Would you expect startup-ers to go to prison for having caused the dotcom crisis of 1999? People who did fraud went to prison. But it's not a crime to make bad business decisions. In fact right now, tech companies are red hot (a bit less since this summer). I am sure people will loose a lot of money on current valuations. Should the management teams of Tesla, Amazon or Jet.com go to prison for that?
If they artificially manipulated the stock themselves and hid their interest in the company to the degree where holdership limits were broken, yes.
You also have to realize what sort of lending put the banks under. Using their influence in the banks they directed the loan officers to make out unsecured loans to their own companies. That was a big part of the banks all failing simultaneously.
Exactly, but that's Enron style fraud. It's not fraud that caused the financial crisis. It is the excess of leverage, and the complacency in lending and the way balance sheets were funded. I am not saying it wasn't moronic, just not criminal.
There were rules that were supposed to prevent such overleveraging that they skirted by hiding their interest in the bank. The holding companies were so transparent about it that they had silly names like Drawercorp and (I shit you not) Twisty (The Icelandic name is Vafningur, it kinda translates)
> There were rules that were supposed to prevent such overleveraging that they skirted by hiding their interest in the bank.
To clarify, executives at Bank created a Holding Company. Bank lent Holding Company $100. Bank then sold Holding Company Bank stock for $100, thereby manufacturing $100 in "equity". This "equity" makes Bank's debt/equity, and other equity-based leverage ratios, look rosier than they are.
I recall a similar shit show going down around Karzai's cronies in Afghanistan.
Fraud wasn't the initial spark, but it was what turned the American 2008 housing market slump from a self contained bust into a global financial crisis.
That is simply wrong. The US housing bubble, while experiencing fraud at the margins, was neither a cause nor an effect of fraud. The bulk was really due to too much money chasing too few assets, and a bunch of foolish decisions made in good faith by both borrowers and lenders.
The idea that fraud lead a US housing bubble to cause a real estate bubble in the UK and Spain, and a banking crisis in Iceland and Ireland is just not correct.
>foolish decisions made in good faith by .... lenders
I'd dispute that. Often it was a smart and cynical decision by lenders to make bad loans, take the bonuses and commissions and leave the government and others to clean up the mess. If you were to pin the blame on one group I'd say it was mostly the governments fault for under regulating this stuff.
It's not gambling and failing - it's intentionally manipulating the market and betting against it. And YES I would expect people ESPECIALLY management to go to prison for that.
In many cases, Wall Street was selling toxic investments to pension funds and other investors knowing full well the investments were worthless and mis-marketed.
So yes, if Tesla sold a car full of explosives that was about to explode as soon as the passenger got in -- then indeed they should be prosecuted. Thankfully the technology industry typically does not act in such manner. Their "crime" is more over-enthusiasm and pushing the envelope of privacy violations.
Not 1999, but during the 2006-08 iffy loans period, Alayne Fleischmann went whistle blower on some of the fraudsters at JP Morgan. None went to prison (or I think lost their bonuses). JP Morgan gave $9bn of it's shareholders money to the US Govt as settlement instead.
