Wow! Attorney General Eric Holder came up with a new one: Too Big to Jail. Holder was grilled yesterday by the Senate Judiciary Committee, which was focusing on the 2008 financial meltdown. They were querying Holder as to why no one had been convicted of wrongdoing. Holder claims that if he had prosecuted a CEO, or other prominent official, at one of these investment banks, he could have caused yet another financial incident. (NBC News Coverage)
Yes, the prosecution of these men would have destabilized the financial markets, causing great uncertainty. Still, is it right to let everyone who was responsible walk out to the door with their multi-multi million dollar bonuses?
My own concern with any prosecution is the possibility of a witch hunt, which would result in scapegoats being convicted. A McCarthy-era type of situation where everyone and anyone would be suspect. Hundreds involved, and one convicted. At what level in the organization are you ‘guilty’ and at what level are you exonerated of any guilt.
Still the issue of “Willful Blindness” is pertinent. According to Wikipedia, “Willful Blindness” is a legal term, where:
An individual seeks to avoid civil or criminal liability for a wrongful act by intentionally putting himself in a position where he will be unaware of facts that would render him liable.
Willful blindness is typically used in drug prosecution, or copyright infringement by users of a service. Now, it also pertains to the financial sector. There is story, after story, of CEO’s of these institutions being forewarned. Cain at Bear Stearns and Fuld at Lehman Brothers come to mind.
The excuse of these gentlemen is that the instruments are too complex for anyone but a multi-year trained expert to understand. If these officials don’t understand the risk, then why are they risking the very existence of their multi-billion dollar institutions to make a buck and tens of thousands of jobs?
I’m not interested in a McCarthy Era type of witch hunt. But, isn’t there something to be done? If the business journalists are correct, the banks continue to risk their existence by continuing to play with these securities. A scary specter. And no one has the stomach to go through 2008 again. If you can’t understand the securities, don’t play with them.
Picture: Karl Addison. Flickr