Anyone going to jail? $700B and no legal grounds for prosecution?

[MotoSook]

A lot of folks got very rich the past several years and left us with a big mess. If $700B equals approx. $2300/person in the US, my household is going to be hit for $16,100. My immediate family over $50,000.

If the rules of the game was such that guys can get away with it, then I want the rule makers accountable. Someone has to pay....pay back the money they made and give them jail time. What about the home buyers who either lied or withheld information? Certainly the mortage brokers, right?

Am I crazy? Or just too simple?

It doesn't look like we'll be able to avoid paying at least $300B....so damnit! I want some accountability from the people who put us in this mess!

[BGCarrera32]

I don't know but its funny because about a half hour ago I had the calculator out running numbers like yourself and came up with similar dollar amounts...and it pisses me off.

[Rick Lee]

Maybe they should also go after the homeowners who made a lot of money selling their houses during the boom. I might be in trouble there, though I'd owned the house for eight years.

[MotoSook]

Rick,

Selling your house is one thing...buying a home one can't afford with the cooperation of a greedy broker is another (obviously not saying you). The FBI made a weak showing about investigating firms, but I haven't heard any news since.

Someone needs to start working from the top down and start putting folks away and making them pay!

[rouxroux]

For starters, check out who Barney Frank's ex-lover worked for.....was it "Freddie's Fanny" or something like that?

hmmm, I wonder if they'll probe that deep?

[Rick Lee]

Originally Posted by Souk

Rick,

Selling your house is one thing...buying a home one can't afford with the cooperation of a greedy broker is another (obviously not saying you). The FBI made a weak showing about investigating firms, but I haven't heard any news since.

Someone needs to start working from the top down and start putting folks away and making them pay!

Well, the house where I more than doubled my money I got with an FHA loan, so no fraud there.

I haven't heard anyone suggest people who broke laws shouldn't be prosecuted. The problem is that too many people think it was illegal to buy a house they couldn't afford with a subprime loan. It was not illegal. Fraud did not cause this problem.

[jyl]

Bad, even incredibly bad, business decisions are not crimes. Whether by bankers or homebuyers. Fraud in mortgage applications can be. I suspect the prosecutable crimes that occurred are primarily on the borrower and mortgage broker side, and are fewer than you might think/like.

There will be loads of new laws and regulations imposed to prevent a similar mortgage bubble from happening again. Fine, but the punishment of the markets will do the same thing - there won't be another no-doc or subprime no-down Option ARM mortgage written for a very long time.

More useful, I think, will be laws to uncover and regulate systemic risk in the financial system, e.g. from CDS. See thread "Lessons Learned From This Financial Crisis". Lessons Learned From This Financial Crisis

Anyway, I think all this howling for blood is unproductive in the extreme. First, try to land the crippled airplane. Only then, mete out punishment.

[MotoSook]

Rick, you're working from the bottom up. I certainly don't believe that buying a home one can't afford is illegal. But if a buyer knows damn well they couldn't afford it, and the broker helped them get the house, then the buyer moves out and the broker goes to jail or assumes the mortgage without passing it on to the tax payer.

If there were just a handful of such cases, no one would be feeling sorry for the over extended buyer and they'd end up being renters until they got their ***** straight.

I won't pretend to understand the mechanics that led to this mess, but my simple mind tells me that if I fuched up and caused someone to have to pay for the damages, I wouldn't be be waiting for tax payers to come to my rescue.

What I hear is Congress wanting to pay the people who steered the ship into the ground to help clean up the mess, and some of our statesmen want to pay then very well for it!

What I hear is that there are no smarter people to help get the ship sailing again than those fuchers who steered it into the ground in the first place. So we have to keep them in the game. OK...if I were to buy into that logic, then I want their compensation to be "jail or work to fix the problem at median US income." Instead they want to pay them 6 figures without any penalties.

What about the policy makers? And the regulators? If I was sleeping on the job and let a mess like this happen at my company, I'd be gone in a heart beat.

[jyl]

Okay, I'm going to be impolite here, because it is late and I've been working way too much lately and I am frustrated.

Personally - when I don't understand what the heck is going on, I try not to voice strong opinions about those things that I don't understand.

Originally Posted by Souk

I won't pretend to understand the mechanics that led to this mess, but my simple mind tells me

[nostatic]

Why are the officers of the company not held financially responsible? If I'm a small business owner and I drive things into the ground, my stuff gets taken. Why do these people get to keep their stuff?

[Pazuzu]

Vote third party, and this all goes away like a bad dream.

[MotoSook]

It's OK John. I'm frustrated about the thought of having to help pay for the mess.

So I been reading your other threads and I see you're fairly up to speed on the situ....tell me how something like this can happen with so many smart people at the helm? Is it too much to ask for accountability?

[jyl]

You understand the difference between sole proprietorship and corporation?

Originally Posted by nostatic

Why are the officers of the company not held financially responsible? If I'm a small business owner and I drive things into the ground, my stuff gets taken. Why do these people get to keep their stuff?

[MotoSook]

John, $700B is kinda beyond the rules established to protect corporations, yes? The reckless actions of corporations that extend beyond the corporations and ends up in our laps to the tune of $300B to $700B deserves a little more thought than falling back on the rules, yes? Or I'm I being simple again?

Since when do the rules that apply to corporations have fine print that says when all else fails, the tax payers will bail you out? Don't get me wrong about the necessity for a bailout. I'm questioning the accountability of those responsible.

[Rick Lee]

Originally Posted by Souk

But if a buyer knows damn well they couldn't afford it, and the broker helped them get the house, then the buyer moves out and the broker goes to jail or assumes the mortgage without passing it on to the tax payer.

If there were just a handful of such cases, no one would be feeling sorry for the over extended buyer and they'd end up being renters until they got their ***** straight.

What makes you think many buyers knew they couldn't afford a $500k house on a $38k stated income? A LOT of those folks believed, and many rightly so, that they could refi their way out of their Option ARM's and 0% down loans. Hey, it really did work, as long as values were climbing.

Brokers simply originated loans that lenders would fund and then investors said they'd buy. They were and still are the middlemen. It's not a crime to do a loan (assuming no fraud) that you have investors willing to buy, especially when the guidelines are pretty standard throughout the industry. And 100% financing on a 640 FICO got to be pretty common for a while in subprime.

BTW, relatively speaking, there really are just a handful of these cases. Most subprime loans are performing just fine. I still would never want to buy the paper, which is a large part of the problem now. But they are performing.

[MotoSook]

I guess I'm giving those home owners a little to much credit for figuring out low risk home purchases

I'm not saying all you guys in the biz should go to jail.

Buy the way..I did see the stick figure tutorial on how the mess was created

[Bill Douglas]

The CEOs and directors of the big organisations that lost huge amounts of money have not done the job they were paid to do. Some were payed 30 million a year to run these organisations and a bunch of school kids would have lost less while doing the same job. They should have the last 5 years of earnings and assets taken off them and leave them with, say, a $50K salary for those years.

[Rick Lee]

Originally Posted by Bill Douglas

The CEOs and directors of the big organisations that lost huge amounts of money have not done the job they were paid to do. Some were payed 30 million a year to run these organisations and a bunch of school kids would have lost less while doing the same job. They should have the last 5 years of earnings and assets taken off them and leave them with, say, a $50K salary for those years.

No one disagrees that people who performed badly should not make off with eight figure checks. But how do you stop it? Have the gov't. void their contracts retroactively? Where does that lead? Tell them they can't sell stock before a collapse and now tell them they can't sell stock after a collapse? Who has this authority other than the shareholders? It's just populist demagoguery. It won't be a drop in the bucket of this bailout, it might make some average Joe's feel better, but it would require a huge expansion of gov't. powers. It's bad enough we have a minimum wage. A maximum wage would be worse.

[nostatic]

Originally Posted by jyl

You understand the difference between sole proprietorship and corporation?

Yeah, but maybe that is part of the problem.

[jyl]

F--k, and I hardly ever say that - I typed up a very thorough answer if I do say so myself, and for some reason it didn't post, and now I've lost it. I will try to retype and repost - tomorrow.

Originally Posted by Souk

It's OK John. I'm frustrated about the thought of having to help pay for the mess.

So I been reading your other threads and I see you're fairly up to speed on the situ....tell me how something like this can happen with so many smart people at the helm? Is it too much to ask for accountability?