As a client, it is perfectly reasonable for me to say to a sales rep "I want X% average return, I'm willing to accept Y amount of risk to get it, and I don't care particularly much about how you give it to me", so long as X and Y are reasonable. My understanding is that the financial institutions were accurately describing the average rate of return but drastically under-representing the risk of these instruments to their clients.
Calling consumers 'complicit' for failing to understand a company's offerings significantly better than their own salespeople is at the very least insulting.
I would agree with you that it's reasonable to expect that to be a conversation that would result in your desired outcome. There are a few technical things at issue.
Again, I agree this is broken. My only point is that saying things are "fraud" is harder than I think you expect.
The problem is that saying "I want X% return with Y risk, show me suitable investments" introduces two problems. The first is that risk is not easily quantifiable[1] and also that there are likely many things that are plausibly suitable for that requirement.
If you are dealing with a salesperson, they are required only to present stuff that has a reasonable likelihood of meeting your goals.
If they're working with someone who is a fiduciary, that fiduciary is required to do the extra analysis, but many people are not lucky enough to work with folks who are held to that higher standard.
In my view, every consumer when transacting with every salesperson should use their own judgment to make sure that the products they are being sold are sensible and suitable for them.
Failing to do that -- to just walk into a store and buy what the salesperson (not your personal shopper or your sister or someone who actually cares) says is best -- is just a bad idea.
I hope that adds some clarity as to where I'm coming from.
[1]Quanta exist, but are not comprehensively descriptive. Any metric will not comprehensively describe risk, especially because there are behavioral factors (your own changing attitude towards risk over time) that need to be incorporated into a thoughtful assessment.
It was fraud, executed at the highest level, with an associated Gresham's law corollary: honesty was driven out of the market as CEOs who failed to follow the "liars loans" trend didn't survive. As I said upthread, go read William K. Black's Wikipedia page, follow a few of the links (his appearance on Bill Moyers was good).
Calling consumers 'complicit' for failing to understand a company's offerings significantly better than their own salespeople is at the very least insulting.