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It's not as easy as "letting Chase bleed" to send a message. If during 2008-9 the US charged these executives with the crimes they arguable should have been ch

It's not as easy as "letting Chase bleed" to send a message. If during 2008-9 the US charged these executives with the crimes they arguable should have been charge with, it would have led to massive panic in the financial world. So the US "pretended" that these guys were just caught by surprise because admitting the alternative had conceivably much worse consequences. Maintaining confidence in the markets was priority #1 for the team dealing with the financial collapse of 2008.

encoded 12y ago
> Maintaining confidence in the markets was priority #1 for the team dealing with the financial collapse of 2008. Arguably an act of fraud in and of itself.
javajosh 12y ago
>It's not as easy as "letting Chase bleed" to send a message. If during 2008-9 the US charged these executives with the crimes they arguable should have been charge with, it would have led to massive panic in the financial world. This is the common refrain, but is it true? I don't see why holding bank leadership accountable for crimes that harm their clients is a bad thing. In fact, I'm sort of surprised that the financial world isn't more "upset" over the fact that US banks have been given carte blanche to knowingly defraud their customers. Why do people still invest with Chase?
- josefresco 12y ago
  Frontline did a great 4 part series on this whole debacle. Transcript: http://www.pbs.org/wgbh/pages/frontline/business-economy-financial-crisis/money-power-wall-street/transcript-19/ http://www.pbs.org/wgbh/pages/frontline/business-economy-fin... There's obviously a lot more to this than this one quote, but this sums it up well (from part 2) "JOSHUA GREEN, Bloomberg Businessweek: Geithner’s entire recovery plan depended on confidence. And if you suddenly started going in and giving haircuts, people are going to get upset. They’re going to be worried. Investors are going to pull back right at the time when they needed investors to have enough confidence in these banks to put their money back in."
  - dd36 12y ago
    And that means the banks that did the right thing are not rewarded for doing the right thing. All of the sudden doing the wrong thing is both profitable and risk free.
  - dragonwriter 12y ago
    It seems to me that charging individuals with crimes while bailing out institutions in a way which protected investors would have neatly dealt with that problem (it may not have dealt with the problem that investors throwing money at firms caring only about returns and not exercising deeper control are part of the problem, but it would have provided accountability at least on the executive side where the more proximate responsibility lies, which would be better than no accountability at all.)
  - dd36 12y ago
    I would add that in the short term, maybe Geithner's decision was a good one to prevent full collapse, but prosecuting the banks 6 years later, when we are out of the crisis, should be more than doable. Delay may be prudent but that's all it should be: delay.
    - lostlogin 12y ago
      I disagree. Delaying things is all fine and good to do maybe once, but after the technique has been seen subsequent offenders will spend the time between the crime and being charged with a shredder. Don't forget that these crimes are still hurting people on the other side of the world. An immediate legal sledgehammer sends a clear message that bs won't be tolerated. Short term pain for long term gain. Edit: just to emphasize the point, people I went to school with are having trouble borrowing money right now as part of the fallout from this saga. That's far away in New Zealand. At least there is hope for change and ways of trying to get it if you live in the US. What's someone in another country to do?
      - dd36 12y ago
        It takes time to build these cases regardless. So there will always be time to shred and hide. After all, that's why her boss wanted no discussion happening over email. It comes down to testimony.
dragonwriter 12y ago
The problem with this theory -- the "holds a position too important a role in the popular perception of the institutional infrastructure to hold accountable for personal misdeeds" theory, which, aside from the financial collapse was frequently cited to justify the Ford pardon of Nixon -- is that: 1) As soon as such a principle is seen to be operating, it licenses further and greater misdeeds from those in the positions to which it applies, and 2) It ignores the damage (which may be less severe in the short-term, but is likely to be more lasting in the long-term) to public perceptions and confidence that the lack of accountability itself produces, including that resulting from the inevitably common perception (whether or not its accurate) that "too important to charge" isn't really about protecting the public from public harms resulting from damage to confidence in the institutional system, but is merely one of a set of a self-serving excuses that elites use to protect other elites from accountability to the superficially generally-applicable rules of society that are the only thing that protects everyone else from abuse by the elites.
- josefresco 12y ago
  This isn't an individual case like Nixon but rather an industry-wide epidemic of sorts that would have pushed the very inter-dependent markets into chaos. None of the bank executives at fault were that important to consider not prosecuting. However their institutions and respective influence on the global markets were (in their options) that important to maintaining stability (albeit a false one) that was deemed the lesser of two evils.
  - dragonwriter 12y ago
    > This isn't an individual case like Nixon but rather an industry-wide epidemic of sorts that would have pushed the very inter-dependent markets into chaos. And in the Nixon case, it wasn't a case of leaders of private institutions, but the President of the United States at a time of deep national division even aside from the proximate issues with which he might have been charged, and it was perceived that charging would have thrown the whole nation into chaos (and not merely financial chaos, but actual fighting-in-the-streets chaos.) There's always a reason why accountability for elites in powerful positions is a special case that can be asserted to be sui generis and requiring special exceptiosn to the normal rules of accountability. But the impact of accepting the temptation to do this is that it rapidly becomes clear that elites are not accountable in general, leading to more elite abuses and less long-term faith and confidence in the very systems that the exceptions are intended to protect (short-term) faith and confidence in. To avoid the long-term erosion and destruction of this faith and confidence, you have to accept (publicly) that the system at issue has been broken when it has and hold people accountable, even though there are severe short-term consequences. Otherwise, the long-term consequences are more severe. Or, as a much better writer than I put it -- "The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants" -- you cannot save the integrity of the system if you are overly obsessed with preserving the myth of the existing integrity of the system.
seiji 12y ago
it would have led to massive panic in the financial world. Because they are all crooks and fear they will be next?
- waps 12y ago
  No. Because a resource that the FED had lied about again and again would have been shown to be "under investigation" (ie. potentially bankrupt). Nobody would have had real information on how deep the problem went, and the price of almost the largest financial resource ever would have dived at a time when the economy was already in trouble. They didn't just choose to not charge Jamie Dimon. They choose to not charge the CDOs of his bank. In reality the US has been engaged in a risky attempt to make bonds and stock prices go up to astronomical levels ever since the crash of 2001. There are a large number of coincidences that keep happening (7 different markets suddenly stopped trading after small slips in equity prices for 2-3 hours. Without exception during those trading halts the price of either the S&P or bond ETFs went up by 2-3% during the halts. This is just from the last month). Needless to say, most of those coincidences are in fact highly illegal if they weren't really accidents. The problem is the answer to "who benefits" seems to be mostly "the U.S. FED".
pjmorris 12y ago
IANAL, but 'Fiat justitia, ruat caelum' (Let justice be done even if the heaven falls) has been a principle of US and English law for centuries [1][2]. I suppose how people see this issue is tied to whether they think there is anything more important to civilization than 'maintaining confidence in the markets'. [1] http://en.wikipedia.org/wiki/Fiat_justitia_ruat_caelum http://en.wikipedia.org/wiki/Fiat_justitia_ruat_caelum [2] p.90 'Law, Liberty, and the Rule of Law', Flores, Himma.

encoded 12y ago

> Maintaining confidence in the markets was priority #1 for the team dealing with the financial collapse of 2008. Arguably an act of fraud in and of itself.

javajosh 12y ago

>It's not as easy as "letting Chase bleed" to send a message. If during 2008-9 the US charged these executives with the crimes they arguable should have been charge with, it would have led to massive panic in the financial world. This is the common refrain, but is it true? I don't see why holding bank leadership accountable for crimes that harm their clients is a bad thing. In fact, I'm sort of surprised that the financial world isn't more "upset" over the fact that US banks have been given carte blanche to knowingly defraud their customers. Why do people still invest with Chase?

josefresco 12y ago
Frontline did a great 4 part series on this whole debacle. Transcript: http://www.pbs.org/wgbh/pages/frontline/business-economy-financial-crisis/money-power-wall-street/transcript-19/ http://www.pbs.org/wgbh/pages/frontline/business-economy-fin... There's obviously a lot more to this than this one quote, but this sums it up well (from part 2) "JOSHUA GREEN, Bloomberg Businessweek: Geithner’s entire recovery plan depended on confidence. And if you suddenly started going in and giving haircuts, people are going to get upset. They’re going to be worried. Investors are going to pull back right at the time when they needed investors to have enough confidence in these banks to put their money back in."
- dd36 12y ago
  And that means the banks that did the right thing are not rewarded for doing the right thing. All of the sudden doing the wrong thing is both profitable and risk free.
- dragonwriter 12y ago
  It seems to me that charging individuals with crimes while bailing out institutions in a way which protected investors would have neatly dealt with that problem (it may not have dealt with the problem that investors throwing money at firms caring only about returns and not exercising deeper control are part of the problem, but it would have provided accountability at least on the executive side where the more proximate responsibility lies, which would be better than no accountability at all.)
- dd36 12y ago
  I would add that in the short term, maybe Geithner's decision was a good one to prevent full collapse, but prosecuting the banks 6 years later, when we are out of the crisis, should be more than doable. Delay may be prudent but that's all it should be: delay.
  - lostlogin 12y ago
    I disagree. Delaying things is all fine and good to do maybe once, but after the technique has been seen subsequent offenders will spend the time between the crime and being charged with a shredder. Don't forget that these crimes are still hurting people on the other side of the world. An immediate legal sledgehammer sends a clear message that bs won't be tolerated. Short term pain for long term gain. Edit: just to emphasize the point, people I went to school with are having trouble borrowing money right now as part of the fallout from this saga. That's far away in New Zealand. At least there is hope for change and ways of trying to get it if you live in the US. What's someone in another country to do?
    - dd36 12y ago
      It takes time to build these cases regardless. So there will always be time to shred and hide. After all, that's why her boss wanted no discussion happening over email. It comes down to testimony.

dragonwriter 12y ago

The problem with this theory -- the "holds a position too important a role in the popular perception of the institutional infrastructure to hold accountable for personal misdeeds" theory, which, aside from the financial collapse was frequently cited to justify the Ford pardon of Nixon -- is that: 1) As soon as such a principle is seen to be operating, it licenses further and greater misdeeds from those in the positions to which it applies, and 2) It ignores the damage (which may be less severe in the short-term, but is likely to be more lasting in the long-term) to public perceptions and confidence that the lack of accountability itself produces, including that resulting from the inevitably common perception (whether or not its accurate) that "too important to charge" isn't really about protecting the public from public harms resulting from damage to confidence in the institutional system, but is merely one of a set of a self-serving excuses that elites use to protect other elites from accountability to the superficially generally-applicable rules of society that are the only thing that protects everyone else from abuse by the elites.

josefresco 12y ago
This isn't an individual case like Nixon but rather an industry-wide epidemic of sorts that would have pushed the very inter-dependent markets into chaos. None of the bank executives at fault were that important to consider not prosecuting. However their institutions and respective influence on the global markets were (in their options) that important to maintaining stability (albeit a false one) that was deemed the lesser of two evils.
- dragonwriter 12y ago
  > This isn't an individual case like Nixon but rather an industry-wide epidemic of sorts that would have pushed the very inter-dependent markets into chaos. And in the Nixon case, it wasn't a case of leaders of private institutions, but the President of the United States at a time of deep national division even aside from the proximate issues with which he might have been charged, and it was perceived that charging would have thrown the whole nation into chaos (and not merely financial chaos, but actual fighting-in-the-streets chaos.) There's always a reason why accountability for elites in powerful positions is a special case that can be asserted to be sui generis and requiring special exceptiosn to the normal rules of accountability. But the impact of accepting the temptation to do this is that it rapidly becomes clear that elites are not accountable in general, leading to more elite abuses and less long-term faith and confidence in the very systems that the exceptions are intended to protect (short-term) faith and confidence in. To avoid the long-term erosion and destruction of this faith and confidence, you have to accept (publicly) that the system at issue has been broken when it has and hold people accountable, even though there are severe short-term consequences. Otherwise, the long-term consequences are more severe. Or, as a much better writer than I put it -- "The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants" -- you cannot save the integrity of the system if you are overly obsessed with preserving the myth of the existing integrity of the system.

seiji 12y ago

it would have led to massive panic in the financial world. Because they are all crooks and fear they will be next?

waps 12y ago
No. Because a resource that the FED had lied about again and again would have been shown to be "under investigation" (ie. potentially bankrupt). Nobody would have had real information on how deep the problem went, and the price of almost the largest financial resource ever would have dived at a time when the economy was already in trouble. They didn't just choose to not charge Jamie Dimon. They choose to not charge the CDOs of his bank. In reality the US has been engaged in a risky attempt to make bonds and stock prices go up to astronomical levels ever since the crash of 2001. There are a large number of coincidences that keep happening (7 different markets suddenly stopped trading after small slips in equity prices for 2-3 hours. Without exception during those trading halts the price of either the S&P or bond ETFs went up by 2-3% during the halts. This is just from the last month). Needless to say, most of those coincidences are in fact highly illegal if they weren't really accidents. The problem is the answer to "who benefits" seems to be mostly "the U.S. FED".

pjmorris 12y ago

IANAL, but 'Fiat justitia, ruat caelum' (Let justice be done even if the heaven falls) has been a principle of US and English law for centuries [1][2]. I suppose how people see this issue is tied to whether they think there is anything more important to civilization than 'maintaining confidence in the markets'. [1] http://en.wikipedia.org/wiki/Fiat_justitia_ruat_caelum http://en.wikipedia.org/wiki/Fiat_justitia_ruat_caelum [2] p.90 'Law, Liberty, and the Rule of Law', Flores, Himma.