RePortersNoteBook.com: STIGLITZ: We Have To Throw Bankers In Jail Or The Economy Won't Recover

Nov 6, 2010

STIGLITZ: We Have To Throw Bankers In Jail Or The Economy Won't Recover

STIGLITZ: We Have To Throw Bankers In Jail Or The Economy Won't Recover

Read more: http://www.businessinsider.com/nobel-economist-says-we-have-to-prosecute-fraud-or-else-the-economy-wont-recover-2010-11#ixzz14Y7YuEH4

ron sez: "It's about time.......I'm sick of hearing the phrase, "....moving forward...." The last thing we need to do is, "move forward." No, not at all. What we should be doing is throwing it in PARK and setting up camp for a long, long series of investigations and prosecutions. War Crimes Trials and corporate criminal roundups.

As economists such as William Black and James Galbraith have repeatedly said, we cannot solve the economic crisis unless we throw the criminals who committed fraud in jail.

And Nobel prize winning economist George Akerlof has demonstrated that failure to punish white collar criminals – and instead bailing them out- creates incentives for more economic crimes and further destruction of the economy in the future. See this, this and this.

Nobel prize winning economist Joseph Stiglitz just agreed. As Stiglitz told Yahoo's Daily Finance on October 20th:

This is a really important point to understand from the point of view of our society. The legal system is supposed to be the codification of our norms and beliefs, things that we need to make our system work. If the legal system is seen as exploitative, then confidence in our whole system starts eroding. And that's really the problem that's going on.

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A lot of the predatory practices in automobile loans are going to be able to be continued. Why is it OK to engage in bad lending in automobiles and not in the mortgage market? Is there any principle? We all know the answer to that. No, there's no principle. It's money. It's campaign contributions, lobbying, revolving door, all of those kinds of things

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The system is designed to actually encourage that kind of thing, even with the fines [referring to former Countrywide CEO Angelo Mozillo, who recently paid tens of millions of dollars in fines, a small fraction of what he actually earned, because he earned hundreds of millions.].

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I know so many people who say it's an outrage that we had more accountability in the '80's with the S&L crisis than we are having today. Yeah, we fine them, and what is the big lesson? Behave badly, and the government might take 5% or 10% of what you got in your ill-gotten gains, but you're still sitting home pretty with your several hundred million dollars that you have left over after paying fines that look very large by ordinary standards but look small compared to the amount that you've been able to cash in.

So the system is set so that even if you're caught, the penalty is just a small number relative to what you walk home with.

The fine is just a cost of doing business. It's like a parking fine. Sometimes you make a decision to park knowing that you might get a fine because going around the corner to the parking lot takes you too much time.