[hrothgar]

 mike777, on 2013-November-26, 20:49, said:

These were not bad people doing bad things. These were normal people making normal decisions based on bad data that arose from artificial circumstances

Bullshit

There was a clear violation of fiduciary responsibility.
The investment banks were deliberately crafting instruments with specific characteristics and failed to disclose this information to buyers or the bond ratings agencies.

The fact that you, a so called investment advisor, considers these sorts of actions "normal" is a clear signal that no one in their right mind should consider doing business with you...

[Winstonm]

 hrothgar, on 2013-November-27, 04:24, said:

Bullshit

There was a clear violation of fiduciary responsibility.
The investment banks were deliberately crafting instruments with specific characteristics and failed to disclose this information to buyers or the bond ratings agencies.

The fact that you, a so called investment advisor, considers these sorts of actions "normal" is a clear signal that no one in their right mind should consider doing business with you...

Richard,

I need to step in here as the quote was what I wrote, not Mike, and it referenced the people who were responsible for managing huge sums of money like retirement accounts and other fund pools - not the mortgage companies or the Wall Street investment bankers.

The basic reason for the systemic nature of the problem was ignoring (or trusting, you might say) risk in search of higher yield - and many of those who ignored risk were not trying hanky panky but simply trying to manage their accounts.

If there is one culprit, look to Alan Greenspan. His actions as Fed chair set up the circumstances that created the scramble for yield.


edit: to be clear, many of the mortgage companies who initiated the loans and the many of the Wall Street investment banks who packaged and sold the loans acted criminally and it is ridiculous that no one is in prison because of the crisis.

[mycroft]

One of the big issues is that everybody, within the rules, did what was best for them. Unfortunately, nobody did what was best for the loan purchaser or the end holder - in fact, it's quite obvious that people deliberately did their best to play pass-the-potato. Why the people who wrapped the damn things didn't make it clear to the purchasers in their company that these things were in fact potatoes I don't understand (but I think boils down to "what's best for themselves", and even loyalty to the company not getting played by their own plays applied, or maybe they just assumed they would always be able to pass).

I think this boils down to the fundamental failure of capitalism - it is frequently not in my best interest to consider your best interest - especially if repeat sales is not going to be an issue (or, at least, not my issue). Without something that mandates care for the purchaser (rather than the "completely educated parties" required for "invisible hand" free markets, which clearly doesn't apply for these kinds of "twice-in-a-lifetime" purchases vs. "handle 40 of them a day") rather than "regulations coming from industry" that Adam Smith himself said should be "ought never be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention", this failure will happen again.

It's just that this time it happened to business. And, as we expect from government that doesn't, in fact, do the above with suggestions from the industry, they - and the people who with intent hosed both their business and their customers (both the end customers and the rebuyers) for their own personal profit - got away with it. Which of course means that they will never do this again...

[mike777]

Stop

many posters want to make selling against the law

If you sell you go to jail.

follow million and million rules or go to jail if you sell equity or debt

My guess is most of you poster never have and want to impose rules on others not you.

I challenge you posters have you sold thousands and more ...if so how?

do you risk going to jail?

[blackshoe]

Mike777 apparently wants to abolish the market economy altogether. Interesting thought, though I frankly don't see how it can work, absent worldwide Communism. I could be wrong but I swear I heard somewhere that horse is dead.

[PassedOut]

 mike777, on 2013-December-01, 00:32, said:

I challenge you posters have you sold thousands and more ...if so how?

Yes, via honest businesses.

 mike777, on 2013-December-01, 00:32, said:

do you risk going to jail?

No.

[Winstonm]

 mike777, on 2013-December-01, 00:32, said:

Stop

many posters want to make selling against the law

If you sell you go to jail.

follow million and million rules or go to jail if you sell equity or debt

My guess is most of you poster never have and want to impose rules on others not you.

I challenge you posters have you sold thousands and more ...if so how?

do you risk going to jail?

If I commit fraud, I risk going to jail. The same should be true of anyone, including sellers of fraudulent mortgage backed securities.

[mycroft]

 mike777, on 2013-December-01, 00:32, said:

many posters want to make selling against the law

If you sell you go to jail.

If you sell something that is actively harmful to the purchaser, there should be a cost to you.

Sell a product that causes a particular kind of cancer to go from 15th most common to absolutely most common? Yeah, we should fine you.
Sell melamine-laced milk or toxic painted toys? Same thing. You didn't make it? Don't care, you sold it. You should be checking; and if you outsource production, you should be *testing*.
Sell a car whose throttle sticks and kills people? BIG fine.
Why should selling an *actively harmful* mortgage to people who you know will likely lead to bankruptcy and foreclosure, or selling that mortgage to a bank as "top rating", or packaging a bunch up and selling them together as "well, there's this 20% that are bad, but most are AAA" be any different?

Now, if you do any of these things, *knowing about their toxicity*, there should be an even bigger fine.
If you do any of these things, *actively concealing what you know about their toxicity*, why should that be any different than if you stuck in the knife yourself?

As has been said repeatedly here, free markets require an equally educated marketplace to work correctly. The vendor is just by their nature going to be better educated, but when it's a huge difference, especially to the point where the consumer can't be "educated enough", then we need regulations to ensure that there's a little more of a level playing field. When the vendor actively discourages education of the consumer (by suppressing that knowledge, or obfuscating the issue enough to impede education) - and it's toxic - there needs to be *punitive* regulations, *especially* if there's a high risk of seriously damaging consequences.

Finally, think of the FDA. I see on channel of choice, 50% of the ads are "did you do this medical procedure and have a major problem? If so, join our class action and get money." This is after all the trials the FDA force medical players to do to put something on the market. Why should the banks be any different?

[mike777]

"If you sell something that is actively harmful to the purchaser, there should be a cost to you"



guys we are talking about selling stocks and bonds in the secondary market (not an ipo). You seem to want to to blame the seller for selling and put them in jail. No one said anything about fraud but many seem to define fraud way too broadly.

For example I own GM stock and think the company is toxic....and want to sell in the secondary market. You want to make this illegal or impossible. Somehow I am going to jail unless I somehow find out who the person buying the stock is and telling her I hate the company.

Or in this case if I think the country housing market is going to crash I have to tell you first. YOu keep talking about fraud in the mortgages but keep in mind these were sophisticated buyers who often were not lied to,, they just did not bother to check. You guys put way too much blame on the seller and none on the buyer.

To use Mycrofts point if I sell you something and you lose money and are harmed it is my fault.

[Winstonm]

No, Mike, we are talking about making misleading, non-factual statements and concealing negative information in order to make a profit: in other words, fraud.

Quote

Fraud
A false representation of a matter of fact—whether by words or by conduct, by false or misleading allegations, or by concealment of what should have been disclosed—that deceives and is intended to deceive another so that the individual will act upon it to her or his legal injury

Quote

The U.S. government on Tuesday filed two civil lawsuits against Bank of America that accuse the bank of investor fraud in its sale of $850 million of residential mortgage-backed securities....The Justice Department and the U.S. Securities and Exchange Commission filed parallel lawsuits in U.S. District Court in Charlotte, North Carolina, accusing Bank of America of making misleading statements and failing to disclose important facts about the pool of mortgages underlying a sale of securities to investors in early 2008.

[mike777]

Winston my concealing negative information ...often very often is not fraud. I just have information you don't have when selling stocks or bonds in the secondary market.

Notice the words Should be disclosed

Again guys I am not saying there was never any fraud...just at some point everything is not fraud and at some point you make selling impossible without a lawyer by your side.

Please notice banks are run by lawyers now..not bankers.

to be fair if you are in the securities business you must be prepared to be sued that is the business today.

[blackshoe]

As far as "there should be a fine", I would prefer a more up-front resolution. If your actions (or inactions, in some cases) harm someone (or lots of someones) then you pay whatever it takes to repair the damage to that person/those people. Paying a fine to the government does nothing to help those you harmed.

[PassedOut]

 mike777, on 2013-December-02, 14:06, said:

Again guys I am not saying there was never any fraud...just at some point everything is not fraud and at some point you make selling impossible without a lawyer by your side.

If you need a lawyer by your side, you should rethink what you are selling.

[kenberg]

 mike777, on 2013-December-02, 14:06, said:

Winston my concealing negative information ...often very often is not fraud. I just have information you don't have when selling stocks or bonds in the secondary market.

Notice the words Should be disclosed

Again guys I am not saying there was never any fraud...just at some point everything is not fraud and at some point you make selling impossible without a lawyer by your side.

Please notice banks are run by lawyers now..not bankers.

to be fair if you are in the securities business you must be prepared to be sued that is the business today.

Yep, it's only fraud if you can prove it. If you can't, it's just business as usual. The problem is that it used to be that I could avoid these problems by avoiding bankers, stockbrokers, and other such folks. Now they seem to have figured out how to get rich by screwing people (not usually by provably fraudulent means of course, but screwing nonetheless) and then sticking the general public with the cost of fixing the wreckage.

[mike777]

so guys if I sell a stock to you in the secondary market and it goes down I caused harm since my research said it was going down and I said nothing, my inaction, my silence caused harm. Guys keep in mind it is the public selling the stock, they are the owners in my example...not the big bad corporation.

People forget that retirement plans, your pension plans, own roughly 70% of stocks and bonds...they are the ones selling.

But yes, listening to you guys you seem to see fraud everywhere if there is a loss.

[kenberg]

 mike777, on 2013-December-02, 15:56, said:

so guys if I sell a stock to you in the secondary market and it goes down I caused harm since my research said it was going down and I said nothing, my inaction, my silence caused harm. Guys keep in mind it is the public selling the stock, they are the owners in my example...not the big bad corporation.

People forget that retirement plans, your pension plans, own roughly 70% of stocks and bonds...they are the ones selling.

But yes, listening to you guys you seem to see fraud everywhere if there is a loss.

I am not saying fraud. That's up to the lawyers. But there is good reason for distrust, and I do distrust. I have to live in the modern world, I don't have to like all aspects of it.

The fact that the viability of my pension is dependent upon the market is unavoidable. Scary, but unavoidable. The only upside is that since there isn't a damn thing I can do about it, i just ignore it. If you live on the side of a volcano, it's best not to dwell on that fact.

[mike777]

ya it is possible very possible that many posters here have a ret/pension plan and they are owners of these companies. The owners are the ones paying these fines for the fraud, etc.

[hrothgar]

 mike777, on 2013-December-02, 15:56, said:

so guys if I sell a stock to you in the secondary market and it goes down I caused harm since my research said it was going down and I said nothing, my inaction, my silence caused harm. Guys keep in mind it is the public selling the stock, they are the owners in my example...not the big bad corporation.

People forget that retirement plans, your pension plans, own roughly 70% of stocks and bonds...they are the ones selling.

But yes, listening to you guys you seem to see fraud everywhere if there is a loss.

Mike, I understand your desire to create straw men to argue against...
Its part and parcel with all those voices in your head that you deal with daily.

No one is talking about fraud charges against pension plans or anyone in the secondary market.
The discussions about criminal charges for fraud have been made with respect to the banks creating the CDOs, not individuals reselling them in the open markets.

I, and others have raised very specific examples like the following quote from earlier in the thread

Quote

I want to focus specifically on the Abacus 2007-AC1 CDOs:

This set of mortgages that were included in this CDO were deliberately selected to have a very similar set of characteristics.

The chance that these mortgages were independent of one another was significantly less than a randomly selected group of mortgages, or, alternatively, one that was engineered to try and ensure that the mortgages were independent of one another.

If you are too stupid, lazy, or mentally impaired to follow a simple conversation, don't post...

[FM75]

 hrothgar, on 2013-December-02, 16:42, said:

Mike, I understand your desire to create straw men to argue against...
Its part and parcel with all those voices in your head that you deal with daily.

No one is talking about fraud charges against pension plans or anyone in the secondary market.
The discussions about criminal charges for fraud have been made with respect to the banks creating the CDOs, not individuals selling them in the open markets.

I, and others have raised very specific examples like the following quote from earlier in the thread



If you are too stupid, lazy, or mentally impaired to follow a simple conversation, don't post...

If you want to talk specifically about it, why not post a link to the prospectus. Otherwise, we don't have any facts to discuss with respect to the issue. So we will expect the usual "feelings based" biased statements.

Of course, even if you do that, we are likely to do a lot of resulting.

[mike777]

Anyway guys this is a good book and I strongly recommend it. I think it lays out its case well.