Study: top bank execs saw the crash coming and sold off shares in their own institutions


#1

Originally published at: http://boingboing.net/2016/07/23/study-top-bank-execs-saw-the.html


#2

Many years ago, I had to get involved in someone else’s personal loan. Sitting at the loan officer’s desk, the other person wanted to go for a variable rate; he was expecting the rate to drop. Fixed-rate interest was a quarter percent cheaper.

I asked the loans officer: “So, what are the long-term interest rates for 1-year, 3-year, and 5-year deposits?”

The loans officer, somewhat startled by my question, asked me why I wanted to know this. “I don’t know what interest rates are going to be doing in the next five years, but you can be damned sure that the Royal Bank of Canada knows…”

“Fixed rate it is, then,” she replied - indicating that the bank expected them to go up. “In any case,” I continued, “if the rates drop enough to make it worthwhile, we can…” The loans officer finished my sentence for me: “…renegotiate the loan.”

Arm yourself with logic and information…you likely can’t win, but you’ll make the bastards pay something.


#3

Whereas as a grunt that provides technical services to investments firms, I have to take anti-insider trading training and would actually get arrested for a similar move.


#4

Gosh if only we had known this in 2008, we would have done nothing different!


#5

You know, I don’t harbor general animosity towards rich people, anymore than I do to any other general demographic. But when people don’t play by the rules and fuck other over it pisses me off. That isn’t working hard for what you earned. It is fucking over the little guy. Didn’t Martha Stewart basically go to prison for this?

No more bail outs of the financial district. And as George Carlin suggested, start jailing the crooked ones. Or killing them.

Full disclosure, my sister works at a bank, but she is like middle management now, not exactly raking it in. They are FINALLY trying to move out of their shit starter home. I wish she could get some dirty money. I’d reminder her I as the cool brother.


#6

I hope this comment doesn’t qualify as concern trolling, but it seems to me that there can be other nuanced details that could account for the top 5 executives selling more shares of their own banks in the pre-crash period.

  1. The top 5 executives receive larger awards of their own bank stock as part of their exorbitant compensation packages, and selling shares is a normal part of their income. If they were selling at the peak of the bubble, they could have been taking advantage of higher prices, and not necessarily cheating on inside information, at least not on information that was not available to other holders of the stock.

  2. The article does not indicate what percentage of increased selling actually took place. Was it 1% or 50% or something in between? Presumably it was statistically significant, but it would be nice to know how much.

  3. Directors of banks have access to all of the same info that the executives have available. Why did they not show the same statistics?

I don’t doubt that evidence may indicate slightly higher selling activity, but I am dubious about drawing a direct connection to cheating. I have no love lost for bankers, and especially the ridiculous compensation packages provided for top executives, but this slightly elevated selling is the least of their sins.


#7

Did you read the study to see whether they accounted for that? I haven’t read the study and I’m lazy, so it would be a lot easier to dismiss your concerns if I just knew that you raised them without checking whether the authors of the study thought if that.

Really, one of the social aspects of science is that it is the art of not fooling yourself, where it is in other scientists’ interests to demonstrate that you fooled yourself about something. That then motivates one to constantly ask yourself how you might be fooling yourself into believing what you really believe and trying to prove yourself wrong. So I generally believe that in a discussion forum like this, objections raised to a paper being discussed are probably raised in the paper and accounted for, if only we’d all read the paper. Of course I state that belief knowing full well that I haven’t checked whether I’m fooling myself about it. :wink:


#8

Ha! No, I’m both too lazy to read the long academic paper, and I’m not qualified to judge the statistics being used as evidence, nor to judge the statistical model. I’m just skeptical of claims like those offered in this article that have other possible explanations.

Since rules against insider trading already exist, and it is extremely difficult to prove illegal behavior of this sort anyway, I am neither surprised that the behavior exists, nor surprised that an academic can show it long after the fact. Strengthening shareholder protections, and making boards of directors more financially accountable for their failures would go a long way to solve this potential problem.


#9

Still waiting for my cash from BofA, they stole my house and I saw zero compensation from it. I can attest to the fact that no lower human feeling exists than losing your home to a greedy fucker with no face to curse.


#10

Or punch repeatedly.

I’m on my phone so I can’t post the GIF of Fry saying the shocked phrase about this whole thing.


#11

Here you go:


#12

Funny, I seem to vaguely recall one of the presidential hopefuls talking about corruption at high levels, and that it was a problem. I don’t think it was a republican candidate, for that matter. But the sound of crickets chirping was so overwhelming, I never really caught the guy’s name.


#13

Thanks for having my back man


#14

Certainly not concern trolling, just naive or more forgiving/rationalizing away that the rest of us who wish for a set of rules that apply to both the “common man” and elites.


#15

Funny, I was a grunt working in risk assessment as a totally outside consultant. When the bankers stopped asking about the risks, I cashed out of the market. I had no inside information, I just paid attention to the questions I was being asked, which went from “is this a safe loan” to “how quickly can you do this paperwork so I can use my rubber stamp and get to Bermuda this weekend”.


#16

Uh … I was working in a related field, and we saw the crash, like, 8 miles away. Basically, the flow of capital seized up and choked. That was 9 months before the consumer level crash. Everyone ran as much mileage out of the system to profit as much as possible as they could.


#17

Hopefully, a desire to look beyond the headline isn’t equal to being naive. I’ve been accused of being a cynic and a sceptic far more often than I’ve heard that I am unnecessarily forgiving, so I suppose I can take the suggestion from time to time. In any case, I want the rules to be equally applied too.


#18

It’s a matter of perception as well. I would imagine that there is certainly insider trading that can arguably not meet the SEC’s definition of Insider Trading.


#19

Did and didn’t. Point made!


#20

This should be grounds for prosecution and forfeiture of all the wealth that
grew out of their positions to be used for restitution for the real
victims.