November 8, 2015

The People Responsible For The Housing Bubble

For a weekend topic, a comparison in the ongoing discussion of the housing bubble. A blogger sent me this: The Research Project, Week Twenty Nine, New Hampshire Reality Check. “For years I wondered why hundreds of people didn’t go to jail when the housing bubble burst, plunging the economy into a recession. My assumption was that the people responsible for creating the housing bubble deliberately led millions of people into making risky real estate investments which, when the bubble burst, led to mass foreclosures and countless bankruptcies. As it turns out the traders at the heart of the housing bubble did worse than most on their housing investments when the bubble burst. This, according to research done by finance professor Ing-Haw Cheng at the Tuck School of Business at New Hampshire’s Dartmouth University.”

“Professor Cheng and his co-researchers from the University of Michigan, Ann Arbor and Princeton University then compared the results with the real estate transactions of plausibly uninformed control groups consisting of lawyers and Wall Street stock analysts over the same time period. They found that those who dealt in mortgage-backed securities did worse in timing their own real estate transactions than those in the control groups.”

“So I guess I have to rethink my assumption that the bankers who helped create the housing bubble deserved to do jail time. And now as a bonus here are some interesting posts that I found on The Housing Bubble Blog.”

A reader posted this Rolling Stone article today, from July 2015: “Eric Holder has gone back to work for his old firm, the white-collar defense heavyweight Covington & Burling. The former attorney general decided against going for a judgeship, saying he’s not ready for the ivory tower yet. ‘I want to be a player,’ he told the National Law Journal, one would have to say ominously.”

“Holder will reassume his lucrative partnership (he made $2.5 million the last year he worked there) and take his seat in an office that reportedly – this is no joke – was kept empty for him in his absence. The office thing might have been improper, but at this point, who cares? More at issue is the extraordinary run Holder just completed as one of history’s great double agents. For six years, while brilliantly disguised as the attorney general of the United States, he was actually working deep undercover, DiCaprio in The Departed-style, as the best defense lawyer Wall Street ever had.”

“Here’s a man who just spent six years handing out soft-touch settlements to practically every Too Big to Fail bank in the world. Now he returns to a firm that represents many of those same companies: Morgan Stanley, Wells Fargo, Chase, Bank of America and Citigroup, to name a few. Holder doesn’t look it, but he was a revolutionary. He institutionalized a radical dualistic approach to criminal justice, essentially creating a system of indulgences wherein the world’s richest companies paid cash for their sins and escaped the sterner punishments the law dictated.”

Bits Bucket for November 8, 2015

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