[johngalt]

What sort of fraud in 2008 would be similar to just wiring millions of dollars out of the bank to a personal investment/scam?

The most egregious stuff in 2008 was mispricing MBSs. Incorrectly pricing risk is pretty far from stealing money from investors/depositors.

[no_wizard]

They paid $13 billion in fines for their role in underwriting fraudulent securities[0][1] as it was coming to light. In a brief that was never filed as part of the settlement (JP Morgan Chase really didn't want this to be filed and made it a contingency for the settlement), made public after the settlement and summarized in the statement of fact released along side the settlement itself[2], the government had enough evidence that it was going to file a lawsuit, the core of which was related to this:

>for a fraudulent and deceptive scheme to package and sell residential mortgage-backed securities that the bank knew contained a material amount of materially defective loans.

If that's not enough, if we want to look just beyond 2008, they pulled a scam to manipulate the part of the settlement which was suppose to 4 billion in loan relief for home owners[3] by forgiving phony mortgages.

I have more, if so desired, but I didn't want this to turn into a hundred link dump of information that would be very dense to read.

[0]: https://www.vanityfair.com/news/2017/09/jamie-dimon-billion-...

[1]: https://www.thenation.com/article/archive/jamie-dimons-13-bi...

[2]: https://www.justice.gov/iso/opa/resources/943201311191510319...

[3]: https://billmoyers.com/story/special-investigation-americas-...

[derangedHorse]

As long as you have the money in your coffers to pay for any wrongdoing you'll never get charged. These fraudulent securities in 08' were also somewhat removed from depositors so it's hard to see too many similarities to this case of a local bank.

[StanislavPetrov]

Robosigning, directing employees to sign fake names on contracts and repeatedly submitting fraudulent statements to the courts, among other things, in a largely successful effort to steal people's homes on a mass scale.

>Reuters has found that some of the biggest U.S. banks and other "loan servicers" continue to file questionable foreclosure documents with courts and county clerks. They are using tactics that late last year triggered an outcry, multiple investigations and temporary moratoriums on foreclosures.

>In recent months, servicers have filed thousands of documents that appear to have been fabricated or improperly altered, or have sworn to false facts. Reuters also identified at least six "robo-signers," individuals who in recent months have each signed thousands of mortgage assignments -- legal documents which pinpoint ownership of a property. These same individuals have been identified -- in depositions, court testimony or court rulings -- as previously having signed vast numbers of foreclosure documents that they never read or checked.

https://www.reuters.com/article/world/special-report-banks-s...

[rib3ye]

Well, there were the thousands of fraudulent NINJA loans made by individual applicants who lied.

But then you have to ask if the institutions doing the application verifications were criminally negligent.

[oldgradstudent]

> But then you have to ask if the institutions doing the application verifications were criminally negligent.

That wasn't negligent. It was intentional.

Not by the institution, but by the officers acting against the interests of the institution.

A tiny example out of so many: it is against the interest of a secured lender to inflate appraised value or allow them to be inflated.

Yet, starting at 2004, appraisers across the country started reporting that they were being pressured to inflate appraisals and blacklisted when they refused.

This is clear indication of fraud against the institution and regulators. There is simply no honest reason to inflate appraisals.

[newswasboring]

> Not by the institution, but by the officers acting against the interests of the institution.

The institution made a bunch of money. In the ghoulish way banks behave, the institutions interests are only making money. The officers were acting in the interest of the institution the way they understand them.

[nradov]

Criminal negligence laws only apply to physical harm, not financial losses.

[leereeves]

I believe a similar concept exists in finance, as part of fiduciary duty. It's called duty of care in that context.

"The American Law Institute’s Principles of Corporate Governance defines the duty of care as the duty by which a corporate director or officer is required to perform their functions in good faith; in a manner that they reasonably believe to be in the best interests of the corporation; and with the care that an ordinarily prudent person would reasonably be expected to exercise in a like position and under similar circumstances (negligence standard)."

https://www.law.cornell.edu/wex/duty_of_care

[nradov]

Again, that's a civil issue not criminal. In theory some lenders might have been able to file civil lawsuits against some of their own employees to claw back part of their bonuses or whatever, but that would have been pointless.

[leereeves]

You're right, it's civil rather than criminal, but in the case of some investment companies, like those that sold mortgage-backed securities, it can be enforced by the SEC.

https://www.law.cornell.edu/uscode/text/15/80a-35

That's just one example. I expect that, had they wanted to, the government could have found many applicable laws to go after those responsible for the financial crisis.

[more_corn]

Sadly. There are som many negligent acts we need to prosecute.

[throwaway81523]

The abbreviation you want is TBTF.

[rib3ye]

Should I understand that you think accountability for the fraudulent loan applicants was just a form of efficient markets under a broken institutional system?

[throwaway81523]

I don't understand this question, sorry.

[User23]

Here[1] is a write up from an expert. It falls into the class of accounting control frauds.

[1] https://fcic-static.law.stanford.edu/cdn_media/fcic-testimon...

[vlovich123]

I mean they they were bribing/manipulating/forcing the ratings agencies to misclassify derivatives. That’s basically stealing except with more steps.

[MattGaiser]

They shopped around to different ratings agencies and only hired those that provided the better results.

You would need to classify everything from consumer reports to industry awards to not inviting influencers who give negative reviews to events as stealing as well.

[vlovich123]

Yeah, no. Credit agencies weren’t hapless victims of market forces.

> Another email between colleagues at Standard & Poor's written before the bubble burst, suggests awareness of what would happen to the securities they were giving top ratings to: "Rating agencies continue to create and [sic] even bigger monster--the CDO market. Let's hope we are all wealthy and retired by the time this house of cards falters."

They were willing participants precisely because they were making huge fees to look the other way.

> One study of "6,500 structured debt ratings" produced by Standard & Poor's, Moody's and Fitch, found ratings by agencies "biased in favour of issuer clients that provide the agencies with more rating business. This result points to a powerful conflict of interest, which goes beyond the occasional disagreement among employees."

These kinds of things are deals negotiated at the highest level of the companies involved. Credit agencies were paid to give the crime the banks were doing a veneer of respectability.

[ffgjgf1]

> These kinds of things are deals negotiated at the highest level of the companies involved

To me it just seems a more or less natural outcome of the major structural flaws in the whole business model. I’m not sure you need an explicit conspiracy for credit agencies to begin behaving in such a way that maximizes their revenue, it was mostly just a natural outcome of competition and extremely useless and inefficient regulation. If anyone deserves to go to prison it’s the people who were supposed to be regulating the banking industry.

Obviously the Federal government had zero interest in doing that but if they only went after the bankers it would have quickly become obvious that they are not the only ones to blame.

[vlovich123]

“You don’t need an explicit conspiracy for pig butchering. It’s a natural outcome of competition in the black market and extremely poor security and training.”

If you can actually draw a distinction between what scammers do and what companies do other than “we explicitly have laws on the books to treat it as a crime” I’d love to hear it. There’s a lot of similarities between corporations and criminal organizational - it’s just groups of people who are trying to make money.

And as for who deserves to go to prison, the ratings agencies refused to pay market rates to retain talent being poached by the banks. The same happens in government. So basically the banks continually poach the best people and create incentives to keep the status quo and for regulators to turn a blind eye so that they can land at the bank later. You can go after the regulators but I don’t think that’s going to be an effective strategy to solve the problem.

[ffgjgf1]

> You don’t need an explicit conspiracy for pig butchering

Yeah but IMO the scam part is mostly tangential. It hardly matters what did the CEO do with the stolen money, he could have gambled it away at a casino or bought a yacht with it, at the end of the day he still stole it and that’s the crime we’re discussing here.

> You can go after the regulators but I don’t think that’s going to be an effective strategy to solve the problem.

Yes, but going after the bankers would have exposed the extreme incompetence by the regulators and if you started unwinding the whole thing it would have affected a lot of high level people in government. So it’s rather obvious that that they had very little desire to prosecute anyone.

And it hardly matters who deserves what since you can’t send anyone who was just exploiting loopholes and didn’t clearly brake any laws regardless how immoral or unethical their actions were.

[victorbjorklund]

Not outright bribes. Just the implicit knowledge among all parties that the rating agency that gives bad grades get fewer customers. Result is the same but not exactly "bribing".

Yea, probably there was invidual cases of bribing like in all industries. But overall the issue wasn't oughtright bribes.

[vlovich123]

It wasn’t just implicit. There was explicit acknowledgment of the problem and turning a blind eye precisely because they were getting paid by the banks. I don’t know how else to categorize that except as bribery - you’re literally paying money to influence the outcome which is the very definition of bribery.

[specialist]

IIRC, SCOTUS recently ruled that only an explicit quid pro quo is considered a bribe. So laundering monies thru multiple parties is a-okay and mutual backscratching, such as a gifting someone an RV and then coincidentally getting preferential lucrative judgements, is reciprocal altruism. Or something. Because vibes.

I know, I know. Requiring conspirators to say "this is a bribe" for there to be legal jeopardy is sort of nuts.