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Another Nobel Economist Says We Have to Prosecute Fraud Or Else the Economy Won't Recover
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.***
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
***
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.].***
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.***
I
think we ought to go do what we did in the S&L [crisis] and
actually put many of these guys in prison. Absolutely. These are not
just white-collar crimes or little accidents. There were victims. That's
the point. There were victims all over the world.***
So
do we have any confidence that these guys who got us into the mess
have really changed their minds? Actually we have pretty [good]
confidence that they have not. I've seen some speeches where they said,
"Nothing was really wrong. We didn't get things quite right. But our
understanding of the issues is pretty sound." If they think that, then
we really are in a sorry mess.***
There are many aspects of [deterring people from committing crime]. Economists focus on the whole notion of incentives.
People have an incentive sometimes to behave badly, because they can
make more money if they can cheat. If our economic system is going to
work then we have to make sure that what they gain when they cheat is
offset by a system of penalties.And that's why, for
instance, in our antitrust law, we often don't catch people when they
behave badly, but when we do we say there are treble
damages. You pay three times the amount of the damage that you do.
That's a strong deterrent. Unfortunately, what we've been doing now, and
more recently in these financial crimes, is settling for fractions –
fractions! – of the direct damage, and even a smaller fraction of the
total societal damage. That is to say, the financial sector
really brought down the global economy and if you include all of that
collateral damage, it's really already in the trillions of dollars.But
there's a broader sense of collateral damage that I think that has not
really been taken on board. And that is confidence in our legal
system, in our rule of law, in our system of justice.
When you say the Pledge of Allegiance you say, with "justice for all."
People aren't sure that we have justice for all. Somebody is caught for
a minor drug offense, they are sent to prison for a very long time. And yet, these so-called white-collar crimes, which are not victimless, almost none of these guys, almost none of them, go to prison.
***Let
me give you another example of where the legal system has gotten very
much out of whack, and which contributed to the financial crisis.In
2005, we passed a bankruptcy reform. It was a reform pushed by the
banks. It was designed to allow them to make bad loans to people to who
didn't understand what was going on, and then basically choke them.
Squeeze them dry. And we should have called it, "the new indentured
servitude law." Because that's what it did.Let me just tell you
how bad it is. I don't think Americans understand how bad it is. It
becomes really very difficult for individuals to discharge their debt.
The basic principle in the past in America was people should have the
right for a fresh start. People make mistakes. Especially when
they're preyed upon. And so you should be able to start afresh again.
Get a clean slate. Pay what you can and start again. Now if you do it
over and over again that's a different thing. But at least when there
are these lenders preying on you should be able to get a fresh start.But they [the banks] said, "No, no, you can't discharge your debt," or you can't discharge it very easily.
***
This is indentured servitude.
And we criticize other countries for having indentured servitude of
this kind, bonded labor. But in America we instituted this in 2005 with
almost no discussion of the consequences. But what it did was
encourage the banks to engage in even worse lending practices.***
The
banks want to pretend that they did not make bad loans. They don't
want to come into reality. The fact that they were very instrumental in
changing the accounting standards, so that loans that are impaired
where people are not paying back what they owe, are treated as if they
are just as good as a well-performing mortgage.So the
whole strategy of the banks has been to hide the losses, muddle through
and get the government to keep interest rates really low.***
The result of this is, as long as we keep up this strategy, it's going to be a long time before the economy recovers ....
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As a DOJ retiree there is an old institutional saying that is quite appropriate with respect to the Director, AG and the rest of these so called law enforcement officials.
Once a cock sucker, always a cock sucker.
And some folks still wonder why those who are actually loyal to the institution find themselves as the hunted of a system that now only knows lawful plunder.
The one thing good old Mr. Myerson got nearly right in Hopscotch..
FBI = Fucking Ballbusting Imbeciles
Should read
FBI = Fucking Ballkissing Imbeciles
Bingo !
The myth of the rule of law...
http://faculty.msb.edu/hasnasj/GTWebSite/MythWeb.htm
Culture of corruption
Start and end with Bernanke.
Why would it end with Bernanke? I think the number would be in the thousands, if not tens of thousands.
For Bernizzle, I would be willing to make an exception to double jeopardy.
PRISON TIME is the only thing that will deter these crooks. Fines that are a tiny fraction of the fraudulent profit do nothing and, if the business venture is not defunct, will simply be passed along to the customers anyway.
No, the only thing that will have any effect would be taking them away from their pleasures of spending/accumulating money and putting them in a prison cell. And that's exactly what we're NOT seeing.
even better, in a prison cell with Bubba, who's real horny....
We need a new PPT. Puppet Protection Team -- administered by the state AG's as a group to have full investigative powers over any and all federal and regulatory entities -- make sure they serve the common good. We need some white blood cells to clear this crap.
“Another Nobel Economist Says We Have to Prosecute Fraud Or Else the Economy Won’t Recover”
Not only won’t the economy recover… but neither will an already creaky legal system…
and you can kiss social cohesion good-bye.
P.S. It doesn’t take a degree in economics to see this.
The entrenchment of bias in the legal system is long-standing but only now becoming endemic, flagrant and readily apparent to all. That this isn’t recognized by ‘the elite’ is only more reason for their removal.
P.P.S. People DON’T expect equal wealth distribution… especially when they see a person’s wealth connected to his/her own efforts and innovations that benefit all (this is the Adam Smith vision)… however when they come to understand that inequality is connected to corruption and deceit on a massive scale… well then you can expect trouble.
The wealth of a society is a product of its NET social energy*…
*social energy: individual and collective decisions operating within the limits of available resources and natural law which (quite literally) result in the product you see as a civilization.
A decision here is defined as an idea + an action. Decisions can be motivated by any number of factors. Technologies are the products of previous decisions thus becoming available resources. And decision here is defined broadly… everything from “Let’s build a pyramid for the pharoah!” to “I’ve got a headache I think I’ll lie down.”
All we see that is a civilization can be most fundamentally defined as a product of decisions: ideas + actions.
Political and economic systems are ‘decision technologies’…
Money, therefore can be seen as a store of decision rights… but it does this job VERY imperfectly and with subtly pernicious effect over time… even with the best of intentions.
Credit Creation and the Building of Sustainable Economic Ecologies
http://culturalengineer.blogspot.com/2010/02/credit-creation-and-building-of.html
No justice! No peace!… isn’t just an incendiary statement… its an AXIOM.
“A Citizen’s responsibility in an area is directly proportional to his or her ability to have an effect. Without improvement in mechanisms of meaningful involvement, we will see a continued growth in apathy, frustration and ultimately a resort to less healthy forms of expression.”
Stiglitz did not just wake-up. He and his hi-IQ brethren have actively and so cleverly suppressed their own awareness...because it was beneficial in $ and status and medals.
Righteousness exists in many false starts and then only in degrees. False prophets persist and flourish because their credibility is manufactured and disseminated by the false reports of co-opted media.
Fairness? Justice? In a system managed by co-opted strawmen like Holder?
Stiglitz for Treasury Secretary while Timmy and Hank go to jail
"The entrenchment of bias in the legal system is long-standing but only now becoming endemic, flagrant and readily apparent to all. That this isn’t recognized by ‘the elite’ is only more reason for their removal" -
- very good, CE. Actually, quite contrary to the "liberty, freedom, & justice" themes we are taught in school, America has always been a class ridden, inequitable society - especially in regards to race.
America was founded not in freedom, but in slavery: forget Mel Gibson's character promising "freedom" to slaves fighting against the Brits in the Hollywood movie, "The Patriot," the truth is, slavery EXPANDED in the American South after the Revolution (although it did decline in the North - Alexander Hamilton's New York in-laws owned slaves during the Revolution years) - the entire Southern economy was DEPENDENT on SLAVERY, and 12 of the first 15 U.S. presidents WERE SLAVE OWNERS !!
The case of Lincoln's father having to either join the slave-owning plantation lords at their own game, or flee to free state Illinois, is a good example of what is happening in our current, rigged economy, when small investors try to compete against the TBTF banksters with their DUAL spigots access to "FREE MONEY" NEAR ZERO interest rate Fed dollars" (Fed "fiat money") - much less the "free money on steroids" of taxpayer extorted bailouts.
If you are a big player, There is NO inducement to run a honest trade, when you will be steamrolled by market riggers if you try.
i enjoyed that and learned something! thanks for taking the time.
(something that Southernerns tend to forget when they complain about "Northern Agression" during the Civil War)
Don't know if that was a slam on the South or not...it was so heavily nuanced by illiterate asinine doctrinaire us poor ole country boy's cain't qat pik up onit.
If it was...
Robert E Lee captured a fanatical mass murderer and his followers at Harpers Ferry. Was this a good thing or a bad thing?
The Black Codes of the North...good or bad? POW camps in NY, Illinois etc. (the North) where clothing, food & medicine were plentiful yet thousands died...good or bad?
If you are going to bend space, time and circumstance in some race baiting rant you better have your shit right or else you get called on it here at ZH.
Maybe you can splain to the collective mass of intelligence here how it is that there were free black plantation owners...hmmm ace?
Ah do believe a've got da vapors...do impress me with your historical knowledge on the subject at hand that you brought up befo I faint dead away ;-)
ha, ha. +1
don't take no shit, rebel. love it!
http://www.youtube.com/watch?v=Hvf8r3cX3vo
"don't take no shit, rebel. love it!"
Damn straight chopper.
I get so sick and tired of socialist international posters throwing this shit up to cause dissension here...and the U.S. leftists thinking they are so fucking smart because they were indoctrinated by a leftist professor to think all "whites" are bad so they carry a friggin millstone around their neck for life...and just plain lazy suburban turds splashing into the toilet of Wikipedia for information before they go upstairs to mommy and supper.
I think that worked for the toilet stain ;-)
Their entire world view would be turned upside down if they just read the Emancipation Proclamation in it's entirety...and understood what it actually said...ya know...except for's and exemptions.
Or if they knew that blacks, Indian's etc. served on N.B.Forrest's personal bodyguard escort.
Idiots.
good stuff. love your posts. glad nothing is one-sided here against the "hillbilly country white folk", of which I am one. although I do speak 'city virmen' in my efforts to infiltrate the enemy camp. safe.
Book 'em Danno?
Whoa... fat...