Worth it just for the email in the middle by a Citi underwriter.<p><a href="http://cybercemetery.unt.edu/archive/fcic/20110310201200/http://c0181567.cdn1.cloudfiles.rackspacecloud.com/2007-11-03_Citi_Email_from_Dick_Bowen_to_Robert_Rubin_and_David_Bushnell_Re_concerns_financial_issues.pdf" rel="nofollow">http://cybercemetery.unt.edu/archive/fcic/20110310201200/htt...</a><p>I don't agree with every stylistic choice, but that's some of the best professional writing in the fling-a-firecracker-outside-of-your-silo circumstance that I've ever seen. ("I do not believe our company has recognized the material financial losses inevitably associated with the above Citi liability." is accountant-speak for "THE WORLD IS ON FIRE!")
My reaction while reading most of this was <i>"Why didn't any of you try harder to let someone know? Why didn't you email everyone? Why didn't you call all the people you emailed? Wasn't there ANYONE important who would listen!?"</i><p>After reading the whole thing, I was a little shocked to realize the answer is "No, there was no one important who would listen." The accountant who essentially documented the impending collapse of Citigroup in less than 2 pages was interviewed by the SEC and then never heard from them again. Then there's this guy:<p>> The congressional responses were, “Thank you for your letter, and thank you for your interest.” And, “We’ll look into this,” basically.<p>> I also wrote letters to just about every television journalist, and network journalist that I could get my hands on. Sent as e-mail with attachments and never received any response. [I wrote to] CNN and Fox News. ABC News, NBC News, CBS. My daughter was working at that time with one of the network affiliates in Phoenix, and she knew how upset I was about this whole thing. So she put me in contact with their consumer reporter, who does the consumer complaints and that sort of thing. He came out to my house and interviewed me for about 45 minutes. And I gave him documentation, and tried to as best I could to explain the situation to someone that was basically ignorant of the mortgage industry. Never heard another word. …<p>> During the mortgage meltdown, [Fox News host] Bill O’Reilly was having a temper tantrum on his show where he was going off about, “Why didn’t I hear about this? Why didn’t somebody tell me about all this that was going on?” And I almost threw my shoe through the television set. Ask my wife — I was screaming and yelling, “I did try to let you know.” ‘Cause he had been one of the ones that I had sent e-mails and attachments with all of this stuff. …<p>What the hell are these people supposed to do? Start posting their warnings all over the internet and hope it goes viral? What are the chances that would work vs. the chances they'd all be dismissed as conspiracy theorist crackpots?<p>It's easy to think <i>"If I were in any of their positions, I would've gotten the entire country's attention"</i>, but it seems people at every level are determined to be ignorant as long as it's profitable.
I hope pbs eventually covers the zero prosecution for HSBC bank money laundering.<p>Only penalty was a month's worth of profit. Not one person will serve a day in prison.<p>But hey, don't unlock your phone, it's a felony. Or download and free journal articles.
The senior banking executives who ignored the early warnings were making tons of money. The mid-level bankers assembling and selling mortgage securities, who also ignored all warnings, were making tons of money too. The ratings agencies and lawyers giving their stamp of approval to these crazy securities, who also ignored all warnings, were making tons of money as well. The mortgage brokers and originators who were making irresponsible loans to home buyers with sketchy credit histories were making plenty of money, and they too ignored the warnings. The home buyers who successfully flipped properties in a matter of months or even weeks were also making money, and also ignored the warnings. The homeowners who borrowed more and more against their home's seemingly ever-rising value were flush with newfound cash, and felt like financial geniuses.<p>To a close approximation, no one wanted to hear the warnings.<p>To find culprits, most Americans need only look in the mirror.
Our system is strictly based on confidence at this point. Fiat currency, fractional reserve banking, massive leverage, and more systemic debt than the world has ever seen all rely on the fact that big banks are essentially untouchable. We'll never see prosecutions of big banks or their principles. It would break the entire system.
"I think we’ve developed in our society an idea that any time we see a problem, we can create a law that’s going to prevent that problem from happening in the future. We don’t need new laws. We need to enforce the laws that have been on the books before." -Tom Leonard (Mortgage underwriter)<p>That's the duty of the Executive branch.<p>"we have a responsibility in the person of our President; he cannot act improperly, and hide either his negligence or inattention; [...] far from being above the laws, he is amenable to them in his private character as a citizen, and in his public character by impeachment." -James Wilson (a Founding Father of the US)<p>"Not but that crimes of a strictly legal character fall within the scope of the power [of impeachment]; but that it has a more enlarged operation, and reaches, what are aptly termed political offenses, growing out of personal misconduct or gross neglect, or usurpation, or habitual disregard of the public interests, various in their character, and so indefinable in their actual involutions, that it is almost impossible to provide systematically for them by positive law." -Joseph Story (Supreme Court Justice, 1811-1845)
It was never a secret. Everyone knew values were out of whack on housing and people were taking out mortgages to high. But the sound of a few tiny whistle blowers is nothing compared to the collective will of the American people to buy bigger and better homes or make a quick buck.<p>This was a lesson we needed to learn as a nation, not one we just need to blame on bankers. Many people participated in the fraud, many banks were complicit with the fraud. That means we should be locking up home buyers right along with the bankers. In fact many of the people interviewed here as whistle-blowers went on being complicit with fraud. None (except the one executive) quit their jobs or even protested in a significant fashion. They all just kept doing work they knew was wrong.<p>Disclosure: Im an ex-Journalist and an ex-Banker.
As someone on Twitter said: "Justice Dept said they'd never speak to @FrontlinePBS again after this Wall Street doc. So naturally it's a must-watch" via <a href="https://twitter.com/trevortimm/status/294337455321133056" rel="nofollow">https://twitter.com/trevortimm/status/294337455321133056</a><p>I found the programme to be very interesting and raise important points but as always, it IS very hard to prove criminal actions in cases like these and while some might be greedy they might not actually be criminal.<p>That said; it seems that some knew about these unsavory dealings and hopefully they will face justice.
The best whistle blowing before the bubble popped had to be Peter Schiff telling a huge crowd of mortgage bankers they were about to lose their jobs in Nov 2006:<p><a href="http://www.youtube.com/watch?v=jj8rMwdQf6k" rel="nofollow">http://www.youtube.com/watch?v=jj8rMwdQf6k</a>
The entire expose is worth reading: <a href="http://www.pbs.org/wgbh/pages/frontline/untouchables/" rel="nofollow">http://www.pbs.org/wgbh/pages/frontline/untouchables/</a><p>The most outrageous part in my mind was where Assistant AG Lanny Breuer (who just resigned) gave a speech in which he talked about how he loses sleep at night over concerns about what bringing a lawsuit against a big Wall Street corporation could do.<p>Imagine if you applied that argument to prosecuting drug cartels! "Just think of all the poor footmen and couriers who might lose their jobs if we prosecute their ringleader"
This documentary implies that applicants were submitting fraudulant applications, which is not true. Most people (including the Frontline producers, apparently) still do not understand who was defrauding whom here.<p>If you apply for a loan and misrepresent your financial situation, this is not fraud (which is a crime) it's a lie, and lying is NOT a crime. You can say you're a teacher making a million a year and what's supposed to happen is the application should be denied (and may be your credit score might suffer).<p>It is the responsibility of the bank, not the applicant, to make sure that the applicant can repay the loan. Issuing a loan to someone who you know is misrepresenting one's financial situation is fraud and a crime. When such a loan is issued, it is the bank defrauding the applicant (not the other way around). It's essentially loan sharking or extortion, which is a felony. In doing so the bank is also failing in its fiduciary responsibility to the depositors, which is a (separate) crime as well.
while back I read the Big Short<p>what I came away with was how durable secrets are<p>here was this billion dollar opportunity that a bunch of people became insanely rich exploiting<p>and it wasn't a secret at all<p>a bunch of people where doing everything they could to tell people how overpriced the housing market was, and the opportunity still persisted<p>it seems like there is so much noise in the world, that signal becomes indistuinghable
Interesting related podcasts if you want to read more:<p><a href="http://www.npr.org/blogs/money/2012/03/16/148751661/the-friday-podcast-inside-the-mortgage-industry" rel="nofollow">http://www.npr.org/blogs/money/2012/03/16/148751661/the-frid...</a><p><a href="http://www.thisamericanlife.org/radio-archives/episode/405/transcript" rel="nofollow">http://www.thisamericanlife.org/radio-archives/episode/405/t...</a><p>The Frontline episode 'The Warning' is related and also good:<p><a href="http://www.pbs.org/wgbh/pages/frontline/warning/" rel="nofollow">http://www.pbs.org/wgbh/pages/frontline/warning/</a>
It's very simple. As long as bonuses are based on the amount of business booked, fraud of this type will continue. Once they get their bonuses, they can jump ship and spout, "I don't remember" all they want to investigators.<p>EDIT for a typo.
The people in the high-up knew. A lot of people in all levels knew. People knew it was a bubble and it cannot last. What people didn't know was how to pop the bubble gently to have a soft landing. Remember real estate and mortgage were majority drivers of the economy from 2000 on after the Dotcom and stock crash. Popping the bubble meant wrecking the economy. People were really uneasy in deliberately engineering a recession. The longer the wait the worst the crash.
<a href="http://dealbook.nytimes.com/2013/01/23/financial-crisis-lawsuit-suggests-bad-behavior-at-morgan-stanley/?smid=tw-share" rel="nofollow">http://dealbook.nytimes.com/2013/01/23/financial-crisis-laws...</a><p>more tragicomedy, with some great work by NYT euphemism writer "suggests bad behavior"
Isn't, for example, prostitution illegal in the US even in Las Vegas? If so, I can easily imagine that there are at least a bunch of people where job description and income don't quite match up ("waitress" in Las Vegas with 12,000 USD/month).
Why isn't the job of underwriter totally automated? I imagine that a good bayesian classifier should be able to spot likely fraud. Sounds like a good startup opportunity.
<i>"industry insiders were ringing the alarm bells"</i><p>Just as today many economists are ringing the alarm bells: the governments public debt issues (both in U.S., Japan and many countries in the Eurozone) are going to end up <i>very</i> badly.<p>Many central banks (including in the U.S.) have basically become bad banks. Anyone holding medium and long-term public government debt (like many insurance products) are basically bankrupt because governments are going to default.<p>If you think 2008 was bad, wait until the house of cards collapse. It shall make 1929 look like a cute event.<p>Some economists are predicting a worlwide GDP drop of as much as 25%.<p>Of course economists that you see on Fox news and CNN like Krugman (sure, lets create a one trillion $ coin, it's a good idea: why not then create 16 of these and be done with our public debt?) either totally lost it or are playing the game that the state asked them to play: propaganda.<p>Capitalism cannot work if the cost of printing money is zero (quantitative easing).<p>Actually I don't think we're living in a capitalistic world. I think we live in a socialist world bent on confiscating savings (at the benefit of the state) using inflation. But the system has its limit.<p>And who are you going to prosecute and hold responsible once everything collapses? The states are basically forcing everyone into buying their junk bonds.<p>Do you really think anyone would buy government bonds seen the current situation?<p>The people responsible for this are very very high up the chain. They're desperately trying to prevent the house of socialist cards from falling apart.<p>"The problem of socialism is that at one point you run out of other people's money". And that's where we're arriving now.<p>Of course they're going to pretend that it's not the states that created the state debt but "evil" capitalists. What a joke : (
This documentary didn't reveal anything that wasn't already known. There aren't any criminal prosecutions because it's hard to prove that there was fraud. It then goes on to speculate why Breuer hasn't been able to charge anyone.
You know what's disgusting? This fucking <i>bubble</i> shit. Let's call a spade a spade. A bubble is when you're in a la la cloud of utopia. This wasn't that. I think there was about a zillion people (rough estimate) who knew where this was all heading.<p>It's disgusting because we don't get to say Aaron Swartz lived in a "freedom of information bubble".<p>Aaron Swartz downloaded some documents – was to be thrown in jail and eventually died by his own hand, perceivably because of the weight of the hammer being dropped down on him.<p>BUT...wreck the entire economy, cause thousands to lose their home, their job, their careers? NOTHING. What the fuck is going on?