Wall Street fraud mustn't go unpunished

Discussion in 'Law and Justice System' started by hvactec, Jul 2, 2011.

  1. hvactec
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    hvactec VIP Member

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    Some on Wall Street would like you to believe the financial meltdown of 2008 was some sort of natural disaster.

    The shockingly unexpected housing collapse and resulting mortgage foreclosure tidal wave were, they say, analogous to the recent Japanese earthquake and tsunami.

    They admit "mistakes were made." But as one financial leader said in January, "there was a period of remorse and apology; that period needs to be over."

    Over? Over for whom?

    Not for the millions who lost their jobs. Not for the millions more who lost their homes or most of their life savings.

    It isn't over for so many who are struggling with the lagging economic recovery.

    The truth is the meltdown was not the result of a natural disaster or the normal business cycle. It was the result of a series of bad business decisions, government inaction, and poor judgment by a lot of consumers.

    It is clear, however, that one major cause was fraudulent behavior on Wall Street and in the mortgage lending industry.

    Nowhere is this made clearer than in the bipartisan United States Senate Permanent Subcommittee on Investigations Report on the Financial Crisis, released by Democratic Subcommittee Chair Sen. Carl Levin and Ranking Member Republican Sen. Tom Coburn.

    Democrat Levin said: "This report tells the inside story of an economic assault that cost millions of Americans their jobs and homes, while wiping out investors, good businesses, and markets. High risk lending, regulatory failures, inflated credit ratings, and Wall Street firms engaging in massive conflicts of interest, contaminated the U.S. financial system with toxic mortgages and undermined public trust in U.S. markets."

    Republican Coburn said: "The free market has helped make America great, but it only functions when people deal with each other honestly and transparently. At the heart of the financial crisis were unresolved, and often undisclosed, conflicts of interest. Blame for this mess lies everywhere from federal regulators who cast a blind eye, Wall Street bankers who let greed run wild, and members of Congress who failed to provide oversight."

    Page 2 of 2)

    The committee held four days of hearings, in which I participated as a member of the Senate in 2010.

    Its investigation relied on emails and other internal documents to follow what happened at the investment bank Goldman Sachs; the giant mortgage lender Washington Mutual Bank; and the two leading rating agencies, Moody's and Standard & Poor's.

    The full 635-page report portrays, in Chairman Levin's words, "a financial snake pit rife with greed, conflicts of interest and wrongdoing."

    Goldman Sachs is supposed to look out for the interests of its customers. Yet Goldman sold customers mortgage investments called collateralized debt obligations (CDOs) without disclosing that at the same time they were betting against the CDOs by selling them short.

    Goldman made millions while their customer's investments crashed. The report alleges that Goldman Sachs executives misled not just their customers, but also the Congress in their testimony at the committee hearing.

    Washington Mutual Bank and its subprime lender subsidiary, Long Beach Mortgage, issued thousands of shoddy, high-risk loans that inevitably failed and devastated unsophisticated borrowers and whole neighborhoods. WaMu executives knowingly sold these loans using a high-risk strategy for short-term profit, and produced toxic mortgage-backed securities that polluted the U.S. financial system.

    Bond buyers depended on Moody's and Standard & Poor's to provide objective ratings to identify safe investments. Instead, they gave high ratings to toxic mortgage-backed securities, in part because they knew lower ratings would result in the loss of lucrative business from the investment banks that paid them.

    They issued tens of thousands of AAA ratings and earned record profits until the underlying mortgages started failing and the securities were revealed to be what they had always been: junk.
    read full story Wall Street fraud mustn't go unpunished | The News Journal | delawareonline.com
     
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  2. Mad Scientist
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    Mad Scientist Deplorable Gold Supporting Member Supporting Member

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    An investigation of Wall Street will never happen as long as the Bankers own our Congress and President.
     
  3. uscitizen
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    uscitizen Senior Member

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    Clearly some in the country are above the law, and not just celebrities.
     
  4. FA_Q2
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    FA_Q2 Gold Member

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    The problem is that much of this situation was legal even though bad. People will be arrested and investigations are occurring but for the most part there were no illegal actions taking place. The whole thing is literally based in the fact that you could produce a loan making 1-3% off the top and sell that loan to good ol' Uncle Sam through Fannie and Freddy so that you did not have to take the risk on a loan that you knew was going to default. That was not legal but the situation that the government created. Who wouldn't take that train as they were going to pay for it in the end anyway.
    But is that illegal. That is the question. I do not think it is. Now, if they misled or lied to their customers as your story is suggesting, then it is illegal. But that has to be proven first.
     

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