KD,

govt is not enforcing the current laws, why create more to ignore

f'em. Worthless

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I generally like the premise, but I don't like the lack of hard accountability. "Stop beating your wife" sounds good, but who pays for her medical treatment? More importantly, if you beat your wife with a baseball bat, simply removing the bat is insufficient so long as there is a kitchen full of knives and chairs available to you when she returns home!

Well put.... and as you pointed out it is a start and at least an acknowledgment that these products are destructive.

SHILL time!

I'd like to see the existing Rule of Law followed. There is enough FRAUD going on to keep the court system backed up for the next ten years yet we are still waiting for A cop to show up. JUST ONE COP! ANYONE SEE ONE? This reminds me of the game “Where’s Waldo” I played with my kids. Without cops and judges before long we will get mob justice. At that point our country will be lost forever. This stuff by Grayson and others is just a bunch of arm waving. Criminals in handcuffs are all that matters which this bill will NOT achieve.

Typically, I agree in varying degrees with everything KD writes. Sometimes he is over the top, sometimes I feel he is overly moderate in his opinions.

I regret to say that this morning, I find myself in total and utter disagreement with this ticker. It is entirely unreasonable and untenable that entities should be deprived -- no, ****d -- of their profits merely because a government finding exists that the profits were garnered in an unequitable way, and in a way which arguably caused large numbers of consumers to file for bankruptcy and/or be foreclosed on. Should certain products be allowed to be offered at all? That's a fair question. Should existing products which have been written be outlawed and the parties be required to unwind them? That, too, is a reasonable if complex question. On the other hand, ex-post-facto penalties on products, whether they exist already or may reasonably and legally exist in the future, is something I have a big problem with, particularly when caveat emptor and absent regulator both pertain.

I am not a fan of usury, but each person's perception of what is usurious varies, and even to the rather tenuous extent that we can define in any useful way a line in the sand beyond which lies Shylock, the simple fact remains that we have not outlawed Shylock and his ilk, and to the contrary many people are clamoring for his services. Some of these people, perhaps even most of these people, may be wrong-headed, and may be destined for a life of penury, or at least a temporary stage of suffering through bankruptcy and foreclosure, with or without, but most especially with, Shylock's gentle ministrations. Yet let us not lose sight of the fact that others may desperately but responsibly and consciously desire to leverage his products to tide them through their misfortunes, and may succeed. If we perceive, as a constitutional republic, that the effect of these products is so grave, then let us ban them and their like, in as specific or as general terms as we may see fit. But for as long as these products are allowed to have, and can retain, a market, that market should not be distorted by laws and provisions such as Karl is advocating here.

And I have said all of the foregoing simply based on my economic beliefs and not based on a natural distrust of government. If we start to bring into it the question of whether I think the government's and the regulator's judgment would be of such quality and such merit that a plan such as this would actually work, even to the extent that you find it desirable... sorry, but here again I am pessimistic.

Heck, if you wish to invoke the power and oversight of the government in your solution then please explain to me why these poor bankrupt souls should not simply be made whole by the taxpayer? After all, is it not the government who was wantonly neglectful in not dictating adequate warning messages to the potential buyer? (I no more believe in this solution than the one which you have presented, but they both seem equally fair and effective when it comes to shifting the blame and shifting the hazard from the buyer onto someone/anyone/everyone else.)

It is not an ex-post-facto penalty. It is a recognition of a private right of action to recover from those who do evil for the evil they have done after they have been found to have committed it.

If there is no penalty for bank robbery other than having to stop robbing the bank, there would be a lot of bank robberies. It is ONLY the fact that such conduct comes with a penalty AT LAW that provides a reasonable deterrent.

What's your objection to that penalty applying to this case?

My objection is that I am not convinced that they have committed a crime in offering the product, i.e. I am not convinced that the "evil" which they have done amounts to a crime.

If their product is criminal in nature, and was criminal in nature when it was offered and sold, then I can get behind your ticker.

Any law which doesn't make the banksters PERSONALLY liable for their actions will do nothing.

> Any law which doesn't make the banksters PERSONALLY liable for their actions will do nothing


I agree with this. Likewise, I believe that people should not be permitted to act unethically simply because they are under the cover and guise of a corporation. As Karl has expounded on previously, we have lots of individuals out there in the financial sector to whose persons criminal penalties should attach.

That said, when it comes to ways of punishing corporations, I am troubled by the increasing tendency of the feds to provide protection to the corporations in exchange for piercing the corporate veil and getting assistance with individual prosecutions. Corporations should be prosecuted and caused to fail too, at the expense of the shareholder. There is altogether too much sentiment that it is somehow unfair to punish the shareholder for the wrongs of the corporation. To the contrary, it is a necessity.

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My objection is that I am not convinced that they have committed a crime in offering the product, i.e. I am not convinced that the "evil" which they have done amounts to a crime.

You didn't read the Ticker.

Go back and read it, then restate your claim.

Being exposed to suit and clawback for ALL damage done to persons from toxic programs is not a criminal sanction.

Mtdm:

How about examples:
1) The .gov could make it illegal to offer mortgage financing with less than 10% down.
2) the .gov could obligate a mortgage issuer to hold the mortgage on it's books for at least 5 years before being able to sell it on
3) the .gov could make it illegal for mortgage re-sells to occur without a physically signed transfer of assets that includes the signature of the borrower.

and so on. Any financial institution violation of these laws would be guilty of a federal offense. This includes individual liability. This is exactly how the Bank Secrecy Act works. For instance, if a person launders money through a branch and the teller or the bank vice president are in on it, the banker - regardless of rank - is subject to jail time and fines, as is the bank itself.

I've seen this work first hand. One individual caught (a VP) is still serving time after 10 years.

@Gen: OK, sorry if I inadvertently conflated civil and criminal sanctions. Nevertheless, you state "Pure logic dictates that screwing someone, no matter how you do it, should lead to legal sanction and exposure for your outrageous conduct." This logic escapes me. I can see how screwing someone might be immoral and unethical. I cannot see how, by a leap of logic, this inevitably translates into sanction at law, be it civil or criminal. Screwing someone is in the eyes of the beholder, whether that beholder is one of the two interested parties, or a disinterested third party, judge or jury. Some types of screwing are demonstrably and irrefutably illegal. Some are arguably illegal. Some are not illegal. Again, if you are talking about activities which are illegal on their face, then I am with you. If you are talking about imbuing a product with illegality merely because of its ultimate outcomes, I am not. And if I am still missing a nuance of what you wrote in the ticker, I apologize.

@snowman: Yes. I would support all of this.

Mtdm voices some of the concerns that I perceive as I read this ticker. While there should always be a provision for clawback if a party to a transaction can be demonstrated to have not acted honestly (i.e. if fraud can be proved), I am uncomfortable with anything that suggests that damages can be assessed just because one party was harmed. To illustrate with an extreme example, could a buyer of a stock sue the seller because his shares decreased in value?

All that being said, re-reading the ticker (as Gen asked Mtdm to do), I see that the "financial autopsy" amendment calls for:

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Requir(ing) the CFPA take corrective action to eliminate or restrict those deceptive products to prevent future bankruptcies and corrections

If deceptive products constitute fraud, then there should be damages. But then again, do we really need new laws to allow for fraud to be punished? A constant refrain with which I think most will agree is that there are many existing laws that are not being enforced. In addition to concern for a slippery slope that could target legitimate market activity, I also worry that new regulation papers over the (willful?) failure to enforce the current laws. Law makers can point to the new regulations and say during their re-election campaigns, "I did something!"

On a side note, there is a very interesting juxtaposition between this ticker and the one that immediately preceded it. The previous ticker called for personal responsibility while this one calls to push responsibility onto the regulatory authorities. While I am not suggesting to abolish oversight, many of the individual problems could have been averting by responsible adults walking away from (boycotting) bad deals.

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The previous ticker called for personal responsibility while this one calls to push responsibility onto the regulatory authorities.

No it doesn't. The right to recovery vests in the person screwed, if that conduct meets the standard of fraudulent or dishonest dealing.

The previous ticker was a call for actions that can be taken without regard to the regulatory authorities while this ticker seems to be calling for them to take proactive steps. We can debate about the level of responsibility that regulators should have. Whatever we think is that ideal level, they clearly have not been enforcing the laws already on the books. I see new regulation as a smokescreen for ignoring the existing set of laws. I mean, if they choose not enforce the current laws, why should we expect them to enforce new ones?

On the other hand, direct boycotts could force the hand of mis-behaving companies regardless of regulatory bad intentions or failure (which one you believe depending upon your level of skepticism).

Tickerguy wrote..

More importantly, if you beat your wife with a baseball bat, simply removing the bat is insufficient so long as there is a kitchen full of knives and chairs available to you when she returns home!

This sounds like a great proposal. Wait until the head of ACORN - or some similar organization - is put in charge of enforcing it. I'll bet it won't seem so benign & reasonable then. There are plenty of do-gooders who view every commercial transaction as one where the "system" is victimizing someone. The very availability of credit - even at very low interest rates - could be deemed a cause of bankruptcies. I guess I'm just old-fashioned, but if someone were willing to lend me money at a low rate and I "couldn't" pay it back (which in many cases would really mean I just didn't want to pay it back), I wouldn't consider myself a victim or the lender a victimizer.

The fact that big banks have been wrongly bailed out does not mean that we should promulgate a growing nanny state that sees virtually everyone as a victim.

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So while I like the direction of this amendment, I would put forward the premise that the entirety of the gains "earned" from such toxic products, when found, are clawed back and distributed to the consumers so harmed, and that to the extent this does not fully compensate for that harm such a finding should give rise to a private, civil cause of action for the consumers who are bankrupted or foreclosed.

In order to prevent ambulance chasing lawyers and leeches gaming the system, I would propose that once the determination is made, treble of the gains be clawed back but directed to benefit taxpayers in aggregate and not to the often complicit leeches.

Most cons are pulled off by the con-artist building trust and credibility with the mark. Some brokers or salesmen are expert con-artists while some people are just very gullible. Puffery is a normal part of the sales pitch but what happens when the mark is so hoodwinked with bull**** that he gets involved in something he clearly should not be involved with.

For example our school district lost over a million dollars in interest rate swaps. Those who made the purchase later said they did not understand the downside and it was never explained to them. Or what about the millions of suckers that get conned into trading forex or commodities on margin that lose all their money.

True, in most cases a disclaimer is signed that protects the salesman but where do you draw the line? Should a contract with a lot of fine print be enough to disclaim everything the salesman said to hoodwink the mark into making the investment?

It's like the pig men are the fire and the fraudsters and the stupid are the fuel.

Take the fuel away and the fire dies.


add
And in the case of the people losing school district (or whatever) investments claiming not to understand, at best they should be fired and lose all their benefits for criminal negligence. While they probably did not understand part or even most of it, if people really looked into it they almost every time were bribed either directly or indirectly.

Very simple concept, they **** up, they pay. That's why they get the big bucks for the cushy job.

No, these people claiming to have been conned, were conned by greed, lack of integrity and dishonesty, not by a lack of intellect, power or capability. If they held these offices, they are responsible. We don't let stupid parents off the hook for selling their children. They thought they were getting something for nothing - a better deal than circumstances would support. They deceived themselves.

That doesn't mean that the fine print shouldn't have been written so that even state government workers could determine whether the deal screwed the state or not. At the same time, I think just like with subprime homeowners, nobody is lily white and 100% innocent.

it sounds like they are trying to do an autopsy on a kid swallowed by an alligator to determine the cause of death.