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Stigletz isn't suggested we should punish failure with prison. He is saying the penalties need to be enough to discourage deceptive practices that encourage cor

by lotusleaf1987 16y ago

Stigletz isn't suggested we should punish failure with prison. He is saying the penalties need to be enough to discourage deceptive practices that encourage corporations to break the law because that's what's best for business: "the financial industry was engaged in predatory lending practices, deceptive practices. They were optimizing not on producing mortgages that were good for the American families but in maximizing fees." Meanwhile, stock-based compensation created further skewed incentives by encouraging executives to pursue short-term stock gains at the expense of long-term corporate sustainablity, Stiglitz said, and in some cases encouraged them to deceive their own shareholders." We're not talking about punishing failure, we're talking about punishing crime: Stiglitz explained, the system of penalties generally meant a small fine relative to the full ill-gotten gains, often in the hundreds of millions of dollars.

jacoblyles 16y ago
"Predatory lending" is a bit of a bullshit term. Not all borrowers were victims. Along with everybody else they were gambling that housing prices would only go up. A person signing a contract for a no-doc interest only 95% mortgage in 2004 knows what they are getting into. It's not like they were tricked into it by some evil banker.
- Confusion 16y ago
  If you think people signing a contract for a mortgage know what they are getting into, then you don't know people. The first 10% is illiterate, the second 20% numerically illiterate and then there's a huge partition that just doesn't understand the math and the options. People are being taken advantage of, because they don't know what they are getting into.
  - gsmaverick 16y ago
    Then they should seek the advice of a professional before signing a very large contract in the form of a mortgage. Executives shouldn't be held responsible for people who don't read fine print or who fail to understand how mortgages work.
lkrubner 16y ago
Fraud has always been criminal. Stiglitz wants to take a new category of behavior and elevate it to the level of a serious crime. And think about this: "They were optimizing not on producing mortgages that were good for the American families but in maximizing fees." I can think of a lot of incentives that might be put in place to help align the interests of those writing the mortgages and those who are receiving the mortgages, however, jail time would not be on my list. We can have a rich and interesting conversation about what incentives might be effective. We can have a rich and interesting conversation about what incentives set up skewed motives that lead to anti-social behavior. But jail time should never come into the conversation. Killing off innovation in the USA could be easy, just introduce jail time into a conversation about what incentives might motivate the business community to be socially responsible.
- slantyyz 16y ago
  what incentives might motivate the business community to be socially responsible. I don't disagree with the spirit of what you're saying, but people and businesses are naturally inclined to game whatever rules and regulations are in place if it means maximizing revenue. While jail time may not be the answer, I do think a stick might be more effective than a carrot.
  - lkrubner 16y ago
    I am curious how far you want to go with the idea that a stick is more effective than a carrot. Do you feel that economies where the bulk of economic activity is organized via free actors engage in voluntary exchange tend to be more dynamic than economies where the government plays the major role in organizing economic activity? If not, on what basis would you justify allowing the existence of non-governmental economic activity?
    - slantyyz 16y ago
      I carefully used the word "might" because this is clearly a complex issue, and I'm no economist. As someone who would otherwise be classified as "pro-business", I have found myself more and more dismayed by the bad behaviour of the largest corporations and their influence on the government. A corporation is a legal entity with rights equal to a human, but in an Animal Farm kind of way. Their influence over governments and lawmaking make them "more equal" than Joe Q. Public. I would like to see checks and balance to keep the most flagrant corporate/financial bad behaviour under control.
lkrubner 16y ago
Please consider this other article just posted to Hacker News: http://news.ycombinator.com/item?id=1821278 http://news.ycombinator.com/item?id=1821278 The state of Texas has hit Amazon with a big fine, and Amazon is contesting it. If Amazon loses the case, and is therefore proven in a court of law to have been in the wrong, then should Jeff Bezos go to jail? If not, why not? How far do you want to go toward criminalizing business activity? How much jail time do you want to give out?
- lotusleaf1987 16y ago
  Why would Jeff Bezos go to jail? Maybe if he directly was the one who decided to do something illegal then sure, if Martha Stewart and Wesley Snipes can go to prison, then sure Jeff Bezos should too. Tax evasion does not equal 'business activity' that's just tax evasion, or a crime. You still haven't answer my question as to where in the article Stigletz wants to make a new category of behavior to punish? I don't see that anywhere in the article. Or did you just make that argument up and attribute it to him?
  - lkrubner 16y ago
    Did you see this paragraph? "What should be done? "I think we ought to go do what we did in the S&L [crisis] and actually put many of these guys in prison," said Stiglitz." He's talking about sending people to prison.
    - lotusleaf1987 16y ago
      Note the headline: Put Corporate Criminals in Jail Keyword: crooks, not failures For fraud, a crime. Prison is for criminals... I don't see anywhere in the article where Stigletz says we should punish failure, only repeatedly referring to crimes/criminals being punished/jailed. Also, read up on the S&L crisis, fraud was a big factor: Fraud and insider transaction abuses were the principal cause for some 20% of savings and loan failures the past three years[clarification needed] and a greater percentage of the dollar losses borne by the Federal Savings and Loan Insurance Corporation (FSLIC). http://en.wikipedia.org/wiki/Savings_and_Loan_crisis http://en.wikipedia.org/wiki/Savings_and_Loan_crisis So please get your facts straight before you start making up incoherent arguments to attribute to Stigletz and then arguing against your own pretend version of the his position. Please find another comment to respond I've lost my patience because I'm wasting my time discussing this with someone who obviously doesn't consider facts/reality pertinent to the discussion.
lkrubner 16y ago
"Stigletz isn't suggested we should punish failure with prison." We are talking about failure. If the gambles on derivatives had all come up 500% profitable, I think the conversation would be heading in a different direction. But the reckless financial gambles of the last few decades have ended in disaster. That is why we are now talking about jail. For my part, I want to live in a country where people can recklessly trip into disaster, and not face any jail time. I want to live in a country that is forgiving of stupidity and failure and screwups. Tolerance of failure is essential to a dynamic economy.
- lotusleaf1987 16y ago
  Note the word deceptive/deceive: "the financial industry was engaged in predatory lending practices, deceptive practices. They were optimizing not on producing mortgages that were good for the American families but in maximizing fees." Meanwhile, stock-based compensation created further skewed incentives by encouraging executives to pursue short-term stock gains at the expense of long-term corporate sustainablity, Stiglitz said, and in some cases encouraged them to deceive their own shareholders." Thus making it fraud. Now how many times are you going to reply to this comment without actually answering my question in response: Where in the article Stigletz wants to make a new category of behavior to punish? I don't see that anywhere in the article. Or did you just make that argument up and attribute it to him? You pointed to:"What should be done? "I think we ought to go do what we did in the S&L [crisis] and actually put many of these guys in prison," said Stiglitz." He's talking about sending people to prison. Note the headline: Put Corporate Criminals in Jail Keyword: crooks, not failures Now I'm trying to assume you're not a troll, but my patience is wearing thin. You're making assumptions and misrepresenting Stigletz position, he never said we should punish failure, only punish crime--categorized by deceptive practices and deception--fraud. Now please find some other comment to reply to if you can't even be bothered to argue against something in the article and instead choose to make up your own strawman argument for Stigletz, attribute that to him, and then argue against your own garbled argument. That's not his logic, that's yours.
  - lkrubner 16y ago
    You write: "Note the headline: Put Corporate Criminals in Jail Keyword: crooks, not failures" My friend, it is up to us (the public) to define what a criminal is. That's the whole point of this conversation. If you want to reason from the headline of the article then you are engaging in a bit of circular reasoning: the title of the article says these people are criminal, therefore the article must be correct, because criminals are bad. I think you and I can agree that criminals are bad. The question is, what do we want to define as criminal behavior?

jacoblyles 16y ago

"Predatory lending" is a bit of a bullshit term. Not all borrowers were victims. Along with everybody else they were gambling that housing prices would only go up. A person signing a contract for a no-doc interest only 95% mortgage in 2004 knows what they are getting into. It's not like they were tricked into it by some evil banker.

Confusion 16y ago
If you think people signing a contract for a mortgage know what they are getting into, then you don't know people. The first 10% is illiterate, the second 20% numerically illiterate and then there's a huge partition that just doesn't understand the math and the options. People are being taken advantage of, because they don't know what they are getting into.
- gsmaverick 16y ago
  Then they should seek the advice of a professional before signing a very large contract in the form of a mortgage. Executives shouldn't be held responsible for people who don't read fine print or who fail to understand how mortgages work.

lkrubner 16y ago

Fraud has always been criminal. Stiglitz wants to take a new category of behavior and elevate it to the level of a serious crime. And think about this: "They were optimizing not on producing mortgages that were good for the American families but in maximizing fees." I can think of a lot of incentives that might be put in place to help align the interests of those writing the mortgages and those who are receiving the mortgages, however, jail time would not be on my list. We can have a rich and interesting conversation about what incentives might be effective. We can have a rich and interesting conversation about what incentives set up skewed motives that lead to anti-social behavior. But jail time should never come into the conversation. Killing off innovation in the USA could be easy, just introduce jail time into a conversation about what incentives might motivate the business community to be socially responsible.

slantyyz 16y ago
what incentives might motivate the business community to be socially responsible. I don't disagree with the spirit of what you're saying, but people and businesses are naturally inclined to game whatever rules and regulations are in place if it means maximizing revenue. While jail time may not be the answer, I do think a stick might be more effective than a carrot.
- lkrubner 16y ago
  I am curious how far you want to go with the idea that a stick is more effective than a carrot. Do you feel that economies where the bulk of economic activity is organized via free actors engage in voluntary exchange tend to be more dynamic than economies where the government plays the major role in organizing economic activity? If not, on what basis would you justify allowing the existence of non-governmental economic activity?
  - slantyyz 16y ago
    I carefully used the word "might" because this is clearly a complex issue, and I'm no economist. As someone who would otherwise be classified as "pro-business", I have found myself more and more dismayed by the bad behaviour of the largest corporations and their influence on the government. A corporation is a legal entity with rights equal to a human, but in an Animal Farm kind of way. Their influence over governments and lawmaking make them "more equal" than Joe Q. Public. I would like to see checks and balance to keep the most flagrant corporate/financial bad behaviour under control.

lkrubner 16y ago

Please consider this other article just posted to Hacker News: http://news.ycombinator.com/item?id=1821278 http://news.ycombinator.com/item?id=1821278 The state of Texas has hit Amazon with a big fine, and Amazon is contesting it. If Amazon loses the case, and is therefore proven in a court of law to have been in the wrong, then should Jeff Bezos go to jail? If not, why not? How far do you want to go toward criminalizing business activity? How much jail time do you want to give out?

lotusleaf1987 16y ago
Why would Jeff Bezos go to jail? Maybe if he directly was the one who decided to do something illegal then sure, if Martha Stewart and Wesley Snipes can go to prison, then sure Jeff Bezos should too. Tax evasion does not equal 'business activity' that's just tax evasion, or a crime. You still haven't answer my question as to where in the article Stigletz wants to make a new category of behavior to punish? I don't see that anywhere in the article. Or did you just make that argument up and attribute it to him?
- lkrubner 16y ago
  Did you see this paragraph? "What should be done? "I think we ought to go do what we did in the S&L [crisis] and actually put many of these guys in prison," said Stiglitz." He's talking about sending people to prison.
  - lotusleaf1987 16y ago
    Note the headline: Put Corporate Criminals in Jail Keyword: crooks, not failures For fraud, a crime. Prison is for criminals... I don't see anywhere in the article where Stigletz says we should punish failure, only repeatedly referring to crimes/criminals being punished/jailed. Also, read up on the S&L crisis, fraud was a big factor: Fraud and insider transaction abuses were the principal cause for some 20% of savings and loan failures the past three years[clarification needed] and a greater percentage of the dollar losses borne by the Federal Savings and Loan Insurance Corporation (FSLIC). http://en.wikipedia.org/wiki/Savings_and_Loan_crisis http://en.wikipedia.org/wiki/Savings_and_Loan_crisis So please get your facts straight before you start making up incoherent arguments to attribute to Stigletz and then arguing against your own pretend version of the his position. Please find another comment to respond I've lost my patience because I'm wasting my time discussing this with someone who obviously doesn't consider facts/reality pertinent to the discussion.

lkrubner 16y ago

"Stigletz isn't suggested we should punish failure with prison." We are talking about failure. If the gambles on derivatives had all come up 500% profitable, I think the conversation would be heading in a different direction. But the reckless financial gambles of the last few decades have ended in disaster. That is why we are now talking about jail. For my part, I want to live in a country where people can recklessly trip into disaster, and not face any jail time. I want to live in a country that is forgiving of stupidity and failure and screwups. Tolerance of failure is essential to a dynamic economy.

lotusleaf1987 16y ago
Note the word deceptive/deceive: "the financial industry was engaged in predatory lending practices, deceptive practices. They were optimizing not on producing mortgages that were good for the American families but in maximizing fees." Meanwhile, stock-based compensation created further skewed incentives by encouraging executives to pursue short-term stock gains at the expense of long-term corporate sustainablity, Stiglitz said, and in some cases encouraged them to deceive their own shareholders." Thus making it fraud. Now how many times are you going to reply to this comment without actually answering my question in response: Where in the article Stigletz wants to make a new category of behavior to punish? I don't see that anywhere in the article. Or did you just make that argument up and attribute it to him? You pointed to:"What should be done? "I think we ought to go do what we did in the S&L [crisis] and actually put many of these guys in prison," said Stiglitz." He's talking about sending people to prison. Note the headline: Put Corporate Criminals in Jail Keyword: crooks, not failures Now I'm trying to assume you're not a troll, but my patience is wearing thin. You're making assumptions and misrepresenting Stigletz position, he never said we should punish failure, only punish crime--categorized by deceptive practices and deception--fraud. Now please find some other comment to reply to if you can't even be bothered to argue against something in the article and instead choose to make up your own strawman argument for Stigletz, attribute that to him, and then argue against your own garbled argument. That's not his logic, that's yours.
- lkrubner 16y ago
  You write: "Note the headline: Put Corporate Criminals in Jail Keyword: crooks, not failures" My friend, it is up to us (the public) to define what a criminal is. That's the whole point of this conversation. If you want to reason from the headline of the article then you are engaging in a bit of circular reasoning: the title of the article says these people are criminal, therefore the article must be correct, because criminals are bad. I think you and I can agree that criminals are bad. The question is, what do we want to define as criminal behavior?