Saying "there's no legal way to go after them!" I find kind of upsetting when bankers can hire great lobbyists to ensure they set up the law favorably for themselves.
Definitely agree we should have paid off mortgages instead though.
Definitely agree we should have paid off mortgages instead though.
What the bankers are accused of doing is classic civil fraud: lying about the quality of assets they sold to investors. These sorts of transactions between sophisticated parties has always been the subject of civil rather than criminal enforcement. (Criminal fraud tends to come into play only where the misrepresentations are more clear cut and egregious, and the victims are ordinary consumers rather than sophisticated counterparties.)
In terms of protections from prison, basically controlling the firms that are meant to police them seems sufficient. No real accountability from the financial crisis seems to show that...
Don't forget Bill Clinton's Community Reinvestment Act too. This lies squarely in his lap.
Glass-Steagall stands out, not in that they'd necessarily have gone to prison, but specific regulation likely could have softened the blow. I realize this is debated, but I wanted to counter the undercurrent of your post that the finance industry isn't working to undermine protective regulation for their own benefit, leaving us in a situation with very little pragmatic recourse for damages.
On the other hand, when you say "fared pretty well" do you mean insofar as "they didn't totally implode"? because at a glance every "bog standard bank" I'm pulling up #'s for over 06-08 did pretty terribly.
That all being said, I'll echo, I agree that glass-Steagall wouldn't have prevented the financial crisis; and potentially had minimal mitigating effect, but stand by my core thrust that it's a datapoint of consumer-serving regulation being overturned by the interested parties to leave us in a situation where instituting even stronger regulation that might impose criminal consequences is politically infeasible.
We repealed Glass-Steagall for the same reason we deregulated airline fares. It was part of a larger, mostly positive trend of deregulating major sectors of the economy. That really has nothing to do with whether there are criminal laws we could’ve instituted. Were we going to put people in jail for trying to combine a commercial bank with an investment bank? Were we going to put people in jail for shoddy underwriting of mortgages?
The fact that people always call for bankers to be jailed, but never specific bankers for specific conduct, is telling. When you’re talking about an anonymous our composite of an entire industry of people, it’s easy to project all the bad intent we consider necessary to prosecuting someone for a crime. It’s much harder when you’re talking about a specific person and his or her specific conduct. “We should send someone to jail because 35% of mortgages in this portfolio should’ve been valued this way if you used these different underwriting standards. No, he didn’t do the underwriting or tell anyone which standards to use. But he was higher on the org chart than the people who did!”
You're touting a narrative that distracts from the actual failure mode of these systems, repeatedly asking for the singular responsibility or legal culpability for the crisis, when that's not what I'm addressing.
My focus is instead on the systemic patterns that allow for these decisions to be made _without liability_. Of course no one person decided, "let's go out and screw over mortgage holders," there was simply no natural incentive to look too hard at if that was happening; and in a political situation wherein even basic protections can't be maintained, _of course_ there wouldn't be laws to assign personal liability.
It's funny that you bring up airline deregulation, as I consider that a wonderful example of exactly the pattern I'm citing. Although costs dropped, service quality followed alongside massive consolidation, soon accompanied by drops in employee pay and benefits, to the point that airlines now regularly file for bankruptcy and use that opportunity to further divest themselves of employee commitments while still giving massive bonuses to executives. (and similarly to the banks, in most of these cases _no one did anything illegal_)
Yet; there is still no hope of even re-instituting regulatory regimes, let alone punitive regimes. (look at recent airline behaviors in the news re: bumping and consumer abuses, and the extremely muted responses for examples of this. While that might not directly result from deregulation, it speaks towards an extremely un-empowered consumer base)
I would cap this rebuttal with a quote to directly shut down your assertion that deregulation has been "mostly positive", especially in light of your airline context, from the former CEO of American Airlines:
"The consequences of deregulation have been very adverse. Our airlines, once world leaders, are now laggards in every category, including fleet age, service quality and international reputation. Fewer and fewer flights are on time. Airport congestion has become a staple of late-night comedy shows. An even higher percentage of bags are lost or misplaced. Last-minute seats are harder and harder to find. Passenger complaints have skyrocketed. Airline service, by any standard, has become unacceptable."
To bring this ramble back to the point, I believe it's the wrong question to ask "what specific law did they break" when we've had a combination of conscious choice to trade worker and consumer protections for lower costs, and incentives aligned behind the powers that be to encourage that, such that even the most basic protections are non-existent, let alone a specific system of accountability.
Airline deregulation has been an unmitigated success for customers.
The only telling thing about is that the system is so incredibly opaque, and responsibility for harm is so diffused in it, that it's a criminal's dream.
What sort of redress should we seek for their reckless behaviour? Criminal convictions, debt forgiveness, nationalization. Not a single one of them took place. Just because the public was not directly being defrauded (even though plenty of actual fraud did take place), doesn't mean that we were not impacted by the fraud that was taking place.
Who was responsible for the Iraq war? Everyone was involved in the lies that lead up to it, but nobody - nobody has been held accountable. Does that mean that there wasn't a thing wrong with how the GOP dragged two countries into it? It's just an unfortunate accident that bad behaviour in bad faith brought about bad results, and we should throw our hands in the air and say: "Well, shucks! What an unfortunate accident! It would be terrible if we sought redress for it... Or changed the rules so that it wouldn't happen again."
> Do you have an example of a law you think should’ve been
> used to put people in prison that we didn’t pass because
> of lobbying?
It's not like there's some independent agency or submission process where people can submit completed bills, which'll only get picked up or not depending on special interests. So we could somehow review the difference between laws that got picked up and passed v.s. those who didn't as some check on corruption.
Rather, the laws don't get written to begin with if they don't align with special interests, that's how pervasive they are.
Then "annoying children in restaurants" or something equally absurd would be the #1 most requested law by that metric.
I was referring to laws that would actually get presented to the legislature to vote on, which the GP is proposing as some metric, but as I'm pointing out can't be used as such because the very fact that it's made it that far is a function of special interests, think tanks etc.
He didn't say anything about "being presented to the legislature." As you make clear, the actual legislative votes aren't really all that important compared to everything that comes before that point.
If you attempted to collate such a list you'd end up with an infinite amount of garbage, including but not limited to a proposed law that anyone suspected of wrongdoing be beheaded.
Asking for a specific example of when that has happened isn't rhetorical grandstanding, it's just asking for evidence to support a claim.
Writing laws is hard work.
The fact that the government had to come in, and the taxpayer took the hit, materially changes things in my view. That's when the bar needed to shift from civil to criminal.
I'd be happy if laws sat on the book and weren't enforced until just this sort of occasion arose, than the opposite, where we didn't have the laws and can't retrospectively enforce them.
So if Donald Trump has a mortgage on a penthouse apartment worth $25 million the government should have paid that off, but some family making $15,000/year that can't get a mortgage in the first place should get nothing? Pay off all the mortgages is a terrible idea.
If there's ever another bailout, they should heavily regulate the people who gain something from it. Not as a punitive measure, but more like a statement of good faith. "If you bought these homes, surely that meant you intended to live in them. So as a condition of the bailout you can't sell them for more than X or rent them for more than Y." It seems drastic, but I can't see many other ways to approach fairness in that situation.
But I don't think we've learned because people are still arguing over whether we should have just thrown the bankers in prison, like the system wouldn't just replace them with more bankers.
It's a terrible idea for a lot of different reasons. Above all because it isn't a good idea. It doesn't come out of any kind of problem solving or optimization logic, just "wouldn't be awesome if I didn't have a mortgage anymore".
> But I don't think we've learned because people are still arguing over whether we should have just thrown the bankers in prison, like the system wouldn't just replace them with more bankers.
People are influenced by fear as well as greed. Of course the system would just come up with more bank executives. We'd want it to. But those bank executives would have something more to fear than just an earlier retirement than they had hoped for. Their greed would push them in one direction and their fear in the other. Hopefully the two would balance out to something closer to the social optimum. At the very least we should expect it to be closer than when there's nothing to fear at all.
It also means rewarding fiscal irresponsibility as people who took 90-100% mortgages on big houses and could barely afford repayments are going to be rewarded while fiscally responsible people who were renting and maybe saving for a deposit down the line get nothing.
The idea that people should be rewarded for making poor choices / taking loans they cannot afford is really worrisome.
Yes it is far better to let the banks fail. Then the system replaces the bankers, with no cost to taxpayers!
If you can target tax breaks to wealthy and companies, you can target benefits to other groups.
If we are going to do wealth distribution why not start at the bottom and work our way up, instead starting in the middle and working our way up to the upper middle?
Sure, universal income and taxing the richest more, re-enacting glass-steagall is better I'm just saying in that situation it would have been more moral to just forgive mortgages than what we ended up doing.
If it's the former, what kind of message would that send to those of us who were responsible enough to avoid getting in over our heads?
Also, I specifically mentioned that some of the blame is on the buyers, so instead of free houses, they could be given the opportunity to continue paying off at the original terms, or a similar form of help. Remember that if the buyers don't get the houses in the end, the banks do instead. And why would we want that to happen?
That is a huge moral hazard. It is essentially same as giving 300k cheque to a selected part of population based on arbitrary logic. How can that be fair to do that? The only fair way to do it would be to just write a cheque for everybody. So all people get the same handout. Any other way is super discriminatory.
I understand that it's appealing for people with mortgages but you have to see how massively discriminatory and unfair that would be.
Wow, OK. Let's think this through a bit further. What effect on the housing market, to say nothing of civil society, would you expect if the government were to stop the music and pay off everyone's mortgages using everyone else's taxes?