Last week, my colleague Adam Belz and I were eating out of our respective microwaveable containers in the office break area when the subject turned to whether the government should have sent people to prison for their role in nearly bringing down the world economy a couple of years ago. I said yes - that the billions paid out in settlements by the big banks were not the same as a judge and jury pronouncing someone criminally responsible. Adam disagreed - he thinks we all helped build the bubble, so it's appropriate that no single player should be blamed when the bubble ruptured. He admits that there was rampant fraud, and that the big players broke rules, but he sees it primarily as a market failure, not a criminal act.
How convenient that my Sunday New York Times Magazine features a prominent story about the reasons behind the reluctance of the government to prosecute the business magnates in charge of the institutions that failed or would have without taxpayer bailouts. Told with the frame of the single trader imprisoned for his bit part in the financial crisis, ProPublica reporter Jesse Eisinger traces the reasons why we didn't see executive perp walks a la Enron and the Michael Milken scandals: Prosecutors humbled by botched cases, unfavorable court rulings, underfunding of white-collar fraud investigations and timidity on the part of career-minded government lawyers.
It remains disturbing to me that after the biggest financial crisis since the Great Depression, in which millions of people lost their homes and jobs because of irresponsible behavior on Wall Street, virtually no one has to answer for it in court. Big payouts from big banks just don't have the same sting as a suit in handcuffs.
Above: Enron executives head into court, hands behind their backs, ca. 2003 (file photo, Bloomberg News)