Quote from: JoelKatz on November 15, 2012, 03:22:52 PM

Quote from: Namworld on November 15, 2012, 02:15:56 PM

The bank makes the mistake of believing the arguments to be sufficient to expect me to repay the loan.
I made the mistake of badly choosing who I'd then pay those funds to and gave them to the wrong individual which commits a financial fraud (accepting payment and not delivering anything in return.) I myself made the mistake that hinders the repayment of the loan, causing loss to the bank.

I agree. This is not common mistake. This is the bank making one mistake and the borrower making a different mistake.

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The mistake is far from being common. The depositor blindly believe Patrick can be expected to deliver based on his arguments. They put themselve in the situation, it was a mistake, but it does not cause the loss of the deposit being irrecoverable, just like you didn't cause the loss of the test's costs by accepting your doctor's claims.

If this mistake didn't cause the loss of the deposit, what do you think did?!

And as such, Patrick's depositors make the same uncommon mistake as this example in believing his argument to be sufficient to expect him to be able to repay the loan. Not that these arguments were requirements/truths or that the repayment of the deposits were 100% dependent on those arguments. That the borrower spends the money as he said he would or that his arguments were truths does not free the debtor of his debt if a problem occurs.

Quote from: JoelKatz on November 15, 2012, 03:22:52 PM

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The loss is caused to the depositor when Patrick loaned the funds to wrong person who then didn't pay him back, something over which the depositor had no control. Patrick bears the responsibility of making that mistake.

Patrick didn't loan funds "to the wrong person". Patrick followed his business model. Patrick didn't do anything his investors didn't ask him to do.

There was no other question Patrick could have asked, no other investigation he could have done, no magic work he could have said, no wand he could have waved. If we could learn at least one thing from this fiasco, it's that high returns always come with high risks. The odds that you will be the one person who finds the exception to this tried and true rule are vanishingly small, and thus, it is axiomatically true.

Yes, I certainly hope people expected there was high risk at extending funds for such high rate. Yes they probably should learn from it. Yes, it could have been foreseen, although you cannot possibly argue that everyone was assured of that. If the person learns from the mistake, good for him/her. High returns, high risks of loss. But that it was risky certainly does not frees Patrick to fill his promised claim: I will honor withdrawals instantly and pay you X% on deposits.

Quote from: JoelKatz on November 15, 2012, 03:22:52 PM

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Consider this: should a person making the mistake of handling over a knife to some shady individual asking for it to cook would place that personal equally responsible for the death of someone when said individual proceeds to kill somebody, because you enabled that murder? Both made the mistake to entrust something they shouldn't have to someone they did not really know, enabling a loss to someone (Financial to yourself in the first case or of someone else's life in the later). Both giving party made a mistake enabling something to happen by entrusting their property to someone else, which is a far different from the mistake of doing the mishandling creating the loss when you had no control of it.

No, they made completely different mistakes.

Your statement that "This is false" is void of any valid argument. Please elaborate. Although I must agree it's probably not the best example I could have made to point my case.

Quote from: JoelKatz on November 15, 2012, 03:22:52 PM

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When you accepted your doctor's claim, you enabled the loss by proceeding with the test which would have been impossible otherwise. But you did not cause it, the doctor did by promising you would not pay and then the insurer not paying as he expected, so he paid for the test since he promised you would not pay for it. I could argue you are just as responsible as Patrick's depositor who did not do due diligence in investigating before proceeding. Had you had investigated and called your insurer, you would have known the test was not covered and the doctor would not have to bear the loss.

Right, but I reasonably relied on a factual claim by my doctor which turned out to be false. The factual claim Patrick made was true.

I stress again that the arguments are NOT part of the contract just as you have agreed in the above example about the bank.

The doctor factual and contractual claim he made is a promise:
- (Factual) That you will not pay.
- (Argument) because the insurer pays for it. (false)
When his argument proved insufficient to make, he ended up paying because he had to honor is promise of the factual claim the you will not pay.

Patrick similarly made the promise that:
- (Factual) I can cover your deposit (He also made the other promise to pay X% interest)
- (Argument) because I have sufficient assets which are not invested in BS&T. (true)
When that argument proved insufficient to make his factual promise to held true, he still owes to fulfill that contractual claim.

The same way you agreed about the borrower of a bank that:
- (Factual) I can repay the loan
- (Argument) because I have a good credit rating. (true)
- (Argument) because I have a stable job. (true)
- (Argument) because I have enough assets to cover the loan should problems arise. (true)
Even if his arguments are true and the bank granted the loan, he did not make the same mistake as the bank. His arguments do not make the factual promise true and he has to respect what he promised.

In all these case the two parties make the same different mistake. One makes the factual promise and bring arguments (which can be factual (true) or not) that this promise is realizable, the other accept their arguments as sufficient to expect that promise to be achievable. The arguments were never part of the contract as exceptions to the factual claim or reasons not to honor it. When you make a promise, you have to fulfill it or otherwise fulfill it has much as you possibly can, regardless of personal consequences or whatever arguments you brought up to convince the other party to trust you.

Patrick knows what he promised, knows who he owes this promise to and provided no evidence he fulfilled his promise as much as it could possibly fulfill it. As far as I know he has personal asset left an he his willingly not departing with them. So he's not fulfilling his promise as much as he could have. You also agreed that the person accepting the contract is not at at cause for the loss for merely enabling it to occur because he accepted the contract. By accepting the contract of sending Patrick funds, they enabled the people (the lendees) who caused Patrick's losses to cause them. Not the depositors. Patrick is neither willingly causing that loss to himself, but he did create the loss to depositor by making the promise he could cover their deposits when it ended up he could not. The depositors lost funds because they lended them on Patrick's promise that he could cover them and pay X% fixed interest.