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You make it sound like it's just a few crooks at Citi and BofA. I believe unfettered from regulations, transparency and oversight, this is what capitalism devolves to. I'm a liberal, but I hate too much regulation. I do think, however, the pendulum has swung very far in the lack of the features I mentioned above.

The US is definitely in a weird place. On the one hand, financial deregulation allowed the greed on Wall St to cause the 2008 global meltdown, and no real regulations have been put (back) in place to stop the next one. But, on the other hand, we have the government regulating things like the size of sugary drinks.

The trend seems to be this: more regulation on people and less on corporations. That is a disturbing trend, for sure. Unfortunately, even though I'm a liberal, I feel that neither party will make this better in the short or long term.

You make it sound like it's just a few crooks at Citi and BofA.

No, but by the same token, it's hardly the case that all business leaders in a capitalist society are crooks. This is just particularly galling because it's so blatant and because they're basically saying "yeah, we're guilty" and still no one is being punished.

I believe unfettered from regulations, transparency and oversight, this is what capitalism devolves to.

But we're not in a system that's unfettered from regulations, transparency and oversight. At least not in the sense that we don't have a "government" that purports to provide those things. But the current system obviously doesn't work, so I'm not sure how more government, bureaucracy, rules, regulations, etc. are going to fix anything, when it's clear that certain groups that break the law with (near) impunity.

I'm a liberal, but I hate too much regulation. I do think, however, the pendulum has swung very far in the lack of the features I mentioned above.

I think lack of enforcement (which I attribute to cronyism and corruption) are more then problem than lack of rules, and laws, and regulations. This is one (but not the only) reason I am so skeptical of government, because the more power you grant it, the more there seems to be temptation for it to devolve, along with the "titans of industry", into this quasi-fascist, corrupt, cronyist system. sigh

Times like these, I tend to think it almost doesn't matter what political ideology one believes in... you almost just have to accept that the system is always going to decay and become corrupt eventually, and you just have to scrap the whole thing, throw it out and start over.

But we're not in a system that's unfettered from regulations, transparency and oversight.

But we've cross a line. On this side of the line, we are in grave risk of the type of thing that happened in 2008.

I phrased it in a black and white way, but this type of thing is never black and white. It's a continuum and as I said, we're too far to one side right now, for the corporate side of things.

> But we're not in a system that's unfettered from regulations, transparency and oversight. At least not in the sense that we don't have a "government" that purports to provide those things. But the current system obviously doesn't work, so I'm not sure how more government, bureaucracy, rules, regulations, etc. are going to fix anything, when it's clear that certain groups that break the law with (near) impunity.

They break the law with impunity because prosecutors know that, due to out of date and/or weakly stated rules and legislation, they would never get a conviction - an indictment and trial would waste everyone's time, money, and reputation. Because the laws are still not worded well enough to overlap perfectly with the crimes being committed. Hence more legislation and rules.

Regulation wasn't about putting people in jail: it was about requirements for stock listings and access to federal money. That's a far more significant deterrent when all the company cares about is cash.

Regulations worked: it was when we unravelled existing regulation that things went belly up in almost exactly the same way they had gone belly-up the time before, inspiring the regulation in the first place. Cause-and-effect are a bitch sometimes.

Well, you could just fund some of the arms better, re-instate glass steagal, and then reduce the amount of funding corporations can put into elections. That would at least lead to some reduction in the ability of money to influence things.

But it's still a horrendously complex thing to do, a revolution doesn't really do much other than bring the complexity level down for a while till all the lessons are learned again and the same problems resurface with new actors.

It's worth pointing out that the market already put Citi out of business, but government stepped in and rewarded them for fraud and interfered with the market. Citigroup was insolvent in November 2008, even after receiving $25 billion in federal TARP funds.

I find it puzzling that you support more government involvement despite government directly funding a company you consider fraudulent.

Because I want a continually functioning economy more than I want to punish Citi? Systematic risk is real, and should be managed on a system-wide level.

In my ideal fantasy world, it is managed with some version of chaos monkey that randomly kills companies to see if the economy crashes ;-)

Capitalism does not inherently entail accepting fraud like this, but every time these asshats get away with this kind of behavior, it reinforces all the negative images that people have about capitalism.

Isn't this more a case of state capitalism, or corporate capitalism, or just plain corporatism?

I keep seeing the word "capitalism" used but rarely with any assigned definition, as if there were but one universal and agreed-upon meaning.

Me, I see these kinds of shenanigans more as an indictment of mixed economies and statism.

Because y'know, fraud _never_ happens in command economies or totalitarian states.

This is human nature and has to do with the culture of lrage organisations, and has nothing whatever to do with capitalism per se.

They do get prosecuted. Except they carry so much legal firepower, and then hide behind complexity at a level where the govt. has to consider which cases to go after.

See the sec going after goldman for example.

Further, the govt in many cases has been co-opted or convinced that should they go after these guys, the economy would collapse. I believe the state wide cases against the mortgage companies foreclosure mills was a close example.

I don't have the details on the tip of my fingers anymore, but in essence the mills were getting sued in every state, and were negotiating.. Perhaps to get the suits bundled together I think. At which point they introduced a clause which stated that they would not be sued for anything else after this case, on this matter.

Essentially protecting them from further prosecution/investigation. If it weren't for a handful of DAs who said no, particularly the NY DA office, it would have passed.

And then there's regulatory capture and resources being reduced to investigative bodies.

I used to follow this mess for a while, and there are a lot of prosecutions and maneuvers and counter maneuvers going on.

If you are wondering why they aren't being sued I suggest doing some research, rollingstone alone will have some great articles, and if you would like the big picture blog, carries some old articles, and is always tracking the crap the finance industry is pulling.

There is a lot going on - make no mistake. It's just that the govt really is the underdog, and is sadly the first one to get bashed on HN.

In a corporate case it's hard--both legally and practically--to pinpoint someone of guilty mind performing guilty acts beyond reasonable doubt. That's why the corporation is a "legal person" that can itself be legally responsible for stuff and get sued: corporate personhood arose partially as a solution to this problem. This has borne out in legal practice, where even when there's obvious blood in the water, prosecutors have trouble convicting all but a few top guys.

Anyway, I also find your profanity-laden vitrol unbecoming of discussion on this site.

EDIT: I guess it's now considered a sin to state an easily-verifiable truth and ask for polite discourse.

Technically a corporation is a person, is it not? What if we tried to send the corporation to jail instead? =)

> In a corporate case it's hard--both legally and practically--to pinpoint someone of guilty mind performing guilty acts beyond reasonable doubt.

What? We solved this problem a long time ago. Corporations are beneficial because they provide liability protection to the employees. That's it.

In the case of fraud, we decided the corporate veil should be lifted.

So all you have to do is go through each individual in the corporation, see what laws they broke, and go after them. It's very straightforward.

The problems occur when the corporations received ungodly amounts of money from the government, when a government "appoints" individuals to positions within the corporation, and when there's quite a bit of collusion between the corporate entity and the government.

At that point, the government has very little incentive to prosecute and the corporate entity has even more incentive to commit fraud.

"Limited liability" and "corporate veil" refer to shareholder protection, not employee protection. Traditionally shareholders, not employees, were on the hook for lawbreaking.

Anyway, you say something like "go through each individual in the corporation, see what laws they broke, and go after them" as though it's easy. In practice prosecutors have a hard time doing this even when they want to for the reasons I just said. Some of the Enron guys were acquitted by a jury, for example.

That's why the corporation is a "legal person" that can itself be legally responsible for stuff and get sued: corporate personhood arose partially as a solution to this problem.

Yes, which should lead one to question whether or not a State created legal fiction like a "corporation" should exist to protect individuals from responsibility for their actions.

Anyway, I also find your profanity-laden vitrol unbecoming of discussion on this site.

That's too bad, but I'm not changing the way I go about things. If pg were to post and say "profanity is no longer allowed here," then I'd have a decision to make, but otherwise, I choose my words to suit the situation at hand and to suit my personality.

You'll have to excuse my ignorance on politics/government, but under a more libertarian/less government rule who is it that prevents this type of situation from occurring? That is, who ensures that sophisticated financial fraud does not occur? Assuming a small government, would it just be individual whistle blowers up against corporations in court?

Surely these guys were perfect anarcho-capitalists. They bowed to no system of external rule, while making as much money as possible.

Surely these guys were perfect anarcho-capitalists.

No, being an An-Cap does not necessarily mean a "profit at all costs mentality." Anarcho-Capitalism, as an ideology, embraces the idea of private property rights, enforcement of contracts, and rejects fraud as a mechanism for achieving one's ends.

Some of these crooks may have chosen the An-Cap label for themselves, but I damn sure don't claim them, FWIW. And neither do most of the other An-Caps I know.

How do you get private property and contract enforcement without laws and law enforcement?

Guns, pitchforks, lynch mobs, Wild West type shit, no? (I don't want that.)

Guns, pitchforks, lynch mobs, Wild West type shit, no? (I don't want that.)

It sounds like you've already made up your mind that it could only be that way, but see my response above if you are actually interested in some more considered discussion of the topic.

I'll just say that I have at least as much faith that people can voluntarily and peacefully reach a workable agreement without using a construct like "The State" as I am that they can do so by using such a construct. In either case, human nature is the ultimate limiting factor.. the State will never be more morally pure, or have more of conscience, etc., than the people who constitute it, IMO.

I don't really have the time or space to right a book here, and - to be quite honest - there are people who are much better equipped to answer those questions than I am. If you're honestly curious, and not just asking that in a sarcastic fashion, I'd suggest a few resources to learn more about the AnCap / libertarian approach:

http://en.wikipedia.org/wiki/Anarcho-capitalism

http://www.mises.org

http://en.wikipedia.org/wiki/Murray_Rothbard

http://www.lewrockwell.com/

http://www.ozarkia.net/bill/anarchism/faq.html

http://www.anti-state.com/

Do you have a very concise source that will answer the most immediate stumbling block to even considering this idea: how will you enforce contracts? Every time I ask I either get pointed to web sites that probably answer my question somewhere (but I'm not the one selling anything here so I don't feel the onus to do most of the work) or told about private contract enforcement agencies. Since the bulk of what government is is violent force or threat thereof, wouldn't this just be privatized rent-a-governments?

I think one of the links mindcrime provided attempts to answer that question briefly: http://www.ozarkia.net/bill/anarchism/faq.html#part16

However, I don't feel it does a very good job. It basically devolves into private security provided a la mafia protection money or what's been seen in Sao Paolo / Rio de Janeiro with the cops enforcing payments from the populace for keeping the riff-raff out, while running their own schemes. Likewise, I can very much see the whole law system being subverted to benefit those providing the most cases (thus helping the bottom line) or benefiting a certain plaintiff over another, like with the eastern district of Texas handling so many patent cases.

Overall, the response seems incredibly wishy-washy with little thought paid to the ways the system can be significantly subverted.

They took on immense risk in order to squeeze all the profit they could out of the system.... but faced no consequences as a result of losing on their bets. $45 billion in two installments kept them afloat.

Wouldn't a anarcho-capitalist demand that a market loser like Citi pay the price?

Citigroup was insolvent. They didn't survive in the market. It was the government that continued their existence.

This is completely without context. I mean I hate to be defending the govt. but at the time, they basically were told, "give us cash or the world burns."

This by the same guys who helped slowly get all the checks and balances to prevent precisely their behavior, removed.

It was the government that continued the existence of a terrible system because the most vulnerable were held hostage by the financial institutions. Which are now once again slowly fighting to get their rules re instated.