Enron is a particularly interesting case, because the filings and statements were all truthful, but almost nobody ever read them. They also had one or two good businesses, but were dragged down by liabilities from the others, so it wasn’t a total fraud. That said, I do think the Enron CFO was guilty of criminal fraud, though I think Lay and Skilling should have only been held civilly liable.
Can it? Say I design a bridge, it falls down and kills people, and does a large amount of economic damage in the process (maybe it falls on a chemical factory which explodes, or something). I'm fired, sure. I probably never work as an engineer again. I'm very unpopular, and my name becomes an insult. But do I go to jail?
And I very much doubt many drunk drivers end up in jail. AFAIK they are not even prosecuted for manslaughter or murder if they kill.
If that starts a market rout, or bank collapses, that sucks, but it's still not a crime
If that leads to the collapse of the US dollar, it's a catastrophe, but it's still not a crime.
US policymakers are responsible for the stability of the US economic system. CEOs are responsible for their own companies. Congress calling for CEOs to be put in jail is in large part simply trying to deflect from the fact that they are not doing their own jobs, and are simply trying to offload responsibility for US economic policy onto the private sector.
There's a guy in the US Senate who used to be CEO of a healthcare company until he was forced out by the board, and the company had to pay out billions in settlements and fines for defrauding medicare. https://en.wikipedia.org/wiki/Rick_Scott#Columbia/HCA
I agree with you that many in legislative and executive positions are negligent and or corrupt, but let's not pretend that the private sector doesn't aggressively lobby for its own financial interests or that it is populated by angels brought down by wicked politicians.
If none of the actions that caused all that misery are actually crimes, that's the problem.
Why? Why should the stock market be further de-risked? Why should the government's poor impulse control be encouraged? Why should mistakes be criminalized?
Could you imagine if I went off to Macau to play a high stakes game of poker, lost, and as a result, you lost your job and the government staked me in my next poker game? That's pretty much what happened.
>"Could you imagine if I went off to Macau to play a high stakes game of poker, lost, and as a result, you lost your job and the government staked me in my next poker game? That's pretty much what happened."
I understand what happened, I just don't see it the same way you do. It's not your fault if I lose my job because it relied on your gambling, and it's also not your fault that my government makes stupid bets.
It's odd that we can all agree on cases where the number of participants is small, but for some reason, if an entire economy is affected, we have to pretend that the people responsible weren't actually responsible and shouldn't be punished in the same way.
It was definitely not small, the fraud was top to bottom including the home owners lying on their loan applications, the loan officers, the managers of the loan operations, the VPs, the ratings agencies, those not doing their due diligence and just assuming that the ratings agencies were perfect etc..
It was a mania more than anything, where regulations were bent and the system lost all of it's checks and balances.
It's illegal to drive blindfolded, it's not illegal for Bear Stearns to make most kinds of stupid bets in real estate.
This was not 'executives do fraud, or at least something like it and banks fall'.
It was more like a bad housing bubble where all the limiting parameters were bent out of shape.
https://www.nytimes.com/2009/12/24/business/24trading.html
(fast forward to real life -- Princeton grads at Goldman Sachs dont go to jail...)
Excerpt from article:
A handful of investors and Wall Street traders, however, anticipated the crisis. In 2006, Wall Street had introduced a new index, called the ABX, that became a way to invest in the direction of mortgage securities. The index allowed traders to bet on or against pools of mortgages with different risk characteristics, just as stock indexes enable traders to bet on whether the overall stock market, or technology stocks or bank stocks, will go up or down.
Goldman, among others on Wall Street, has said since the collapse that it made big money by using the ABX to bet against the housing market. Worried about a housing bubble, top Goldman executives decided in December 2006 to change the firm’s overall stance on the mortgage market, from positive to negative, though it did not disclose that publicly.
Even before then, however, pockets of the investment bank had also started using C.D.O.’s to place bets against mortgage securities, in some cases to hedge the firm’s mortgage investments, as protection against a fall in housing prices and an increase in defaults.
Mr. Egol was a prime mover behind these securities.
Whose interest does it serve, for that to be a common narrative?