International Law

Should Bankers go to Jail?

Image by Getty Images via Daylife

Aaron Wall, writing at his Seobook.com, is mad about bankers.

"I am not sure what will come of today, but if this country actually had any sense of justice then there would be at least a half dozen bankers serving a few decades in jail.

The fact that none of them have been locked up yet shows how perverse our justice system is and how little you should trust the U.S. government.

Politicians work for the bankers. Obama has a poll allowing voters to ask questions about the economy.

Most of the questions are about "what about me I am broke and don't know what to do" and "I need some relief" etc.

And that is how they will remain until our financial system is fixed.

And by fixed I mean these bankers serve the jail-time they earned and pay back their "earnings."

Billions of hours of labor have been wasted wasted propping up a ponzi scheme that promotes insider/bank traders winning on both sides of the trade, while handing you the losses."

Aaron's rant mirrors the general populace's disgust with the AIG bonuses.  

Most of the "explanations" about our current financial dilemma are moral plays or resort to the lessons we learn from fables.

Some make for very entertaining reading.

I like this fable, at Kim Klaver's blog on direct marketing, which blames the crisis on those purchasers of houses who had poor credit.

"In order to increase sales, he decides to allow his loyal customers -most of whom are unemployed alcoholics - to drink now but pay later. He keeps track of the drinks consumed on a ledger (thereby granting the customers loans)."

But I also like the economist's who rant about the central bank.  This is Israel Kirzner "explaining" Mises's solution.

"Mises is most emphatic in laying at the door of governmentally installed central banks the ultimate responsibility for the distortions (and eventually the depressions) which arise out of the expansion of fiduciary media.

He refers, in particular, to the practice of considering it the duty of central banks of issue "to shield the banks which expanded circulation credit from the consequences of their conduct," in order to soften the economic hardships experienced during the crisis.

Mises was caustic in his condemnation of such public policy attitudes. The "practice of intervening for the benefit of banks, rendered insolvent by the crisis, and of the customers of these banks, has resulted in suspending the market forces which could serve to prevent a return of the expansion.

If the banks emerge from the crisis unscathed . . . what remains to restrain them from embarking once more on an attempt to reduce artificially the interest rate on loans and expand circulation credit . . .?"

All of these are great stories, some with more fable appeal than others.

But equally obvious is this: these are not difficult stories to comprehend.  

So if your favourite fable is a good explanation of how we got from there to here, you owe us a further explanation of why when we were there, in the past, the story we tell here in the present, somehow didn't prevent us from going from there to here.  (And any further explanation which begans with "Behavorial economics ..." is ruled out by fiat.)

Otherwise all you have is a fable, a good fable perhaps.  But still just a story.

Full post as published by Misleading Advertising Law on March 26, 2009 (boomark / email).