I love how 20-sigma events happen every 8-10 years on Wall Street. Sounds like no statistics I've ever seen.
Conveniently, money is extracted along the way in the form of generous fees, everyone apologizes for the thousand-year event they couldnt predict, and we repeat the cycle. People on the outside make excuses while those on the inside craft brilliant tales of hard work and rugged individualism.
>> In both situations, some subordinates will inevitably commit crimes in the name of the organization (eventually), and holding the person at the top completely responsible is totally unreasonable.
My entire argument was that someone somewhere along the chain was indeed responsible and it doesnt have to be the CEO. Youre arguing that the CEO cannot be completely responsible, which totally sidesteps the 14 other layers of people responsible and also conveniently ignores the other 14 layers that could be held responsible, investigated, and prosecuted.
Fine, the CEO cant be responsible -- is absolutely no one responsible at all within the organization? If so, how did tens of billions of dollars of profits pour in? How can no one be responsible and yet the companies be so profitable?
Probably has something to do with the upper-crust NY culture where those at the SEC, NY Times, SD-DoJ, and Walls Street are all friends. It is also not surprising that the two individuals on whom most issues were hung were a French trader with a deep french accent and an Egyption desk head at a Swiss bank.
There is a pretty clear line between innovation, risk taking, and fraud. Intent can be shown based on firms' internal positions and emails (e.g., Goldman Sachs was internally short these products and make a lot of money both by selling the bad products, and then again on their bet against the products.: https://www.nytimes.com/2009/12/24/business/24trading.html)
Internally it was a joke they were selling this garbage:
QUOTE: "
Please use the sharing tools found via the share button at the top or side of articles. Copying articles to share with others is a breach of FT.com T&Cs and Copyright Policy. Email [email protected] to buy additional rights. Subscribers may share up to 10 or 20 articles per month using the gift article service. More information can be found at https://www.ft.com/tour.
https://www.ft.com/content/4798ae22-f552-11e2-b4f8-00144feab...
Former Goldman Sachs trader Fabrice Tourre said he “deeply” regretted an email in which he joked about selling subprime mortgage bonds “to widows and orphans” following a grilling from lawyers for the US Securities and Exchange Commission."
You conveniently cite the case where the perpetrators were also fooling themselves. What about the case where the perpetrators were saying on thing publicly and privately betting against their products?
(fast forward to real life -- Princeton grads at Goldman Sachs dont go to jail...)
Excerpt from article:
A handful of investors and Wall Street traders, however, anticipated the crisis. In 2006, Wall Street had introduced a new index, called the ABX, that became a way to invest in the direction of mortgage securities. The index allowed traders to bet on or against pools of mortgages with different risk characteristics, just as stock indexes enable traders to bet on whether the overall stock market, or technology stocks or bank stocks, will go up or down.
Goldman, among others on Wall Street, has said since the collapse that it made big money by using the ABX to bet against the housing market. Worried about a housing bubble, top Goldman executives decided in December 2006 to change the firm’s overall stance on the mortgage market, from positive to negative, though it did not disclose that publicly.
Even before then, however, pockets of the investment bank had also started using C.D.O.’s to place bets against mortgage securities, in some cases to hedge the firm’s mortgage investments, as protection against a fall in housing prices and an increase in defaults.
Mr. Egol was a prime mover behind these securities.
You dont necessarily need to charge the Wall Street CEOs. You can charge the Senior Managing Director of Structured Products. Or MD of Structured Products banking/trading/risk/whatever. There were plenty of individuals who set policy to enable this. No need for a scarecrow argument about CEO or bust. I could literally look thru Linked In or a Bloomberg Terminal and figure out who the responsible parties are. Too bad they all go to the same country clubs as the folks at the SEC and NY Times
Sure. Lets start with an easy example. Why didnt any Directors at Goldman Sachs serve prison time for knowingly bundling Synthetic CDOs with bad CDS that they internally know were garbage? They sold these to pension funds, and other public entities. There were documented losses. There are documented emails with full internal discussion on how bad these investments were.
Conveniently, money is extracted along the way in the form of generous fees, everyone apologizes for the thousand-year event they couldnt predict, and we repeat the cycle. People on the outside make excuses while those on the inside craft brilliant tales of hard work and rugged individualism.