Home > Social Commentary > Financial Fraud by Wall Street and Mortgage Lenders: Ignorance and Stupidity Are No Excuse

Financial Fraud by Wall Street and Mortgage Lenders: Ignorance and Stupidity Are No Excuse


eric-j-holder-jrIt’s not my fault. I didn’t know what I was doing. My boss made me do it. I didn’t realize it was wrong. Everybody else was doing it. Nobody told me. I didn’t mean to hurt anybody.

Now that the white collar criminals who perpetrated the mortgage crisis by deliberately giving loans to unqualified buyers and defrauding the country are on the brink of state and federal prosecution, they’re pleading “stupidity and ignorance.” According to the New York Times:

The question behind any cases brought against Wall Street will boil down to this: Was the worst economic crisis in decades caused by law-breaking or some terrible, but noncriminal, mix of greed, naïveté and blunders? The challenge for the Obama administration will be to prove that it was the former, said Michael F. Buchanan, a partner at Jenner & Block and a former United States attorney in New Jersey. “We punish people for intentional misconduct, we don’t punish them for stupidity or innocent mistakes,” he said. “If you’re a prosecutor, you want evidence that shows real dishonesty. You want something that shows that these people were doing something wrong, and they knew it.”

Really?! People receive speeding tickets when they don’t know they’re over the speed limit. For example, they’re preoccupied and don’t realize they’re going too fast or they miss a sign that the speed limit dropped from 65mph to 50mph. Should their tickets be forgiven because of ignorance? I wish.

Stupidity and ignorance are no excuse, hence, ignoratia juris non excusat (ignorance of the law does not excuse). Stupidity and ignorance do not exempt you from accountability and consequences, it just makes you a dumb crook. You’re still responsible for your actions. Even if you were just “following orders” because you were afraid of your boss, you’re complicit. Higher ups who encouraged these behaviors are doubly responsible for encouraging criminal business practices. If executives claim they were “unaware” of what was going on in their organizations, that makes them criminally negligent.

People who took out the bad mortgages with no thought of the morrow are just as culpable. Borrowers were scammed. Banks offered them a deal that was too good to be true. Banks preyed on people’s fantasies of McMansions, borrowers fell for it hook, line and sinker and now they’re paying for it.

A few years ago, a friend and I were in midtown Manhattan with our suitcases on our way to Penn Station. A man approached us and asked if we were interested in buying a “seriously discounted all inclusive day pass to a luxury spa” for $100. My friend and I  knew what was going on and asked very detailed questions about the spa, products, etc. With each question asked, he became irritated and tried to make us feel like stupid hicks because we didn’t recognize what a “great opportunity” (to be fleeced) he was offering us. We kept grilling him until he spotted two other women with suitcases and moved on. I called after him, “Good luck finding another mark!”

Even though we knew better, we both had an initial flash of excitement at the thought of having a day at the spa for next to nothing—until our brains resumed control over our ids. Had we fallen for his scam, we each would’ve been out $100 with little recourse—even if the police caught him. No one would have given us our money back. Unfair? Yes, but we would’ve learned a lesson about being gullible; it’s survival of the mentally fittest. I have the same view of people who signed on for mortgages that were beyond their means. They fell for a much bigger scam with a far more expensive lesson.

According to the same NYT article:

That nearly all of the banking industry acted the same, possibly reckless, way could actually help any executive who lands in court, lawyers said. The herdlike behavior suggested that bankers were competing for business using widely shared assumptions, rather than trying to get away with a crime. It would be hard to prove that anyone broke the rules, these lawyers said, since regulations in the riskiest parts of the mortgage industry were so lax.

Ahh, the “But Everybody Else Was Doing It” defense. Are you f**king kidding me?! Are these adult executives or 14-year olds who were caught drinking beer in their friend’s basement?

Narcissistic, predatory bullies believe they’re exempt from the rules by which the rest of us abide. They know what they’re doing is wrong; they just don’t care. In terms of psychological development, the narcissistic mentality is that of a 6-year old, which explains the childlike lame excusess they’re using to exonerate themselves from their indefensible behaviors. They’re not sorry for what they did; they’re sorry that they’ve been caught and are being exposed.

feeding-frenzy-sharksThis as an example of a group of abusive, predatory bullies who saw an opportunity to go after financially vulnerable, gullible people who wanted the good life, but no means to attain it. They offered them a risky, “Get-a-House-Quick” scheme and the pigeons wanted to believe everything would work out in the end.

When reality hit the fan, the bankers blamed the victims and then hit the government up for money. The same government who should have been protecting its citizens instead of enabling corporate malfeasance.

The NYT continues:

One defense lawyer said he expected to argue that either his clients did not understand the financial instruments they were marketing, or were not warned of the dangers by underlings. “We’ll all sing the stupidity song,” said the lawyer, who said he feared that speaking publicly by name would deter potential clients. “We’ll all sing the ‘These guys never told me’ song.“

This is financial abuse on a grand scale. These people knew what they were doing. Once one bank made big profits off these practices and got away with it, the rest of the banks followed suit in a predatory feeding frenzy.

The mortgage lenders need to be held accountable for their corrupt practices and the people who fell for their scams need to deal with the consequences of their gullibility and wishful thinking. Every scam is a dance between predator and prey. People who took out the loans were willing victims. Harsh, but true.

By Dr Tara J. Palmatier, PsyD

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Photo Credits:

Attorney General Eric J. Holder, Jr. by European Press Photo Agency.

Shark Feeding Frenzy on Animal Pictures Archive.

  1. Free at Last
    April 14, 2011 at 12:03 am

    Along the same lines – and in an attempt to inject a little humour into an otherwise very sombre topic – check out this early-2009 automotive-industry bailout poster. Its stunning quality leads me to believe that some Detroit marketing-agency minion with a really sharp sense of humour designed and unleashed this; it’s all over the Internet.

    Did you catch the tagline at the bottom? “We’re the Big Three. We Don’t Need to Compete.” Can you say “arrogance and entitlement?” It’s so rampant that perhaps someone will propose a 28th amendment to the USA Constitution that protects narcissism.

  2. Free at Last
    April 3, 2011 at 9:38 pm

    A terrific post! It exposes the root cause — predatory narcissism — of the global financial crisis of 2008. If you’re at all interested in this topic, I highly recommend that you buy the movie “Inside Job” released in early 2011. It won an Oscar for “best documentary” and is definitely worth owning so that you can watch it two or three times. Every minute of it supports Dr. T’s statements.

  3. March 12, 2009 at 6:50 pm

    “The mortgage lenders need to be held accountable for their corrupt practices and the people who fell for their scams need to deal with the consequences of their gullibility and wishful thinking.”

    Well said. Wall Street has an old saying…

    “it takes two to make a market: a buyer and a seller”

    • shrink4men
      March 12, 2009 at 10:40 pm

      Heya Matt,

      And it takes two to run a scam; a con artist and a mark. It’s a natural impulse to be excited by the thought of getting something for nothing or to get something you really want without having to put in the time and effort to obtain it legitimately. Scam artists prey on this information. This is why the web is full of offers for free digital cameras and laptops. There are very smart people I know personally who sometimes fall for this (not naming names).

      Our desires, greed, or entitlement issues can override our smarts—con artists and unscrupulous Wall Street types “bank” on it (pun intended).

      Dr T

  1. December 17, 2010 at 6:32 pm

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