Well... according to a post by Simon Johnson on the NY Times Economix blog the pattern of stock selling makes it pretty clear that the bank executives knew the bottom was about to fall out on their industry. They bailed with their money before the shock waves hit the rest of us:
One view of executives at our largest banks in the run-up to the crisis of 2008 is that they were hapless fools. Unaware of how financial innovation had created toxic products and made the system fundamentally unstable, they blithely piled on more debt and inadvertently took on greater risks.One of the greatest tragedies of the on-going tragedy of the Great Recession is that nobody has been made to do a "perp walk" and be sentenced to hard time in jail. The message this sends is that it is OK to trash the economy, rob the taxpayers of trillions of dollars, and stuff your pockets full so long as you shrug your shoulders and utter the lament "who could have known?"
The alternative view is that these people were more knaves than fools. They understood to a large degree what they and their companies were doing, and they kept at it up until the last minute – and in some cases beyond – because of the incentives they might receive.
New evidence in favor of the second interpretation has just become available, thanks to the efforts of Sanjai Bhagat and Brian Bolton, who went carefully through the compensation structure of executives at the top 14 financial institutions in the United States from 2000 to 2008.
The key finding is that chief executives were “30 times more likely to be involved in a sell trade compared with an open-market buy trade” of their own bank’s stock and “the dollar value of sales of stock by bank C.E.O.’s of their own bank’s stock is about 100 times the dollar value of open market buys.” (See page 4 of the report.)
If the chief executives had really believed in what their banks were doing, they would have wanted to hold this stock — or even buy more. Disproportionately, more sales than purchases strongly suggests that the chief executives felt their stock was more likely overvalued than undervalued.