If you are a young investor and want to create wealth in the long term there are a few things that you should keep in mind. Read about the SEC prosecution of the Banks in the USA. It is amazing. The Fed is owned by a few big banks, so do not expect them to prosecute a Goldman Sachs or a Wells Fargo. It rarely happens to an amount that hurts them. Once in a while a token fine of a few million is levied on them, but that is more a show.

Read the SEC prosecution of Wells Fargo, Countrywide Financial, and the other giants.

A jury concluded that Countrywide Financial, now a unit of Bank of America defrauded Fannie Mae and Freddie Mac by selling them tens of thousands of defective mortgages.

Many banks have settled similar claims out of court. Great.  JP Morgan Chase is in the process of concluding a $13 billion settlement with the U.S. government. This is a very rare case where a bank has been convicted for misleading the govt  about activities relating to the financial crisis. This is very rare, and banks have ALWAYS denied MENS REA. Until now, banks have denied that they INTENTIONALLY cheated anyone. Being wrong is different – that they admitted, but now it is FRAUD. Mens Rea. THEY KNEW THEY WERE FOOLING THEIR CLIENTS.

This is my peeve. Try telling a school teacher, a head of technology, or a head of HR that a big big life insurance company can design a product, get it approved by a regulator, and still leave you with Rs. 248 after investing Rs. 50,000. In 5 years time this should have become say Rs. 100,000 – instead it turns out that the whole thing is wiped out. (SBI, Allahabad High court). Guilty mind.

In the Countrywide case, which involved a program known as the “Hustle,” it means that executives at the nation’s then-largest mortgage originator purposely dismantled controls meant to ensure compliance with Fannie Mae and Freddie Mac’s underwriting standards. It means that they knew that the government would be left holding the baby for a large number of toxic mortgages underwritten in an effort to squeeze out profit as the housing market came tumbling down in 2007.

When students – especially of risk and compliance – and historians look back decades from now, they will see corporate greed serve as tangible evidence of the behavior that led the US and the world into the worst financial crisis and recession – perhaps hitting more people than the Great Depression.

History would have recorded one more case of Human Greed since Duryodhana’s quest for the whole kingdom.