<p>Like many other organizations the SEC focuses on core competencies. From all appearances most prosecutors pursue cases they feel they can win and tend to decline cases they don’t feel confident about.</p>
<p>Even though I know that was sarcasm, some people actually do find Martha Stewart’s trading something that should result in decades in prison. Anyone think prosecutions of people like her are mostly political?</p>
<p>Banks needed zero push to write and sell mortgages they made a ton of money doing so. </p>
<p>Credit agenices should have rated the underlying mortgage instrument accurately and if they did that the banks would not have written any loan they could not sell.</p>
<p>You really believe a class of citizens living in poor areas had more clout with government regulators than the bankers?</p>
<p>Actually, it was the federal reserve that cause the financial crisis by constantly raising the fed funds rate which excessively raised short term interest rates. (There was no inflation problem in sight). This caused the adjustable rate mortgages to go under which caused the rest of the housing market to crash. If the fed had been less aggressive, it is arguable that the market would have corrected itself. Many people knew the housing market was in a bubble beginning in 2005.</p>
<p>I don’t know how the market would have corrected itself when financial institutions were leveraged like subprime borrowers.</p>
<p>There is a lot of wishful thinking going on to fit ideologies. I don’t know why people have such a hard time believing the private sector screwed up. The private sector always screws up. I guess my years working in the private financial sector has me jaded but I have seen so many private sector screw ups. And I trust what I actually see and experience.my experience is the private sector screws up.</p>
<p>Yes. The fed provided the ammo. But the financial institutions pulled the trigger.</p>
<p>I have seen so many stupid things done by professionals. People get greedy and careless. They don’t always behave rationally. Groups behave irrationally too. This happens all the time. It is happening today. </p>
<p>Anyway, razorsharp you are one of my favorite posters even though I rarely agree with you and when I do you don’t know it and think of me as a socialist. I just like your posts</p>
<p>I wish I could have brought you to a trading floor. I dont mean one of those hour visiting sessions. A couple of days there and you would have seen some things that don’t mesh with some of your thinking. You probably wouldn’t change your ideology but you would sometimes say things that would show a different view than what you write now.</p>
<p>I have a very good friend that was a trader and he is very conservative. When he just talks off the cuff the things he says about the financial industry that arent flattering because he was a player and knows, but when he is careful with what
he says it is the government’s fault.</p>
<p>You know. … There is nothing to stop me from taking all my money and buying otm options. I could do that right now. And I can lose everything. The govt can’t stop me. If I do that and lose everything, it won’t be the government’s fault. I could also sell more puts than I can handle if the securities drop in price. I better be careful with aapl. Lol
The margin requirements are too low. Now I hope I dont do anything too crazy like sell too many Puts. Oh wait. Aig did that. GS levered over 30 to 1. We are talking the whole company was levered 30 to 1. This was GS choice. And things blew.</p>
<p>I think that people (professionals in the institutions that failed including appraisers, mortgage insurance companies, banks and mortgage companies that made mortgages, banks that securitized loans, institutions that bought the securities and the ratings companies) that made what we consider mistakes may have been acting rationally. They were getting bonuses, raises, stock options or compensation for keeping the party running. If things collapsed, their companies took the hit - they had theirs and enough to start over somewhere else. At least those that stashed some of it away. You had a lot of checks and balances - the problem is when you have multiple players with the opportunity to cheat for big rewards. Then you encourage collusion - whether by agreement or by just acting in a way that gives you a lot of rewards.</p>
<p>In the stock-trading world, people go to jail and forfeit their gains. This didn’t really happen in the mortgage and mortgage-banking world.</p>
<p>I guess we can argue what players did what rationally. I may even agree with you.</p>
<p>I did see irrational behavior though. Traders working drunk. Traders working high. Traders doing things with no probability of success. Like selling something for a dollar that was worth 1.50. </p>
<p>I saw traders take too much risk. A lot. There is a lot of turnover of traders. I saw traders make millions one year and lose the whole thing the next. </p>
<p>Then there were those that just lost from the beginning.</p>
<p>There were people that did not understand what they owned.</p>
<p>There was plenty of illegal activity although most of that activity was done by the customers and firms. Just a little by floor traders.</p>
<p>I have also seen illegal activity in the hft space. </p>
<p>Instead of arguing about what is or isn’t rational, the above are facts.</p>
<p>The crises started with greenspan’s bubble economics, which began with the market crash in '87. It was the inevitable outcome, and housing was just the final resting place and the most complicated and uncontrollable use of leverage.</p>
<p>If the leverage hadn’t been at 30-1, on a low estimate, then the problems wouldn’t have been 30-1, on a low estimate.</p>
<p>But it all starts with Greenspan and the crash, then the tech bubble and crash, then the housing and the crash. </p>
<p>I heard the big worry now is deflation. “Look over here. Over here.”</p>
<p>It was not just the US. Many countries were printing money and that had to be invested somewhere. For many that somewhere was US mortages and not just residential. Large amounts went to commercial buildings too.</p>