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As far as I know, all of these companies have the option to have their day in open court. I think the likes of JPMorgan can handle defending themselves legally

As far as I know, all of these companies have the option to have their day in open court. I think the likes of JPMorgan can handle defending themselves legally without falling into commercial ruin. Usually, with extortion, these kinds of options are not available.

tbrownaw 12y ago
While they may have that option in theory, it apparently isn't viable in practice: Financial firms rarely survive being indicted on criminal charges. Few want to go the way of Drexel Burnham Lambert or E.F. Hutton. For their managers, the threat of personal criminal charges is career-ending ruin. Unsurprisingly, it is easier to empty their shareholders’ wallets. To anyone who asks, “Surely these big firms wouldn’t pay out if they knew they were innocent?”, the answer is: oddly enough, they might. First, note "indicted" not "convicted". Second, note the difference between paying with someone else's money vs risking imprisonment/etc yourself (and no, our criminal courts don't have a zero false-positive rate).
- jbooth 12y ago
  So you're buying the line that BoA or BNP Paribas would go into bankruptcy if charges were filed? Even the author knew he couldn't make that case and resorted to a weasel-worded implication.
  - nickff 12y ago
    The problem is not that the company would go bankrupt if charges were filed, in fact the author argues that it would be less costly for the companies to go to court. The problem is that the company's officers and employees would lose their jobs, and likely become unemployable at their previous level. Because of this personal cost to the officers and employees, settlement becomes their only viable option.
    - jbooth 12y ago
      So we're talking about cases like threatening the world financial system, polluting the whole gulf of mexico, helping the sudanese government while the're committing an actual genocide.. and you're saying the legal system shouldn't act because what if some CxO who profitted from those actions loses their job? Am I misreading you?
      - tbrownaw 12y ago
        Or that settling out of court shouldn't be an option. Since if it is, everyone will take it and the system will attempt to corrupt itself.
        jbooth 12y ago
        If settling shouldn't be an option, and indictment is unthinkable, what's that leave for enforcement? I'm unhappy with the settlements and would have liked to see a big trial, it would have resulted in much bigger fines IMO for these deplorable actions. But that takes a lot more money from the government side. I wonder how the article author feels about "more federal spending".
      - nickff 12y ago
        My personal opinion is that it does not make much sense to lay criminal charges against a corporation, especially if what "The Economist" is describing is true. I would prefer that the individuals (such as the CxO) responsible for crimes be charged with any relevant civil or criminal laws, and that the corporation only be charged with civil suits. The problem described here appears to be that no one is truly representing the interests of the shareholders, who are absorbing the losses; one of the questions the author(s) present(s) is whether it is even possible for any employee or officer of the corporation to represent the shareholders' interests if there is a conflict.
        jbooth 12y ago
        The shareholders absorb the profits, as well. If a CEO messes up at his job in a purely business sense and the shareholders lose money, that's ok, right? I mean it's the whole idea of having shareholders. I'd include "broke federal laws and exposed the company to serious financial liability" in the same (or a worse) category.
- clavalle 12y ago
  'Apparently'. It isn't the indictment that causes financial institutions to collapse, it is the exodus of clients. For this 'death blow indictment' theory to hold water you'd have to assert that many more people would stop dealing with these firms if indicted than have left them after hearing about these alleged misdeeds for years from the media. Yes, Arthur Andersen collapsed but their charges were a big surprise and hinted at something much bigger.

tbrownaw 12y ago

While they may have that option in theory, it apparently isn't viable in practice: Financial firms rarely survive being indicted on criminal charges. Few want to go the way of Drexel Burnham Lambert or E.F. Hutton. For their managers, the threat of personal criminal charges is career-ending ruin. Unsurprisingly, it is easier to empty their shareholders’ wallets. To anyone who asks, “Surely these big firms wouldn’t pay out if they knew they were innocent?”, the answer is: oddly enough, they might. First, note "indicted" not "convicted". Second, note the difference between paying with someone else's money vs risking imprisonment/etc yourself (and no, our criminal courts don't have a zero false-positive rate).

jbooth 12y ago
So you're buying the line that BoA or BNP Paribas would go into bankruptcy if charges were filed? Even the author knew he couldn't make that case and resorted to a weasel-worded implication.
- nickff 12y ago
  The problem is not that the company would go bankrupt if charges were filed, in fact the author argues that it would be less costly for the companies to go to court. The problem is that the company's officers and employees would lose their jobs, and likely become unemployable at their previous level. Because of this personal cost to the officers and employees, settlement becomes their only viable option.
  - jbooth 12y ago
    So we're talking about cases like threatening the world financial system, polluting the whole gulf of mexico, helping the sudanese government while the're committing an actual genocide.. and you're saying the legal system shouldn't act because what if some CxO who profitted from those actions loses their job? Am I misreading you?
    - tbrownaw 12y ago
      Or that settling out of court shouldn't be an option. Since if it is, everyone will take it and the system will attempt to corrupt itself.
      - jbooth 12y ago
        If settling shouldn't be an option, and indictment is unthinkable, what's that leave for enforcement? I'm unhappy with the settlements and would have liked to see a big trial, it would have resulted in much bigger fines IMO for these deplorable actions. But that takes a lot more money from the government side. I wonder how the article author feels about "more federal spending".
    - nickff 12y ago
      My personal opinion is that it does not make much sense to lay criminal charges against a corporation, especially if what "The Economist" is describing is true. I would prefer that the individuals (such as the CxO) responsible for crimes be charged with any relevant civil or criminal laws, and that the corporation only be charged with civil suits. The problem described here appears to be that no one is truly representing the interests of the shareholders, who are absorbing the losses; one of the questions the author(s) present(s) is whether it is even possible for any employee or officer of the corporation to represent the shareholders' interests if there is a conflict.
      - jbooth 12y ago
        The shareholders absorb the profits, as well. If a CEO messes up at his job in a purely business sense and the shareholders lose money, that's ok, right? I mean it's the whole idea of having shareholders. I'd include "broke federal laws and exposed the company to serious financial liability" in the same (or a worse) category.
clavalle 12y ago
'Apparently'. It isn't the indictment that causes financial institutions to collapse, it is the exodus of clients. For this 'death blow indictment' theory to hold water you'd have to assert that many more people would stop dealing with these firms if indicted than have left them after hearing about these alleged misdeeds for years from the media. Yes, Arthur Andersen collapsed but their charges were a big surprise and hinted at something much bigger.