Comment by wattsbaat | Hacker News Reader

Comment by wattsbaat | Hacker News Reader

The article makes a good point. There have been no trials (let alone convictions) of bank executives because they probably did not violate any actual laws. Reckless financial risk-taking on the part of private firms is not illegal. Sure, there were clear instances of fraud and predatory loaning by more minor players, but the guys at the top of the food chain are most likely not guilty of any specifiable crimes.

But if the overwhelming majority of US citizens do in fact believe that the actions of the bank executives should be illegal, the logical thing to do would be to change the laws. (Of course, this solution is a bit unsatisfying, since no one can accurately predict these major market collapses and the next major crisis will likely be different enough that it could very well fall outside scope of any new laws.)

Sidenote: Unfortunately, the recent conviction of Raj Rajaratnam will probably assuage public anger while not at all addressing this issue. From what I understand, he was found guilty of insider trading, which is more or less unrelated to the mortgage-bubble/financial-crisis.

The article confuses two related but separate questions. The first is who caused the collapse. The second is whether or not they did something illegal. On the first point, the article claims the banks are "not guilty", which isn't really true. They're excessive risk-taking did cause the collapse. That doesn't mean it was necessarily illegal, just that they are "guilty" of causing the collapse. But just because the causes weren't illegal doesn't mean that they didn't commit fraud along the way. The collapse revealed the fraud that had been going on, and while it didn't cause the collapse, it made it worse.

Ultimately, it doesn't even matter whether there was a collapse or not. The fundamental point of people like Ferguson is that we now know of a number of illegal acts which took place before and during the collapse, yet those have not been properly prosecuted, and that's a problem.

Thanks for highlighting that distinction. I guess we can chalk up the lack of prosecution for actual fraud to the incredible power the investment banks have over the political process (i.e. lobbyists, campaign funding, regulatory capture, etc). I watched Inside Job a while ago and details are starting to blur together. (I just remember everyone looking really bad.) Perhaps it's time for a second watch.

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