part of the financial collapse. The big mistake, which Stewart briefly touched on, was that the rating agencies massive fucked up. The financial risk model they used didn't work.

The big financial institutions were demonstrably complicit in the fraud of the underwriters and loan officers. There are emails, and plenty of people willing to testify. The problem is that the SEC and DOJ never pursued those investigations.

A while back, Frontline did their own investigation on this very topic, and interviewed multiple underwriters and loan officers who said that the higher ups on Wall Street were literally directing everyone to not abide by their own standards.

You can watch the entire documentary here: http://www.pbs.org/wgbh/pages/frontline/untouchables/

Lanny Breuer from the DOJ was interviewed in this documentary, and his attempt to explain why the DOJ did not pursue any charges on executives was so laughable, and the evidence presented from Frontline's cursory investigation was so damning, that Mr. Breuer resigned days after the program was aired. After not prosecuting any banking executives, he then of course went on through the revolving door to make $4M/year by taking a position at a corporate law/lobbying firm that defends financial institutions.

This is NOT a "tough case" - the solid evidence is there. This is a case of a captured regulatory system.

Also, to say that ratings agencies simply "fucked up" is disingenuous. They were totally and knowingly complicit as well. The way the system was set up, the more they gave good ratings to crap, the more money they made. That's not just a "fuck up".

To the main point of the rant, aside from the regulatory capture, the difference between teachers and Wall Street is that Wall Street is very good at setting up a system where there's plausible deniability for executives, massive lobbying efforts to garner political influence, and if needed, gigantic legal teams to fight for every inch.

Yeah, I was suspicious of the claim that only one mortgage banker went to jail, and for 12 months only. In fact, Lee Farkas is serving a 30 year sentence for mortgage fraud, effectively a life sentence at his age.

Also, this kind of document fraud was only a minor part of the financial collapse. The big mistake, which Stewart briefly touched on, was that the rating agencies massive fucked up.

Well, no, those are two sides of the same coin.

On the one hand you have people giving out dubious loans and reselling them while claiming that if you mix the shit up the right way it turns into gold.

On the other hand you have ratings agencies who bought into the nonsense.

The two were 100% complicit and, I think, equally to blame.

But the dubious loans were known to be dubious, it wasn't fraud. It would have been a problem even if there was no fraud.

The fraud exacerbated the issue further, but I wouldn't say it is two sides of the same coin.

I'm not claiming they were equally complicit in fraud. I'm saying the ratings agencies and the lenders are equally responsible for the collapse. The lenders knew they were giving out dubious loans. The ratings agencies bought into the mathematical models.

Frankly, I think it was simply stupidity and hubris. On both sides. It's amazing how stupid people are in the face of irrational exuberance. Which is why I say: they're equally complicit.

As are those folks who took the loans (though to a lesser degree, as they may have been poorly or actively misinformed by loan officers), and those folks who bought and sold the derivatives knowing full well what was in them (or at least were aware of the models the risk assessments were based on).

Which is where ultimately regulators and regulations are supposed to play a role: to counteract the market's tendency toward irrationality. IMO, if you want to lay the crash at the feet of anyone, it's captured regulators, toothless regulatory bodies, and elected officials who bought into Wall Street bullshit that they could mind their own playground.

And really, you could lay all that straight at the feet of that granddaddy of all corruption issues: money in politics.

Almost all those mortgages were insured by Fannie Mae and Freddie Mac, both of which have very strict documentation and qualification requirements to issue policies. If the big banks knowingly lied to them or to any other insurer about the mortgagees in order to obtain an insurance policy, and the insurer relied on these misrepresentations, they are guilty of fraud.

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