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Five Years Have Passed Since The Financial Crisis

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The Financial Crisis: Why Have No High-Level Executives Been Prosecuted?

Who was to blame? Was it simply a result of negligence, or was it the result, at least in part, of fraudulent practices, of dubious mortgages portrayed as sound risks and packaged into ever more esoteric financial instruments, the fundamental weaknesses of which were intentionally obscured?

But if, by contrast, the Great Recession was in material part the product of intentional fraud, the failure to prosecute those responsible must be judged one of the more egregious failures of the criminal justice system in many years. Not a single high-level executive has been successfully prosecuted in connection with the recent financial crisis, and given the fact that most of the relevant criminal provisions are governed by a five-year statute of limitations, it appears likely that none will be. It may not be too soon, therefore, to ask why.

One possibility, already mentioned, is that no fraud was committed.

But the stated opinion of those government entities asked to examine the financial crisis overall is not that no fraud was committed. Quite the contrary. For example, the Financial Crisis Inquiry Commission, in its final report, uses variants of the word “fraud” no fewer than 157 times in describing what led to the crisis, concluding that there was a “systemic breakdown,” not just in accountability, but also in ethical behavior.

As the commission found, the signs of fraud were everywhere to be seen, with the number of reports of suspected mortgage fraud rising twenty-fold between 1996 and 2005 and then doubling again in the next four years. As early as 2004, FBI Assistant Director Chris Swecker was publicly warning of the “pervasive problem” of mortgage fraud, driven by the voracious demand for mortgage-backed securities. Similar warnings, many from within the financial community, were disregarded, not because they were viewed as inaccurate, but because, as one high-level banker put it, “A decision was made that ‘We’re going to have to hold our nose and start buying the stated product if we want to stay in business.’”

The point is that the subprime mortgages, i.e., mortgages of dubious creditworthiness, increasingly provided the chief collateral for highly leveraged securities that were marketed as AAA, i.e., securities of very low risk. more here

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Money talks, the truth walks.

The bottom line is that as long as the politicians can keep on delivering a good standard of living for the rump of the population or can convince them that the alternative is worse, people will happily overlook any amount of malfeasance in an area about which they have absolutely no comprehension (irrespective of how vital it is).

Basically, the politicians are PR-savvy showmen soothing the general population and creating the impression that the public actually have a say about anything, whilst the insiders get their way usually at the expense of the public. People who think that they live in a 'democracy' produce a lot more and require much less in the way of heavily armed security to make them hand over a wodge of their production and stay civil.

It's far easier and cheaper to provide entertainment and news media distractions, spend money on intelligence gathering, pay off the right people and carry out black ops on those who can't be bought than to maintain a massive physical security apparatus forcing the masses to keep producing and staying in line as the less developed regimes do.

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There have been some prosecutions in the US. It must be something to do with the real level of democracy and the real level of representation?

Edited by billybong

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There have been some prosecutions in the US. It must be something to do with the real level of democracy and the real level of representation?

Wall Street paid for Obama's election campaign.... It was in the $Billions... Go figure.... :rolleyes:

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It's worth pointing out that Credit Default Swaps were originally called Credit Default Options until JP Morgan observed that options were regulated by US commodities and securities agencies, whereas swaps were specifically excluded from such oversight. The convention 'CDS' was quickly taken up by the industry. Calling them swaps ensured that CDSs would remain off the regulatory radar for a decade.

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Edited by zugzwang

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It's worth pointing out that Credit Default Swaps were originally called Credit Default Options until JP Morgan observed that options were regulated by US commodities and securities agencies, whereas swaps were specifically excluded from such oversight. The convention 'CDS' was quickly taken up by the industry. Calling them swaps ensured that CDSs would remain off the regulatory radar for a decade.

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Interesting, and of course, the regulator didn't notice a thing!

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Wall Street paid for Obama's election campaign.... It was in the $Billions... Go figure.... :rolleyes:

I know but even so there were still some prosecutions. Maybe fewer than there would have been without the $billions of "support".

Apparently the old FSA regulator in the UK was by UK law not subject to sanction for whatever it did so that helps to explain some things - as well as being funded by the companies it regulated.

Whether the new UK regulator/regulatory system operates in similarly penalty free manner is another matter.

Edited by billybong

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In other news our fearless leaders have in fact launched a campaign against fraud- benefit fraud.

Far safer to go after chavs on the make than take on the people who have ruined the country with their financial frauds and sheer unbridled greed.

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It's worth pointing out that Credit Default Swaps were originally called Credit Default Options until JP Morgan observed that options were regulated by US commodities and securities agencies, whereas swaps were specifically excluded from such oversight. The convention 'CDS' was quickly taken up by the industry. Calling them swaps ensured that CDSs would remain off the regulatory radar for a decade.

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Can you evidence this claim about JPM renaming it? As far as I know they have always been called swaps and swaps have always been considered derivatives

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I think it was more that they didn't want it falling under the regulations for 'insurance'.

That is true. It still is not regulated as insurance. But then again you have to own something to insure it.

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Can you evidence this claim about JPM renaming it? As far as I know they have always been called swaps and swaps have always been considered derivatives

Nicholas Dunbar's 'The Devil's Derivatives: The Untold Story of the Slick Traders and Hapless Regulators Who Almost Blew Up Wall Street . . . and Are Ready to Do It Again'

http://www.amazon.co...88792843&sr=1-1

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