Jail Time for Wall Street's Derivatives Writers?

[Celebration]

http://seekingalpha.com/article/200669-jail-time-for-wall-street-s-derivatives-writers

According to the SEC, these included bonds secured by mortgages that included borrowers with a high percentage of adjustable rate mortgages, relatively low borrower FICO scores, and a high concentration of mortgages in states like Arizona, California, Florida and Nevada that had recently experienced high rates of home price appreciation.

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The Fair Credit Protection Act protects consumers, including subprime borrowers, from impermissible use of their credit information. The term “consumer report” means any written, oral, or other communication of any information by a consumer reporting agency bearing on a consumer’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living. ‘‘Consumer information’’ means any record about an individual, whether in paper, electronic, or other form, that is a consumer report or is derived from a consumer report.

Such information may only be used with respect to specifically defined “permissible purposes.” Permissible purposes include those events that somehow involve or benefit the original borrower in some way. The borrower must either be applying for or receiving credit, or someone must be doing something, in the chain of contract, to facilitate the borrower’s ability to receive credit, such as creating, buying or selling an existing loan.

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The word “existing” is critical. Personal credit information can be legally and properly used to help securitize real mortgages that already exist. That means that when an investment bank creates mortgage backed bonds, it is perfectly ok to use credit information. Using private personal credit report information, however, to create synthetic derivatives, is NOT permissible. Synthetic derivatives do not involve buying, selling or servicing existing loans in any way. Synthetic derivatives do not facilitate the salutary public purpose of financing homes for families.

[no_hypocrisy]

1. I don't see why not. Michael Milken went to prison for his junk bonds.

http://en.wikipedia.org/wiki/Michael_Milken

[notesdev]

2. Not under the present government

And by "present government" I consider the two major parties to be facets of the same entity - an entity bribed to the gills by folks like these derivative writers.

[upi402]

6. All hail the Uniparty

One nation, under corporatism, with little liberty and injustice for most.

[fasttense]

3. Well, then how come employers can use credit ratings on prospective employees? n/t

[Celebration]

5. that may be counted as one of the permissible uses

At the present time, anyway.

I agree that Obama's government is unlikely to take this approach, though. I just thought it was interesting.

[notesdev]

7. Because they can

same reason they can make you piss in a cup... people go along with it because they'd rather have the job than their privacy.

[Turbineguy]

4. I doubt it.

If anything they'll be forced to live in exile on their superyacht on the French Riviera.

[golfguru]

8. Jail only if they falsified the bond prospectus

Buyer beware rules! Unless of course the bond
issuers lied in the prospectus.