Markets & EconomyMortgage

Banks don’t cheat people; people cheat people

  • Goldman and Wells were small-fry, and not one executive has been penalized.
  • American corporate governance relies on boards of directors to guide and control senior officers, and the American people are paying these fines through additional institutional fees.

Goldman Sachs’ $5 billion and Wells Fargo’s $1.2 billion settlements of mortgage wrongdoing would be grounds for giggling if it were not all so painful. Goldman has -- at last -- this week settled with the Department of Justice for securitizing bad loans from 2005-2007, and Wells for lousy underwriting of FHA loans from 2001-2008. The most painful part here -- eight years after the collapse of the worst miscreant firm, Lehman -- is this: We still do not have a national understanding of the cause of the credit bubble. Especially on the political right, many still blame Fannie and Freddie. On the left, blaming “big banks” is in vogue again. [Tweet "Who's responsible for Great Recession? On the right, blame Fannie/Freddie. On the left, blame big banks."] Both of those angles are Tales of the West without foundation or merit. Horrifying reality follows here: 1. Goldman and Wells were small-fry. Goldman was the only player that left the game early, hoping to escape, ...