[RD] 1,000,000 Obamas

[Timsup2nothin]

My understanding is that some of the time, it was more or less like this. The loan officers were orchestrating the situation and basically inducing people to commit fraud. But even in situations where they weren't, do you want to convict the kingpins in charge of a drug operation or spend a whole bunch of time convicting their customers on the street?

I have nothing against convicting these "kingpin" CEOs, if you can make a case. All I said was that there is absolutely no way I'm buying into "I committed fraud, my signature is all over a bunch of false claims about the source and amount of my income, but it's not my faullllllllt!"

 

[Lexicus]

I have nothing against convicting these "kingpin" CEOs, if you can make a case. All I said was that there is absolutely no way I'm buying into "I committed fraud, my signature is all over a bunch of false claims about the source and amount of my income, but it's not my faullllllllt!"

Well, my view is that many people weren't really at fault, except I suppose for not really knowing what they were getting into. We can argue the morality of that, but the metaphysical "innocence" of the borrowers is really beside the point.

 

[Timsup2nothin]

C'mon man.

"I work at Costco. I gave the loan officer my paycheck stub. Somehow when I signed the loan application I didn't notice that it said I was self employed and made twice as much as I make, and my paycheck stub wasn't attached, but I never noticed that either."

You buying that?

"I work at Toys R Us. I tried to give the loan officer my paycheck stub, but he told me that just for the purpose of the loan paperwork we were going to say I work as an independent contractor and we didn't want to mention Toys R Us. Then he put down on the application that I make twice as much as I really do, but he said not to worry about it. I had no idea there was any problem."

You buying that?

There's nothing metaphysical about it. They might have been induced into it by unscrupulous loan officers, but these people did commit fraud, and they knew it when they did it.

 

[Lexicus]

"I work at Toys R Us. I tried to give the loan officer my paycheck stub, but he told me that just for the purpose of the loan paperwork we were going to say I work as an independent contractor and we didn't want to mention Toys R Us. Then he put down on the application that I make twice as much as I really do, but he said not to worry about it. I had no idea there was any problem."

There's nothing metaphysical about it. They might have been induced into it by unscrupulous loan officers, but these people did commit fraud, and they knew it when they did it.

Problem is that to prove fraud you need to prove that the misrepresentations were material. The borrowers signing the form with the inflated income doesn't constitute a material misrepresentation that would be needed for a conviction. Because remember:

In the Sacramento case, the jury essentially found that the truth or falsity of the documentation the borrowers provided was immaterial--the lenders would have made the loans anyway.

 

[Timsup2nothin]

Problem is that to prove fraud you need to prove that the misrepresentations were material. The borrowers signing the form with the inflated income doesn't constitute a material misrepresentation that would be needed for a conviction.

C'mon Lex, get real.

"I'm gonna get you this loan, because I don't care about anything anyway and my company doesn't either...so just go ahead and sign this deliberately falsified application. Not because it's really necessary. The misrepresentation there isn't actually material. But sign it anyway."

Like I said, there is *a* jury. That jury may have bought into "these applications were fraudulent but they didn't really need to be because the loans would have been made anyway." But trying to get that to fly on a widespread basis is a mighty hill to climb, because you won't find file cabinets full of applications that don't pass debt to income requirements. The method of the fraud involves unchecked claims of income, not ignoring honest claims of incomes that are too low.

What you might find is physical documents that don't match data inputs in the application process. A busy bee of a loan officer may very well just enter an income they know will pass rather than the failing income on the paperwork, then file the paper and hope no one ever notices. Now, that is a clearly obvious fraud with an evidence trail a mile wide...but all it gets is a loan officer, not a CEO.

By the way, the jury in question wasn't actually ruling on the individual cases of the fraudulent borrowers. To that jury they were just cooperating witnesses. As to their individual fraud cases, those were dropped in exchange for their cooperation.

 

[aelf]

The flash was this: Well, at least it's been good to have confirmed that Trump would be as bad as we all guessed he would. Trump is, in other words, the more interesting counterfactual of the two about which to have the opportunity to see it actually play out.

And what difference has that made? Trump is still sitting firmly on his seat, and his supporters still support him. Republicans don't seem to have broken ranks with him in general.

So, what difference has knowing that Trump really sucks made? The moderates aren't winning here either.

 

[metalhead]

C'mon man.

"I work at Costco. I gave the loan officer my paycheck stub. Somehow when I signed the loan application I didn't notice that it said I was self employed and made twice as much as I make, and my paycheck stub wasn't attached, but I never noticed that either."

You buying that?

The loan officer works for the bank. If the loan officer says, "Oh don't worry about that, it's just a formality to make sure you get approved," an unsophisticated person is probably going to believe them. Why would the loan officer say that if it wasn't true? He works for the bank, after all, he wouldn't put them at risk. So it must just be a formality, and I'm already emotionally invested in this house, so I'll sign the papers.

Millions of people were victimized on account of trusting their lender would deal honestly. Yes, surely there were individuals who were greedy and more than happy to be dishonest to try to make a buck. But many were not.

Which is a big part of the reason this stuff made people angry - they got stuck holding the bag with a now-underwater mortgage, and were stuck choosing either foreclosure or bankruptcy, while the banks themselves got taxpayer bailouts and zero consequences. The honest trusting people got screwed while the people responsible got off the hook.

That should eff up anyone's sense of justice and fairness.

 

[Timsup2nothin]

So, what difference has knowing that Trump really sucks made? The moderates aren't winning here either.

Who's that?

 

[Lexicus]

"I'm gonna get you this loan, because I don't care about anything anyway and my company doesn't either...so just go ahead and sign this deliberately falsified application. Not because it's really necessary. The misrepresentation there isn't actually material. But sign it anyway."

You already know the misrepresentation isn't material if the lender is going to make the loan whether the representation is false or not. Nothing else you've said refutes that basic point.

 

[Timsup2nothin]

The loan officer works for the bank. If the loan officer says, "Oh don't worry about that, it's just a formality to make sure you get approved," an unsophisticated person is probably going to believe them. Why would the loan officer say that if it wasn't true? He works for the bank, after all, he wouldn't put them at risk. So it must just be a formality, and I'm already emotionally invested in this house, so I'll sign the papers.

Millions of people were victimized on account of trusting their lender would deal honestly. Yes, surely there were individuals who were greedy and more than happy to be dishonest to try to make a buck. But many were not.

Which is a big part of the reason this stuff made people angry - they got stuck holding the bag with a now-underwater mortgage, and were stuck choosing either foreclosure or bankruptcy, while the banks themselves got taxpayer bailouts and zero consequences. The honest trusting people got screwed while the people responsible got off the hook.

That should eff up anyone's sense of justice and fairness.

Unsophisticated?

My experience as the equivalent of a loan officer suggests that the number of people who would fall for that is vanishingly small. However, I always worked in California. Maybe the flyover states are filled with morons?

 

[Timsup2nothin]

You already know the misrepresentation isn't material if the lender is going to make the loan whether the representation is false or not. Nothing else you've said refutes that basic point.

In this century, loan applications are "machine scored." If the income wasn't misrepresented the machine would kick the application. So the lender isn't making the loan without that misrepresentation. They may be complicit in getting the misrepresentation made, but the borrower still has to make it.

 

[metalhead]

Unsophisticated?

My experience as the equivalent of a loan officer suggests that the number of people who would fall for that is vanishingly small. However, I always worked in California. Maybe the flyover states are filled with morons?

Well, look at the situation. "Falling for it" is a rather wide range on a sliding scale. Maybe you believe the officer. Maybe you're not sure but you like the house and just want to get on with it. Maybe you don't believe, but figure "He works for the bank and does this all the time; he wouldn't do it if it was going to be a problem."

 

[Lexicus]

In this century, loan applications are "machine scored." If the income wasn't misrepresented the machine would kick the application. So the lender isn't making the loan without that misrepresentation. They may be complicit in getting the misrepresentation made, but the borrower still has to make it.

Notice that I didn't say "they're making the loan with or without the representation." I said "they're making the loan whether the representation is false or not." Important difference.

I mean, come on, you're not stupid. You must know that in a situation where lenders are originating massive quantities of crap loans as part of a fraud scheme, the borrowers who are taking out those bad loans are not in any meaningful sense deceiving the lender. It may be a crime on paper but it's not worth prosecuting and it's not worth talking about as a cause of the crisis.

 

[Timsup2nothin]

Well, look at the situation. "Falling for it" is a rather wide range on a sliding scale. Maybe you believe the officer. Maybe you're not sure but you like the house and just want to get on with it. Maybe you don't believe, but figure "He works for the bank and does this all the time; he wouldn't do it if it was going to be a problem."

There's always such a sliding scale when someone is advocating the commission of a crime. Generally speaking no point on the scale provides serious protection from prosecution. "I was told it wasn't really shoplifting if it was just a pack of gum." That's never worked.

 

[metalhead]

But as Lexicus points out - who is the borrower defrauding? The loan officer, and by extension the bank itself, knows the income is fabricated before issuing the loan. That's why it matters that the loan officer is the one writing the wrong numbers on the form.

It's not stealing if the store manager hands me a pack of gum off the shelf. I have every reason to believe he's authorized to give me the pack of gum, whether it's true or not.

 

[Timsup2nothin]

Notice that I didn't say "they're making the loan with or without the representation." I said "they're making the loan whether the representation is false or not." Important difference.

I mean, come on, you're not stupid. You must know that in a situation where lenders are originating massive quantities of crap loans as part of a fraud scheme, the borrowers who are taking out those bad loans are not in any meaningful sense deceiving the lender. It may be a crime on paper but it's not worth prosecuting and it's not worth talking about as a cause of the crisis.

I certainly agree that no individual fraudulent loan caused the crisis. Just like me boosting a candy bar next time I pass through WalMart wouldn't bankrupt them. However, there is no connecting path from there to "it isn't worth talking about the borrowers who were complicit in the fraud that caused the collapse." It isn't worth prosecuting them, generally, because there are just too many of them, their individual cases are small, and juries are likely to consider them sympathetic figures who have already been punished, but it is still accurate to say that if people, en masse, were not willing to commit the crime the banks couldn't have done what they did, so that willingness is worth addressing.

It's not stealing if the store manager hands me a pack of gum off the shelf. I have every reason to believe he's authorized to give me the pack of gum, whether it's true or not.

Nicely argued counselor, turning my own analogy. However, if the store manager that hands you the gum has you sign a document that says you paid for it can you claim you were unaware of the lie you were signing?

 

[Lexicus]

I certainly agree that no individual fraudulent loan caused the crisis. Just like me boosting a candy bar next time I pass through WalMart wouldn't bankrupt them. However, there is no connecting path from there to "it isn't worth talking about the borrowers who were complicit in the fraud that caused the collapse." It isn't worth prosecuting them, generally, because there are just too many of them, their individual cases are small, and juries are likely to consider them sympathetic figures who have already been punished, but it is still accurate to say that if people, en masse, were not willing to commit the crime the banks couldn't have done what they did, so that willingness is worth addressing.

I don't think it is. What policy or other response would you suggest to address this willingness? I wouldn't be opposed to some kind of financial literacy program being made available to people, but it just isn't realistic to expect ordinary people to be vigilant against this kind of thing. The vigilance needs to come from the regulators and the prosecutors. It can't come from the general public.

Nicely argued counselor, turning my own analogy. However, if the store manager that hands you the gum has you sign a document that says you paid for it can you claim you were unaware of the lie you were signing?

If the document is dressed up in sufficiently opaque legalese, I might be able to.

 

[Timsup2nothin]

I don't think it is. What policy or other response would you suggest to address this willingness? I wouldn't be opposed to some kind of financial literacy program being made available to people, but it just isn't realistic to expect ordinary people to be vigilant against this kind of thing. The vigilance needs to come from the regulators and the prosecutors. It can't come from the general public.



If the document is dressed up in sufficiently opaque legalese, I might be able to.

There is really very little "dressing" around a block on a form that says "where do you work?" or "what is your monthly income?" No one is asking John Q Citizen to "be vigilant" about bank policies. There is also no "policy" to suggest or education in "financial literacy" to provide that makes any difference when the issue is millions of people being willing to commit a "small" fraud. It is a well known rule among people who cheat on a grand scale; it is only possible if you can find people who are willing to cheat on a small scale. The victim of a fraud, if forced to be honest, will almost always say "I thought that I was taking advantage of them."

 

[Lexicus]

The victim of a fraud, if forced to be honest, will almost always say "I thought that I was taking advantage of them."

Okay, I don't dispute that this is true in many of these cases. I do dispute that it reduces the moral culpability of the bankers in all this.

 

[Timsup2nothin]

Okay, I don't dispute that this is true in many of these cases. I do dispute that it reduces the moral culpability of the bankers in all this.

Well, since no one has questioned the culpability of the bankers that's a perfectly reasonable position, but how are you going to have a dispute?