[rayiner]

I'd love to hear which specific person did which specific thing that you believe "directly caused the 2007-2009 economic crisis."

Identifying a "direct cause" of the 2007-2009 financial crisis, with certainty exceeding 90-95% (the "reasonable doubt" threshold) would be worthy of a Nobel Memorial Prize, in my estimation.

[walrus01]

a) the people who paid off the bond rating agencies to rate mortgage-backed securities full of junk mortgages as AAA.

b) the senior executives at institutions like bear stearns who signed off on creating the mortgage backed securities and their known composition of shit mortgages.

c) the senior executives at the rating agencies who knowingly rated shit bonds as AAA.

d) senior executives at institutions like Countrywide which pumped the shit mortgages into the market.

[rayiner]

And you’re 95% certain that bond ratings are what caused the financial crisis?

[walrus01]

no, at a more fundamental level before the ratings agencies ever saw them, the composition of the mortgage-backed securities and their tranches. The number of no-documentation/no-income mortgages that were rolled together into securitized products by the clients of the ratings agencies.

[paulsutter]

So tell us then what it was? Good people doing solid work until they were hit by a random black swan event? That’s the official story and it’s absurd.

[kbenson]

I think the implication is that there were multiple causes from multiple sides, all to varying degrees of culpability.

In other words, bond ratings may not be the cause, but still be a cause.

[cycrutchfield]

For all of those you would need definitive proof that those decisions were made with criminal intent to commit fraud. That is a very high evidentiary standard to clear, which is why these cases are so hard to prosecute.

Even the Enron case, which was a pretty clear case of fraud, took the government 5 years to build a case and win in court.

So, while all of those things you mention do indeed sound bad, they are incredibly difficult to prove in a criminal trial.

[walrus01]

While I don't disagree with your points, it boils down to a defense by the persons accused of "We, titans of industry of finance, were so clueless, inept and incompetent that this unexpected thing happened. We definitely weren't intentionally trying to defraud anyone!". Doesn't exactly sound like a ringing endorsement for people whose yearly salaries are >$500,000.

[charlesdm]

Making profits unethically doesn't necessarily mean it's fraud. The two things are very different.

I can knowingly sell you a crappy car, and if you sign an agreement that you bought and accepted the good in its current state, that's that. Yes, I acted unethically, but I didn't defraud you.

[Sabinus]

The rich have the ability to make their unethical actions legal, whereas the poor have no such sway in politics.

[cycrutchfield]

It has nothing to do with politics, but it may have something to do with the cost of legal representation.

[rayiner]

First, that's not the defense. The defense is that the 2007-2009 recession was a "black swan" event resulting from a confluence of factors that nobody expected. To date, I'm not aware of any economic work that points, with 95%+ certainty, to a specific cause of the recession.

Second, a successful prosecution requires proof beyond a reasonable doubt that a specific person performed each element of specific crimes. Defendants do not need to even present a defense--and in fact sometimes do not, relying entirely on poking holes in the government's case.

[cycrutchfield]

That is how our system of criminal law works, though. We would prefer 100 criminals go free to prevent 1 innocent person from being convicted.

[charlesdm]

Both b and d are most definitely not illegal -- deceptive yes, but not illegal.

If I sell you a crappy asset (imagine a company almost going bankrupt) for $10m and you don't do proper due diligence on said asset, then you have no right of complaining afterwards. No one is going to do your homework.

[jazzyk]

If I am your client, you have fiduciary responsibility to warn me - I am paying you commission to do due diligence.

If you know it is a crappy product, and don;t warn me, it is at the very least a SEC violation, punishable. Could also be viewed as fraud, and pursued as a crime.

[URSpider94]

Actually, in the USA, very few financial advisors have a fiduciary duty to their clients.

[jazzyk]

All bigger institutions certainly do. I have worked for quite a few.

[FireBeyond]

And never mind those situations where GS etc were playing both sides, advising one side to buy, others to sell.

They knew through sheer logic that one of these positions was by deduction not tenable.

But they went for it anyway, collecting commissions on both sides.

[matt4077]

Nobody "paid off the rating agencies". Or, more accurately: everyone did. It was standard practice for the rating agencies to be paid by those being rated.

Now that's obviously not a terribly smart idea. But there's simply no way to blame any single individual when none of them had the power to the system by themselves. I mean: quite obviously the companies being rated would have loved for others to bear the costs for it.

[paulddraper]

There are not specific people responsible.

There are organizations, financial institutions, executives, investors, businesses, etc. that did not deserve jail, but did deserve to lose financially.

Instead, some lost their sort and others were shielded with $100,000,000,000s of taxpayer money.

The kinds of people that supported this flagrant graft are despicable. Probably not jailable (I mean most politicians and even the president supported bailing out asset holders), but more despicable than Zuckerberg or most of the scapegoats you see in the news.

[protomyth]

Of everyone involved, I would love to see the rating agencies and their corporate officers get charged with fraud for rating the bundles of crappy mortgages AAA.

[drb91]

> with certainty exceeding 90-95% (the "reasonable doubt" threshold)

How do you figure? Smells like a p value taken from a science class, not anything related to a legal definition of reasonable doubt.

[hammock]

It's a rough estimate to help you grok the concept, and is widely taught in law school. It is best viewed in comparison to another standard like "preponderance of the evidence" or "more likely than not" (51%)

[chrisgd]

It would have been nice to see them throw some charges and see what sticks.

[RoyTyrell]

Are you advocating that the US government should just charge people with crimes that haven't been investigated and they have perhaps no evidence for, just to see if a jury will convict them?

[chrisgd]

No, not even close. But it seems there was not much of an Investigation to see if any laws were broken

[meepmorp]

It sounds like a great idea, when they’re targeting people you don’t like.

[zerg2k]

That can be easily refuted by saying “do you really think that all big bank executives didn’t know what was going on and decided to ride the money wave”?

[kbenson]

Knowing that one or more people of a group have done something doesn't necessarily lead to knowing which ones, or having proof of them doing that thing. (much less proof of knowing, which is what you are saying).

[rayiner]

“Where there is smoke there is fire” is not a doctrine of criminal law. Also, by that token, who should we have prosecuted for the 2000 tech-related crash?

[walrus01]

a number of people were prosecuted:

https://www.google.com/search?client=ubuntu&channel=fs&q=wor...

the dotcom 1.0 crash had a lot of irrational exuberance, where VC money was raised and pissed away for ideas that wouldn't work at the time (beenz, flooz, pets.com, webvan, etc). Then there was the outright fraud like Enron and Worldcom.

[tptacek]

The criminal justice response to dot-com and to the 2008 crash seem comparable.

[lovich]

Eric Holder, the attorney general at the time, did not prosecute bankers for the 2008 recession. The attorney general did prosecute people responsible for the issues in the dot com crash.

How is that comparable? Holder even stated, "I am concerned that the size of some of these institutions becomes so large that it does become difficult to prosecute them" because it might damage the economy. That is not an aspect the AG should be considering. They should be upholding the rule of law which did not occur after the 2008 crisis

[rayiner]

You're taking that quite a bit out of context. Here is the full transcript: http://stopforeclosurefraud.com/2013/03/06/ag-holder-i-am-co....

Right after that, the questioning continues:

> Grassley: Do you believe that the investment bankers that were repackaging bad mortgages that were AAA-rated are guilty of fraud or is it a case of just not being aggressive or effective enough to prove that they did something fraudulent and criminal?

> Holder: We looked at those kinds of cases. I think we have been appropriately aggressive, these are not always easy cases to make. When you look at these cases, you see that things were done ‘wrong’ then the question is whether or not they were illegal. And I think the people in our criminal division… I think have been as aggressive as they could be, brought cases where we think we could have brought them. I know that in some instances that has not been a satisfying answer to people, but we have been as aggressive as we could have been.

He also says:

> Holder: You are right, senator. The greatest deterrent effect is not to prosecute a corporation — although that’s important — the greatest deterrent effect is to prosecute the individuals in the corporations that are responsible for those decisions.

He's saying the opposite of what you're claiming he said: that he tried to prosecute the "bankers" as aggressively as he could, but the cases were "not easy to make."

[walrus01]

More granularly than decisions made by Holder, one could also look at the number of prosecutions (vs lack of prosecutions) from the US Southern District of New York which has jurisdiction in the area.

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