We should have jailed the bankers after the last crisis
Perhaps the most revealing passage from Barack Obama’s memoirs in 2020, A promised land, comes towards the end of his recollection of the 2009 financial crisis and his administration’s response to it. For Obama – who never seems to have seriously considered a proactive or aggressive response to the Wall Street chicanery – the dilemma his team faced was primarily political management. As such, he tells us, they attempted to “straddle the line between the public’s desire for Old Testament righteousness and the financial markets’ need for comfort.” The key moment comes later in the chapter as the former president reflects on the now common accusation that he could and should have been tougher on Wall Street:
If it was possible for me to go back in time and do a makeover, I can’t say I would make any different choices. In the abstract, all of the different alternatives and missed opportunities that critics offer seem plausible, simple plot points in a tale of morality. But when you dig into the details, each of the options they offer – whether it’s nationalizing the banks, or expanding the definitions of criminal laws to prosecute bank executives, or just letting part of the banking system collapse. to avoid moral hazard – would have required violence against the social order, an uprooting of political and economic norms [my emphasis], that would certainly have made matters worse. No worse for the rich and powerful, who always have a way to get on their feet. Worse for the people I pretend to save. At best, the economy would have taken longer to recover, with more unemployment, more foreclosures, more business closures. In the worst case, we could have slipped into a full-scale depression.
Without disputing the entire administration response to what was then the worst economic crisis since the Great Depression, it is worth highlighting the choice Obama faces as he himself chooses to make it. For the president and his advisers, the public’s outrage at Wall Street (and the corresponding desire to see executives put in jail) was ultimately driven by a sort of reductive moralism out of step with reality. The idea of ”Old Testament righteousness,” in his account, might have sounded good on paper, but would have done nothing to make the rich lose sleep and, worse yet, would have ended up hurting the most. vulnerable.
It’s a cynical, self-serving and unconvincing tale, of course. But it also distorts much of the case for prosecuting white-collar criminals. “Lock them up!” was certainly a pervasive sentiment towards banks and bankers after the financial crisis, and no one can deny that it had a lot to do with a simple popular (and fully justified) desire for retribution. It was far from a complete story, however, and even a quick glance at a few major cases of corporate malfeasance over the past decade shows us exactly why.
The thought came to me after watching an episode of the excellent Netflix series Dirty money, which recounts – with admirable populist flair – various recent examples of sleaze and corruption. The topics of the show are quite varied: drug price inflation by pharmaceutical companies; Jared Kushner’s Slum Empire; the theft of over three thousand tonnes of Canadian maple syrup; a major conflict of interest scandal that has dethroned the Malaysian Prime Minister and his long-ruling party; the litany of scams committed by Donald Trump before he entered politics. Nonetheless, quite a few end up spinning on the same basic theme for the simple reason that many of capitalism’s greatest hoaxes are structurally very similar: (1) a capitalist or a group of capitalists seek to maximize profits by all necessary means, bypassing laws or ethical obstacles as necessary; (2) those at the bottom – workers, consumers, tenants, citizens – are injured; (3) those responsible face minimal consequences. Lather, rinse and repeat.
The ur-episode in this regard is probably the show’s take on the scandal surrounding Wells Fargo, the supposed “golden child” of banking who was discovered for opening millions of accounts without the client’s permission. , registered people for credit cards. never asked, overcharged black and Hispanic homeowners for mortgages, and forged consumer signatures (among other things). With a hat tip at the the Wall Street newspaperEmily Glazer, who made a stubborn report on the Wells Fargo affair, the heroes of the episode are ultimately Yesenia Guitron and Kilian Colin, two base employees who were disciplined for exposing the abusive behavior and operating the business.
To inflate its value, Wells Fargo aggressively tricked its low-paid cashiers to sell as many new accounts as possible so that customers were charged additional fees. The result is that low-wage workers themselves have become the main instruments of unethical corporate practices, sometimes with heartbreaking results that still trouble them today. Given his extractive attitude towards employees, many also found themselves out of work (between 2011 and 2016, more than eight thousand were made redundant for failing to meet arbitrarily imposed sales quotas).
In the end, the company issued a laudable public apology, paid a settlement of $ 175 million in 2012, and has since been forced to shell out more than an additional $ 3 billion in additional penalties – still absolute peanuts considering her size. Likewise, CEO John Stumpf was sentenced to a life ban from working in the financial industry and fined $ 17.5 million. Although he has since lost more than $ 70 million in total due to confiscations and recoveries, Stumpf eventually walked away with stocks valued at $ 80 million, $ 60 million in wages and bonuses and a pension of 22. , $ 7 million. In other words, he is ready to live and has suffered only the most superficial consequences of his involvement in the scandal.
This is just one of countless examples of how the U.S. justice system treats corporate wrongdoers with childish gloves while inflicting cruel punishments on the poor for sometimes trivial crimes. For many CEOs of large corporations, there is essentially no deterrent against unethical and fraudulent behavior beyond a handful of watered-down fines or a few hours of grilling in front of a Senate committee. . While tougher penalties won’t end many of the worst corporate crimes, executives and barons in the capital might be hesitant to inflate stock values, scam consumers, or rip off tenants if the personal cost amounted to more than an uncomfortable visit to Capitol Hill. , the confiscation of the glorified pocket change and a few weeks of bad headlines.
“Lock up the bankers” was never just a catchy slogan born out of popular rage. More than anything else, it was a call for the kind of fundamental justice that might make wealth evildoers think twice before committing arson again.