Why Goldman Sachs, Other Wall Street Titans Are Not Being Prosecuted

[sd'sker]

I remember plenty of people I know who got loans they should never have gotten. Sure banks should have done a better job and there is plenty of fraud that should be prosecuted. But if you read my whole comment and not just a fraction of a sentence, you would see that I said that is how it was set up to happen and not that it was the whole problem.

i did read it all. i only put in bold the pertinent part. you really did not say, explicitly or implicitly, that there was more. you said that the gov't forced banks to give loans, then it was inevitable for the bubble to burst. you did not leave much to the imagination for what went on in the middle.

sd'sker, the pertinent part as I remember it was the huge push for "affordable" housing by the government, basically threatening banks with penalties if they did not go along. Of course, for the banks, the loans weren't risky at all since they were eventually backed up/ bundled/ or folded into papers taken over by freddie and fannie. Please enlighten me if you don't recall it that way.

this is how i remember it:

is that how you remember it? i think there was a little more to it than that. like mortgage lenders committing massive fraud on loan applications and using tricky adjustable apr's.

there is plenty of blame to go around, but i see the banks as being more culpable. the lending officers had most to gain and placed the risk on the unqualified homeowners. they saw an opportunity and used it to commit fraud on the applications of the aspiring homeowners setting them up to fail.

 

the gov't did want to make affordable houses more available to lower income citizens, i do not think they expected the banks to sell mortgages to people who had no business owning such expensive and confusing mortgages.

[strigori]

A big part of things also stems from the deregulation of a number of industries, allowing for lateral integration that has previously been illegal.

 

To start commercial banks were allowed to be the same entity as investment banks. Where as since the Great Depression that was prohibited, to protect the consumers' money from banks betting.

 

Banks were then also allowed to own real estate companies. mortgage brokers and title insurance firms. Forming a very corrupt closed system.

 

People would get approved for loans, the real estate agents would then find and manipulate the market, housing became over priced (often massively more than what the evaluation would be) People (especially first time home buyers who had limited to no experience with things, and no clue that everyone they were dealing with was a single company looking to make as much money as possible off them) were pressured/convinced to buy with the maximum amount approved they had been approved. And in many cases there would be falsifications to paperwork to get people into houses they normally would not have qualified for. And some checks and balances that would have existed, even in the simplest form of personal integrity at times, ceased under pressure from the banks to get the deals done so they can cash in.

 

Now with people in homes they can barely afford, and a decade or so previously they would not have, the banks went a step farther. They took large numbers of loans, bundled them as a security and sold slices off. A slight down turn in the economy, interest rates go up a little, and now these people can no longer afford their homes. The same banks that pushed them into these adjustable rates, then started quickly (and in cases illegally fast) foreclosing on the same people. Creating a snowball effect with property values dropping back to what they really should have been, leaving struggling homeowners underwater with no way out. Pulling money out of the retail, leading to the economic uncertainty and making a viscous cycle, that we are just starting to come out of.

 

Had the banks not been allowed to become one entity I do not think we would be in the shape we are in. Commercial banks vs investment banks were like the tortoise and the hare. Commercial banks were about steady stable returns and investment banks were the big risk big reward outfits. Now its all about high and fast returns.

[Ziggy]

Some of the responsibility has to fall on the people who accepted the terms to loans without preparing to cover the long term financial obligations. When I sign my name on a contract, I make sure either I or a lawyer/ someone knowledgeable has looked at it and made sure it was ok to sign. I understand people wanted houses, but buying a house isn't like buying almost anything else. Don't get me wrong, the loan officers and those told to put out loans for people with questionable financial backing are just as wrong if not worse but its not fair to skip over the people who accepted the deal in the first place.

[sd'sker]

Some of the responsibility has to fall on the people who accepted the terms to loans without preparing to cover the long term financial obligations. When I sign my name on a contract, I make sure either I or a lawyer/ someone knowledgeable has looked at it and made sure it was ok to sign. I understand people wanted houses, but buying a house isn't like buying almost anything else. Don't get me wrong, the loan officers and those told to put out loans for people with questionable financial backing are just as wrong if not worse but its not fair to skip over the people who accepted the deal in the first place.

i agree completely. (although, i doubt you read all contracts, i mean come on. who reads all those internet disclaimers. i still understand the sentiment).

stigori, that was a great explanation. i always knew the industry was deregulated allowing banks to be multiple (as shawn watson would say), but you made it much more understandable and simplified.

[strigori]

Some of the responsibility has to fall on the people who accepted the terms to loans without preparing to cover the long term financial obligations. When I sign my name on a contract, I make sure either I or a lawyer/ someone knowledgeable has looked at it and made sure it was ok to sign. I understand people wanted houses, but buying a house isn't like buying almost anything else. Don't get me wrong, the loan officers and those told to put out loans for people with questionable financial backing are just as wrong if not worse but its not fair to skip over the people who accepted the deal in the first place.

i agree completely. (although, i doubt you read all contracts, i mean come on. who reads all those internet disclaimers. i still understand the sentiment).

stigori, that was a great explanation. i always knew the industry was deregulated allowing banks to be multiple (as shawn watson would say), but you made it much more understandable and simplified.

 

Some, sure. But a couple factors put more blame on the banks, just by being deceptive bastards if nothing else.

 

One - A lot of the people who ended up in trouble were first time home buyers, and quite frankly ignorant of all the details. They made a colossal mistake of trusting people they thought were independent and actually giving them good advice to go on. Misplaced trust would be what many people are to blame for I suppose.

 

Two - Sorta ties into the first, real estate agents put pressure on people to sign NOW, or you might lose the home of your dreams, someone else is looking at it, regardless of weather any of that is true or not. And Most people do not function well under pressure.

 

Glad I could offer some info.

 

I did forget one thing when I was writing that too. The 'slices' of bundled mortgages were a huge reason for banks collapsing themselves. After they sold off these 'slices' they no longer had a grasp on who owed whom money. And that is never good news for accounting or stocks, or any number of other things.