"the financial industry was engaged in predatory lending practices, deceptive practices. They were optimizing not on producing mortgages that were good for the American families but in maximizing fees."

Meanwhile, stock-based compensation created further skewed incentives by encouraging executives to pursue short-term stock gains at the expense of long-term corporate sustainablity, Stiglitz said, and in some cases encouraged them to deceive their own shareholders."

We're not talking about punishing failure, we're talking about punishing crime:

Stiglitz explained, the system of penalties generally meant a small fine relative to the full ill-gotten gains, often in the hundreds of millions of dollars.

A person signing a contract for a no-doc interest only 95% mortgage in 2004 knows what they are getting into. It's not like they were tricked into it by some evil banker.

http://news.ycombinator.com/item?id=1821278

The state of Texas has hit Amazon with a big fine, and Amazon is contesting it. If Amazon loses the case, and is therefore proven in a court of law to have been in the wrong, then should Jeff Bezos go to jail? If not, why not?

How far do you want to go toward criminalizing business activity? How much jail time do you want to give out?

You still haven't answer my question as to where in the article Stigletz wants to make a new category of behavior to punish? I don't see that anywhere in the article. Or did you just make that argument up and attribute it to him?

"What should be done? "I think we ought to go do what we did in the S&L [crisis] and actually put many of these guys in prison," said Stiglitz."

He's talking about sending people to prison.

Keyword: crooks, not failures

For fraud, a crime. Prison is for criminals... I don't see anywhere in the article where Stigletz says we should punish failure, only repeatedly referring to crimes/criminals being punished/jailed.

Also, read up on the S&L crisis, fraud was a big factor: Fraud and insider transaction abuses were the principal cause for some 20% of savings and loan failures the past three years[clarification needed] and a greater percentage of the dollar losses borne by the Federal Savings and Loan Insurance Corporation (FSLIC). http://en.wikipedia.org/wiki/Savings_and_Loan_crisis

So please get your facts straight before you start making up incoherent arguments to attribute to Stigletz and then arguing against your own pretend version of the his position.

Please find another comment to respond I've lost my patience because I'm wasting my time discussing this with someone who obviously doesn't consider facts/reality pertinent to the discussion.

Hank Paulson lobbied for that limit to be removed, unsuccessfully in 2000, then successfully in 2004. That banks and financial entities were levered up to 30:1, 40:1, even 60:1 on toxic securities when the crisis occurred grossly exacerbated it.

So essentially, 'gambling recklessly with credit' was indeed, for a long time, illegal. It was only Wall Street's increasing influence in Washington that got it legalized.

Yes, but in the old days, if a bank went over the leverage limit that the government had set, then the bank got fined, and was required to rapidly deleverage. No one went to jail.

And think about this:

"They were optimizing not on producing mortgages that were good for the American families but in maximizing fees."

I can think of a lot of incentives that might be put in place to help align the interests of those writing the mortgages and those who are receiving the mortgages, however, jail time would not be on my list. We can have a rich and interesting conversation about what incentives might be effective. We can have a rich and interesting conversation about what incentives set up skewed motives that lead to anti-social behavior. But jail time should never come into the conversation.

Killing off innovation in the USA could be easy, just introduce jail time into a conversation about what incentives might motivate the business community to be socially responsible.

I don't disagree with the spirit of what you're saying, but people and businesses are naturally inclined to game whatever rules and regulations are in place if it means maximizing revenue.

While jail time may not be the answer, I do think a stick might be more effective than a carrot.

As someone who would otherwise be classified as "pro-business", I have found myself more and more dismayed by the bad behaviour of the largest corporations and their influence on the government.

A corporation is a legal entity with rights equal to a human, but in an Animal Farm kind of way. Their influence over governments and lawmaking make them "more equal" than Joe Q. Public. I would like to see checks and balance to keep the most flagrant corporate/financial bad behaviour under control.

Me too. That's not the issue. The issue is why anyone would suggest jail. There is a large range of actions that could be pursued to modify the incentives that lead people to make reckless gambles with credit. Why not pursue those other actions first? Why not change the financial incentives? Why resort to jail?

However, I do see this: "We fine them, and what is the big lesson?" said Stiglitz. "Behave badly, and the government might take 5% or 10% of what you got in your ill-gotten gains, but you're still sitting home pretty with your several hundred million dollars that you have left over after paying fines that look very large by ordinary standards, but look small compared to the amount that you've been able to cash in."

Taken together, Stigliz said, this system of widespread fraud, lax regulation and non-deterrent enforcement, created a system of skewed incentives that rewarded criminality, gambling and other bad behavior, and left American workers, investors and homeowners holding the bill.

So please, why do you think jail time should be off the table for a white collar criminal who destroys the wealth of millions and of shareholders, but that jail time for say someone who steals a car is fine? That makes no rational sense. One is obviously more harmful, although a little less tangible than say stealing a car or a diamond, but it's still real value/wealth that they are effectively destroying/stealing.

You're acting like there is more innovation when there is less regulation, but that obviously isn't the case otherwise companies would be fleeing America for Africa.

>Killing off innovation in the USA could be easy, just introduce jail time into a conversation about what incentives might motivate the business community to be socially responsible.

This makes no sense, if they commit a crime, they should go to jail, end of story. We don't need to legalize crime to incentivize innovation.

We are talking about failure. If the gambles on derivatives had all come up 500% profitable, I think the conversation would be heading in a different direction. But the reckless financial gambles of the last few decades have ended in disaster. That is why we are now talking about jail.

For my part, I want to live in a country where people can recklessly trip into disaster, and not face any jail time. I want to live in a country that is forgiving of stupidity and failure and screwups. Tolerance of failure is essential to a dynamic economy.

Thus making it fraud.

Now how many times are you going to reply to this comment without actually answering my question in response: Where in the article Stigletz wants to make a new category of behavior to punish? I don't see that anywhere in the article. Or did you just make that argument up and attribute it to him?

You pointed to:"What should be done? "I think we ought to go do what we did in the S&L [crisis] and actually put many of these guys in prison," said Stiglitz." He's talking about sending people to prison.

Note the headline: Put Corporate Criminals in Jail

Keyword: crooks, not failures

Now I'm trying to assume you're not a troll, but my patience is wearing thin. You're making assumptions and misrepresenting Stigletz position, he never said we should punish failure, only punish crime--categorized by deceptive practices and deception--fraud.

Now please find some other comment to reply to if you can't even be bothered to argue against something in the article and instead choose to make up your own strawman argument for Stigletz, attribute that to him, and then argue against your own garbled argument. That's not his logic, that's yours.

"Note the headline: Put Corporate Criminals in Jail Keyword: crooks, not failures"

My friend, it is up to us (the public) to define what a criminal is. That's the whole point of this conversation. If you want to reason from the headline of the article then you are engaging in a bit of circular reasoning: the title of the article says these people are criminal, therefore the article must be correct, because criminals are bad.

I think you and I can agree that criminals are bad. The question is, what do we want to define as criminal behavior?