Henry Blodget Doesn't Think Banks Did Anything Illegal. Wrong!!!

Henry Blodget, editor of Business Insider, posted that he didn't believe the banks did anything illegal in the housing bubble:

"Sorry, I'm just tired of these drive-bys. Every prosecutor that can has looked into what the banks did, and they didn't find anything illegal. (Because the truth is that almost everything they did was legal--as outrageous as that may sound). So I think it's time we stopped just throwing around this word.

Congress deserves a lot of the blame for what happened. As, I am sorry to say, do folks who borrowed money to buy houses they couldn't afford."

The responses to his comment that was on his own article basically covered these bases:

1. The banks violated Sarbanes Oxley when the chief bank officers signed off on the financials. This was never prosecuted even though there are criminal sanctions.

2. Goldman was charged with civil fraud and settled. They could have easily been charged with criminal fraud.

3. Goldman Sachs helped Greece defraud the Eurozone.

4. Goldman screwed Libya.

5. Yves Smith (Naked Capitalism) would not say what they did was legal, and I am presuming on the spread of the bogus CDO's. That should have been securities fraud. 

6. My two responses:

A: Wrong, Henry. They never applied RICO laws of continual fraud to the selling and packaging of the CDO's. Never even applied the law. And the law says you don't have to prove intent, just pattern.

I am sorry you feel that way about the banksters. They are banksters.

B Henry, you really do believe that the bankers were not frauders in a criminal sense. That is unfortunate. It shows a lack of judgement.

The banks were not prosecuted because Tim Geithner forbade it. However, truth is, the bogus Gaussian Copula adopted at Basel 2 in 2000 was a fraud from the beginning. To assume all loans can't go bad at the same time flies in the face of the Japanese experience. Risk management became a fraud. You can't prosecute for central bank collusion in the housing bubble? Every CDO was a fraud. Every CDO sold to investors was a fraud.


Popular posts from this blog

Learn Economics

The Unholy Alliance of Big Banking, Neocons, Big Media and Israel

John Mauldin Discusses What Could Go Wrong