should there be such a thing as a financial malpractise suit?

The Corinthian

KyussBishop, can you please stop using your replies to me as a vehicle to evangelize your personal economic theories?

KyussBishop

clairefontaine wrote: »

Well I'm utterly bewildered by the zebra crossing argument you are both having, but between the jigs and the reels, I would think that nationalised banking would have a communist aspect or value to it, even if it is not indicative of a communist regime in totality.

I would also be uncomfortable with certain banks having specialised relationships with the EU via their nationalisation, it seems inherintly anti-competitive to me, but that is a hunch and I am hardly an expert.

Anyway, it also seems to me that prices on the Dublin southside are still in a bubble because they seem phenomenally expensive for what they have on offer. The prices just don't ring true.

Just to note: I don't support full nationalization of banking myself, only nationalization of the ability to create money out of nothing (as well as the creation of a public bank, but not banning private banks).
The point on nationalization of banking, was that even if that was done, it is not enough to make a planned economy.


I would say house prices are going to be kept propped up in Ireland, all through and past the crisis, and much of the south of Dublin, in having the prime property locations, is likely always to be a spot where overvaluation and speculation over house prices persists.

This is what finance is all about these days: Forget in engaging in actual beneficial activity in the real economy, but engage in speculation instead where asset prices get pumped up, and the financial actors in-the-know (the Gresham's dynamic i.e. 'information asymmetry', where they know it's a bubble, and can detect early when it is close to bursting), can turn their investments into cash while the price is highly overinflated (well above its real value), and can watch the asset bubble burst, as the price bottoms out back towards its real value (which can cause massive economic destruction in its wake), making losers out of everyone not 'in-the-know', who didn't get out early (and not everybody can win either - it's like a massive economy-wide ponzi-scheme).

Houses are the ultimate way of engaging in asset speculation like this, since they're the most expensive thing people will buy, and ownership is heavily incentivized over tenancy here (thus they are a way of extracting huge 'rents' in a sense, off the majority of people in the economy), and in my view, this country is too corrupt still for another property boom not to emerge, once we turn the corner economically.

Really enormous amounts of money have been parasitically reaped off the rest of the economy and society, through the property bubble here (some see it as class-warfare anew, with the rich financial speculators blowing asset bubbles that inflate everyone elses lifetime cost of living, with 'rents' extracted from society going to these speculators, but not sure if I view it in this highly-politicized way myself yet); there's a (in my view) very lax attitude to fraud/corruption in this country, and with this being one of the ultimate ways to make silly amounts of money, those with political/economic power are going to fight hard against reform in this area.

The Corinthian wrote: »

KyussBishop, can you please stop using your replies to me as a vehicle to evangelize your personal economic theories?

There was nothing even in my last reply, relating to economic theories I support.

Cody Pomeray

I have to say I find Kyussbishop's posts more thoughtful than most. It's funny to read kneejerk reactions to them, which seem to revolve around the use of 'dirty words' like Communism and revolutionary, with users seeming to think that's an adequate rebuttal.

I disagree with kyussbishop, but mainly because I'm not sure that Government agencies purporting to act in the interests of the state are, in fact, any more likely to promote the public interest in full and honest disclosure.

In fact, a nationalised money creation system may open up a whole new series of negative externalities.

For example, the sole owner of AIB is, effectively, the Minister for Finance. Yet you would have a hard time trying to convince just about anybody that AIB's nationalisation has been a helpful or progressive public transaction.

edit: I realise that last example is not entirely relevant to kyussbishop's proposals, based on his last post.

KyussBishop

^^ Indeed, I wouldn't view wholesale nationalization of the private banking system as good or desirable.

It's a different topic, but monetary reform is a very big deal economically and politically (it isn't fringe either - people like Martin Wolf, the leading editor of the Financial Times, support the core arguments underpinning monetary reform), and what it revolves around is making private banks full-reserve (and removing their ability to create money), with some variations of monetary reform having government pick up the slack with money creation instead (at least because there still has to be some way for new money to be introduced into the economy, once private banks lose that ability), either through spending or a public bank.

It's a topic that's starting to pick up speed now, as more and more people (especially economists, the vast majority of which who bizarrely do not know this) realize that banks are earning profits, generated from money created out of nothing.

It's crazy that economics is the way it is today, because more than 70 years ago during the last Great Depression, economists like Keynes and Irving Fisher had already figured all of this out, and proposed all the necessary reforms.

maryishere

Sleepy wrote: »

I've seen evidence of a case where a farmer sued a bank after they extended him credit beyond what their own farm adviser reckoned was sustainable. The case never saw a courtroom but that case was in the bad debts files so had presumably been written off at the time..

If that is true, then there are other cases where banks could be sued. For example, if a borrower was extended such credit that was 50 or 60 times his annual income. Such cases did occasionally slip through the net. If the credit was unsustainable even when it was taken out and mistakes were made, should not the bank bear some responsibility?

[Jackass]

My biggest disappointment with the current Government is definitely the failure to legislate for corporate crime in the future.

The going on of Anglo directors alone clearly broke the existing law in my eyes (with insider trading and falsifying accounts), but also I think a raft of new white collar crime legislation should be drafted.

I do think that professional malpractice should be a criminal offence, but only in tandem with proper and extremely well defined regulation being in place for all of industry.

Essentially, irresponsible lending practices that happened here would be thought about twice if criminal charges could apply for blatant recklessness and not staying within certain liquidity guidelines that should be regulated for.

Also within regulation stringent corporate controls on pay and bonuses in the event of investigation and conviction, also greater powers on repossesion and freezing of assests globally, similar to the household tax, a maximum valuation of a home that can not be seized (which would be in line with the national average, or around 300k for example), any property above this value can be seized and auctioned with up to 300k of the proceeds going back to the person to house themselves.

Basically very thorough, comprehensive and stringent laws and regulation against corporate recklessness in this country.

Potatoeman

maryishere wrote: »

If that is true, then there are other cases where banks could be sued. For example, if a borrower was extended such credit that was 50 or 60 times his annual income. Such cases did occasionally slip through the net. If the credit was unsustainable even when it was taken out and mistakes were made, should not the bank bear some responsibility?

They do. The person losses their assets to the bank and file for bankruptcy. The bank makes a loss on the loan.
They dont share in the profits people make so dont have to share in the losses. They have risk exposure if someone defaults.

Potatoeman

[Jackass] wrote: »

My biggest disappointment with the current Government is definitely the failure to legislate for corporate crime in the future.

The going on of Anglo directors alone clearly broke the existing law in my eyes (with insider trading and falsifying accounts), but also I think a raft of new white collar crime legislation should be drafted.

I do think that professional malpractice should be a criminal offence, but only in tandem with proper and extremely well defined regulation being in place for all of industry.

Essentially, irresponsible lending practices that happened here would be thought about twice if criminal charges could apply for blatant recklessness and not staying within certain liquidity guidelines that should be regulated for.

Also within regulation stringent corporate controls on pay and bonuses in the event of investigation and conviction, also greater powers on repossesion and freezing of assests globally, similar to the household tax, a maximum valuation of a home that can not be seized (which would be in line with the national average, or around 300k for example), any property above this value can be seized and auctioned with up to 300k of the proceeds going back to the person to house themselves.

Basically very thorough, comprehensive and stringent laws and regulation against corporate recklessness in this country.

We have plenty of regulation. It was not enforced by the financial regulator.

maryishere

Potatoeman wrote: »

The bank makes a loss on the loan.

If a bank extends 50 or 60 times annual income to someone, or neglects to check if the figures stack up before issuing the loan, and neglects to check in advance to see if the borrower has a hope in hell of paying the repayments, then yet the borrower will default and the bank (which issued that ridiculous loan) makes a loss on the loan. The bankers involves will keep their wages, bonuses and pensions.

Contrast that to the bank who turned down the borrower / did not lend him a mortgage at 50 or 60 times annual salary. They done a few minutes work ( at least ) and did not issue the loan, so they do not make a loss on the loan.

When a bank knows - or should have known - a loss was practically inevitable when issuing the loan, why should there not be such a thing as a financial malpractice suit? It would be for the greater good of society if the a financial malpractice suit was brought against an irish bank. Better late than never. Mistakes and negligence by individual rogue bankers must be punished.

Vizzy

maryishere wrote: »

If a bank extends 50 or 60 times annual income to someone, or neglects to check if the figures stack up before issuing the loan, and neglects to check in advance to see if the borrower has a hope in hell of paying the repayments, then yet the borrower will default and the bank (which issued that ridiculous loan) makes a loss on the loan. The bankers involves will keep their wages, bonuses and pensions.

Contrast that to the bank who turned down the borrower / did not lend him a mortgage at 50 or 60 times annual salary. They done a few minutes work ( at least ) and did not issue the loan, so they do not make a loss on the loan.

When a bank knows - or should have known - a loss was practically inevitable when issuing the loan, why should there not be such a thing as a financial malpractice suit? It would be for the greater good of society if the a financial malpractice suit was brought against an irish bank. Better late than never. Mistakes and negligence by individual rogue bankers must be punished.

Are you suggesting that banks were offering loans of 50 or 60 times annual salary ?
That would mean that a person/couple on say €50,000 would have gotten a loan of €2.5 to €3.0
Surely not ?

maryishere

Vizzy wrote: »

Are you suggesting that banks were offering loans of 50 or 60 times annual salary ?
That would mean that a person/couple on say €50,000 would have gotten a loan of €2.5 to €3.0
Surely not ?

Most banks were prudent enough not to lend money if they knew the borrow could not meet monthly repayments. However, yes, I am aware of a case not unlike the above which did slip through the net. A mistake was made. IMHO mistakes and negligence by individual rogue bankers should be punished.

Potatoeman

maryishere wrote: »

If a bank extends 50 or 60 times annual income to someone, or neglects to check if the figures stack up before issuing the loan, and neglects to check in advance to see if the borrower has a hope in hell of paying the repayments, then yet the borrower will default and the bank (which issued that ridiculous loan) makes a loss on the loan. The bankers involves will keep their wages, bonuses and pensions.

Contrast that to the bank who turned down the borrower / did not lend him a mortgage at 50 or 60 times annual salary. They done a few minutes work ( at least ) and did not issue the loan, so they do not make a loss on the loan.

When a bank knows - or should have known - a loss was practically inevitable when issuing the loan, why should there not be such a thing as a financial malpractice suit? It would be for the greater good of society if the a financial malpractice suit was brought against an irish bank. Better late than never. Mistakes and negligence by individual rogue bankers must be punished.

The bank do a check based on risk which was fine when the asset was increasing in value. It was the downturn that caused ne and ment default would result in a loss.
Its still up to the individual though. You are dealing with a sales person. Just like buying a car on credit if you buy something you cant afford they reposses it and you still owe the remainder.

Cody Pomeray

From yesterday's EU Commission Working Document on Ireland
http://ec.europa.eu/europe2020/pdf/nd/swd2013_ireland_en.pdf

A durable treatment of non-performing loans still needs to be achieved, and there are signs that some lenders continue to provide unsecured credit to highly indebted borrowers without adequately checking their creditworthiness. These developments make it all the more important that efforts to establish an operational credit register, a programme objective, be stepped up as progress to date has been slow and this may not be achieved before end-2013.

maryishere

Potatoeman wrote: »

The bank do a check based on risk which was fine when the asset was increasing in value.

If the bank neglects to do a check, and does not even check if the person has a proper job or business, and lends an astounding amount of money which no other lender would ever lend in such circumstances...what happens if such a case slips through the net? A case where the borrowers income was never remotely sufficient to cover mortgage repayments? And the bank/building society never asked how the loan was to be repaid, or looked for or carried out financial projections. Surely in such isolated cases then mistakes and negligence by individual rogue bankers should be punished?

Potatoeman

maryishere wrote: »

If the bank neglects to do a check, and does not even check if the person has a proper job or business, and lends an astounding amount of money which no other lender would ever lend in such circumstances...what happens if such a case slips through the net? A case where the borrowers income was never remotely sufficient to cover mortgage repayments? And the bank/building society never asked how the loan was to be repaid, or looked for or carried out financial projections. Surely in such isolated cases then mistakes and negligence by individual rogue bankers should be punished?

If the bank choose to. The borrower would not get a say in this.

maryishere

Potatoeman wrote: »

If the bank choose to.

yes the bank chose to lend the money to someone whose income always was insufficient - by a mile - to pay it back. Surely in such isolated cases then mistakes and negligence by individual rogue bankers should be punished?

Potatoeman

maryishere wrote: »

yes the bank chose to lend the money to someone whose income always was insufficient - by a mile - to pay it back. Surely in such isolated cases then mistakes and negligence by individual rogue bankers should be punished?

But it would raise questions about the banks policies and controls. Which would be seen as bad press.