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This suggestion keeps popping up as though 'do nothing' and 'destroy some randomly selected lives, at additional cost to society, by way of revenge' were an exh

This suggestion keeps popping up as though 'do nothing' and 'destroy some randomly selected lives, at additional cost to society, by way of revenge' were an exhaustive list of options. I think a much more constructive response would be to claw back all the bonuses the bankers were awarded in the years leading up to the crash. If the losses must be socialized, the gains should not stay privatized.

junkscience2017 9y ago
why stop at bankers? millions of Americans flipped homes, took out loans to buy baubles and then benefited when their loan papers became lost in the resulting chaos...and almost everyone knew damn well what they were doing the government CHOSE to bail it all out, and they will probably be doing something similar one day for Uber, Bitcoin and maybe even Tesla. we have CHOSEN the bubble/bailout cycle
- Zigurd 9y ago
  You can't sink a big investment bank with bad mortgages. not even securitized bad mortgages. Not even corruptly rated bad mortgage securities (and we are already far from the retail borrower's culpability). To blow up the global banking system, you need a cascading set of bets that goes bad and creates orders of magnitude more counterparty risk than retail lending could possibly create.
  - chrisbennet 9y ago
    I don't think most people realize that i.e. it wasn't the mortgages themselves that caused the crises - it was the wall street's bets on the mortgages that made things blow up.
  - sseveran 9y ago
    What you need is any pool of securities that is devalued by more than the capital base of the company. It was the way that the post partnership, publicly traded investment banks were financed that ultimately led to their collapse. When you borrow short and lend long with 30X leverage you can never have a serious market correction. Otherwise your counterparties get nervous and their refusing to continue to lend becomes a self fulfilling prophecy. Its not the first time we have seen this and it won't be the last.
  - marcosdumay 9y ago
    Of course you can. Your government simply takes it from its owners, without compensation and personally billing them any fine for fraud or whatever. Then it auctions a zero asset version of the bank, and pays for the rest of any protected debit.
yequalsx 9y ago
Overall I agree with your sentiment about the options not being either of two extremes. In the case of bankers and financiers who seemingly engaged in fraud on a grand scale it’s about the idea that justice should in some sense be blind with regard to the amount of money you have. There are lots of cases where people steal things on the order of a $1000 going to jail for lengthy periods of time. The anger about the lack of prosecutions for bankers, at least in part, is the frustration that comes from realizing things aren’t right in the U.S. The justice system works very differently for the 1% than for everyone else. I think with growing inequality comes growing anger and resentment.
- eadmund 9y ago
  > There are lots of cases where people steal things on the order of a $1000 going to jail for lengthy periods of time … The anger about the lack of prosecutions for bankers, at least in part, is the frustration that comes from realizing things aren’t right in the U.S. The thing is, it's very much not clear that they did anything actually illegal. In that sense, not throwing them in gaol for not violating the law is exactly how the justice system is supposed to work, for the rich and the poor alike.
- mikeash 9y ago
  Last year I got kicked off a jury for (they don’t say why, but I’m pretty sure) saying I couldn’t possibly consider a 20-year sentence for the crime of receiving stolen property worth $500 or more.
  - somecontext 9y ago
    In case anyone is curious, Virginia Code 18.2-108 states that "If any person buys or receives from another person, or aids in concealing, any stolen goods or other thing, knowing the same to have been stolen, he shall be deemed guilty of larceny thereof" and the following section states "Any person who commits larceny of property with a value of $200 or more with the intent to sell or distribute such property is guilty of a felony punishable by confinement in a state correctional facility for not less than two years nor more than 20 years". https://law.lis.virginia.gov/vacode/title18.2/chapter5/section18.2-108/ https://law.lis.virginia.gov/vacode/title18.2/chapter5/secti...
smallnamespace 9y ago
Clawbacks sound good in theory, but there's one giant barrier: the legal system and due process. To justify taking away someone's bonuses, you still have to accuse them of some sort of wrongdoing and malfeasance, and then prove it. The barrier is lower (preponderance of evidence vs. no reasonable doubt), but the same basic question remains: what do you charge them with, and can you prove it? Note that bonus clawbacks were instituted at many banks after the crisis, but they weren't in place before then. I just want to note that many bankers did lose their jobs and their life savings in the crisis themselves. A lot of bankers had much of their savings (unwisely) in their own company stock. Everyone at Bear, Lehman, MF Financial, and a bunch of other places found themselves out of a job and often out of much of their wealth at the same time. Most of these weren't people greedily rubbing two coins together while thinking of how to screw the American people -- they were people who deluded themselves and thought their money machines stable and impregnable and never thought they would blow up.
- lowbloodsugar 9y ago
  Taxes.
  - twoodfin 9y ago
    If Congress tried to restructure what would otherwise be a taking in the form of a retroactive tax on past earnings, I suspect the Federal courts would see right through it.
- 1024core 9y ago
  > Clawbacks sound good in theory, but there's one giant barrier: the legal system and due process. You haven't heard of "Civil Asset Forfeiture" ? Where's the "due process" there??
  - twblalock 9y ago
    Are you arguing that such a lack of due process should be extended to other areas of law? If you think civil asset forfeiture is wrong, the solution is to get rid of it, not to create more wrongness in other places.
enraged_camel 9y ago
>>This suggestion keeps popping up as though 'do nothing' and 'destroy some randomly selected lives' "Randomly selected"? Not sure what you mean by that. We know which companies acted in shady ways. I mean sure, there was no way to trace wrongdoings to specific individuals. But that's OK. C-level executives make tens of millions of dollars every year. In return, they must carry the burden of responsibility when their underlings do shady shit. Gotta earn all that money, you know?
- twblalock 9y ago
  I don't see why any smart person would want to be a CEO when they could go to jail when one of their employees, who they may have never met or even heard of, committed a crime. More broadly, it's wrong to punish people for wrongdoing that they did not commit. That kind of thing should not happen in a free society.

junkscience2017 9y ago

why stop at bankers? millions of Americans flipped homes, took out loans to buy baubles and then benefited when their loan papers became lost in the resulting chaos...and almost everyone knew damn well what they were doing the government CHOSE to bail it all out, and they will probably be doing something similar one day for Uber, Bitcoin and maybe even Tesla. we have CHOSEN the bubble/bailout cycle

Zigurd 9y ago
You can't sink a big investment bank with bad mortgages. not even securitized bad mortgages. Not even corruptly rated bad mortgage securities (and we are already far from the retail borrower's culpability). To blow up the global banking system, you need a cascading set of bets that goes bad and creates orders of magnitude more counterparty risk than retail lending could possibly create.
- chrisbennet 9y ago
  I don't think most people realize that i.e. it wasn't the mortgages themselves that caused the crises - it was the wall street's bets on the mortgages that made things blow up.
- sseveran 9y ago
  What you need is any pool of securities that is devalued by more than the capital base of the company. It was the way that the post partnership, publicly traded investment banks were financed that ultimately led to their collapse. When you borrow short and lend long with 30X leverage you can never have a serious market correction. Otherwise your counterparties get nervous and their refusing to continue to lend becomes a self fulfilling prophecy. Its not the first time we have seen this and it won't be the last.
- marcosdumay 9y ago
  Of course you can. Your government simply takes it from its owners, without compensation and personally billing them any fine for fraud or whatever. Then it auctions a zero asset version of the bank, and pays for the rest of any protected debit.

yequalsx 9y ago

Overall I agree with your sentiment about the options not being either of two extremes. In the case of bankers and financiers who seemingly engaged in fraud on a grand scale it’s about the idea that justice should in some sense be blind with regard to the amount of money you have. There are lots of cases where people steal things on the order of a $1000 going to jail for lengthy periods of time. The anger about the lack of prosecutions for bankers, at least in part, is the frustration that comes from realizing things aren’t right in the U.S. The justice system works very differently for the 1% than for everyone else. I think with growing inequality comes growing anger and resentment.

eadmund 9y ago
> There are lots of cases where people steal things on the order of a $1000 going to jail for lengthy periods of time … The anger about the lack of prosecutions for bankers, at least in part, is the frustration that comes from realizing things aren’t right in the U.S. The thing is, it's very much not clear that they did anything actually illegal. In that sense, not throwing them in gaol for not violating the law is exactly how the justice system is supposed to work, for the rich and the poor alike.
mikeash 9y ago
Last year I got kicked off a jury for (they don’t say why, but I’m pretty sure) saying I couldn’t possibly consider a 20-year sentence for the crime of receiving stolen property worth $500 or more.
- somecontext 9y ago
  In case anyone is curious, Virginia Code 18.2-108 states that "If any person buys or receives from another person, or aids in concealing, any stolen goods or other thing, knowing the same to have been stolen, he shall be deemed guilty of larceny thereof" and the following section states "Any person who commits larceny of property with a value of $200 or more with the intent to sell or distribute such property is guilty of a felony punishable by confinement in a state correctional facility for not less than two years nor more than 20 years". https://law.lis.virginia.gov/vacode/title18.2/chapter5/section18.2-108/ https://law.lis.virginia.gov/vacode/title18.2/chapter5/secti...

smallnamespace 9y ago

Clawbacks sound good in theory, but there's one giant barrier: the legal system and due process. To justify taking away someone's bonuses, you still have to accuse them of some sort of wrongdoing and malfeasance, and then prove it. The barrier is lower (preponderance of evidence vs. no reasonable doubt), but the same basic question remains: what do you charge them with, and can you prove it? Note that bonus clawbacks were instituted at many banks after the crisis, but they weren't in place before then. I just want to note that many bankers did lose their jobs and their life savings in the crisis themselves. A lot of bankers had much of their savings (unwisely) in their own company stock. Everyone at Bear, Lehman, MF Financial, and a bunch of other places found themselves out of a job and often out of much of their wealth at the same time. Most of these weren't people greedily rubbing two coins together while thinking of how to screw the American people -- they were people who deluded themselves and thought their money machines stable and impregnable and never thought they would blow up.

lowbloodsugar 9y ago
Taxes.
- twoodfin 9y ago
  If Congress tried to restructure what would otherwise be a taking in the form of a retroactive tax on past earnings, I suspect the Federal courts would see right through it.
1024core 9y ago
> Clawbacks sound good in theory, but there's one giant barrier: the legal system and due process. You haven't heard of "Civil Asset Forfeiture" ? Where's the "due process" there??
- twblalock 9y ago
  Are you arguing that such a lack of due process should be extended to other areas of law? If you think civil asset forfeiture is wrong, the solution is to get rid of it, not to create more wrongness in other places.

enraged_camel 9y ago

>>This suggestion keeps popping up as though 'do nothing' and 'destroy some randomly selected lives' "Randomly selected"? Not sure what you mean by that. We know which companies acted in shady ways. I mean sure, there was no way to trace wrongdoings to specific individuals. But that's OK. C-level executives make tens of millions of dollars every year. In return, they must carry the burden of responsibility when their underlings do shady shit. Gotta earn all that money, you know?

twblalock 9y ago
I don't see why any smart person would want to be a CEO when they could go to jail when one of their employees, who they may have never met or even heard of, committed a crime. More broadly, it's wrong to punish people for wrongdoing that they did not commit. That kind of thing should not happen in a free society.