Crime And Punishment
A lot of the crisis in the banking sector is attributable to legal practices, like changes in the law that allowed 30-1 leveraging and the rise of the shadow banking system. The biggest problem is that we allowed the financial sector to become far too large a part of the economy, when it should only exist to allow the efficient flow of capital and facilitate small business and manufacturing. It's not just that the banks are too big to fail; it's that they're too big. We have to rebalance our economy.
But a fair bit of it was just outright fraud. I'm not just talking about Ponzi schemers like Bernie Madoff, who is set to plead guilty (and his wife should not be allowed to keep $67 million dollars in the exchange, by the way), but the fraudulent tactics of bankers in several areas. A lot of members of Congress, in particular Alan Grayson, have been talking about that, and now Barney Frank is going public with his desire to seek justice.
House Financial Services Chairman Barney Frank (D-Mass.) is pressing state and federal authorities to seek criminal and civil penalties on financial actors that helped cause the current crisis.
"Rules don't work if people have no fear of them," Frank said at a press conference Thursday.
He announced a hearing March 20 with Attorney General Eric Holder, bank regulators and the Securities and Exchange Commission as witnesses to discover what their plans are to prosecute irresponsible and in some cases criminal behaviors.
I think the biggest thing troubling the public with respect to the financial meltdown is the lack of accountability. They see activities that they would surely be arrested for if they tried them, and yet nobody is being held responsible. Of course, the financial sector has gotten so big, and accrued a certain power along with their wealth, that they have a status somewhere above the law, despite statements like this from members of Congress. So we have to see the follow through.
One great initiative is what Change to Win is doing with Bank of America. As a fairly large shareholder in the bank through their pension funds, they are making known their dissatisfaction with the CEO, and preparing for a fight.
Now CtW has upped the ante on Bank of America, amid reports that B of A is seeking to quash a subpoena of records that show senior Merrill Lynch execs earned more money when B of A took over their struggling company than before.
The CtW Investment Group, in a letter to B of A's lead director, conveyed a simple message: Fire Ken Lewis, the bank's CEO, or CtW will encourage shareholders to vote him and other independent bank directors out of office during the company's next annual meeting.
Shareholders do have some power to force decisions on the corporate structure. But ultimately, if we're talking about criminality, this is a matter for the Justice Department.