Nobel economist says banksters must be prosecuted to save the economy...

[rfranklin]

As economists such as William Black and James Galbraith have repeatedly said, we cannot solve the economic crisis unless we throw the criminals who committed fraud in jail.


And Nobel prize winning economist George Akerlof has demonstrated that failure to punish white collar criminals - and instead bailing them out- creates incentives for more economic crimes and further destruction of the economy in the future. See this, this and this.

Nobel prize winning economist Joseph Stiglitz just agreed. As Stiglitz told Yahoo's Daily Finance on October 20th:



This is a really important point to understand from the point of view of our society. The legal system is supposed to be the codification of our norms and beliefs, things that we need to make our system work. If the legal system is seen as exploitative, then confidence in our whole system starts eroding. And that's really the problem that's going on.

***

more at--
http://www.washingtonsblog.com/

[SammyWinstonJack]

1. NEVER. GONNA. HAPPEN.

:spray:

[glitch]

12. PERHAPS.BUT.STILL.TRUE.

No confidence (aka investment and predictable stability) until law is restored.

[TheKentuckian]

2. We cannot have a system of justice that the wealthy and well connected have immunity

It breaks down faith in the system and encourages a wild west mentality.

If it ain't good enough for them then it ain't good enough for me or anyone else.

We need massive jury nullification of all crimes until the law applies to one and all.

[notesdev]

5. You can count on me for that

If I'm selected for a jury, there is no non-violent crime for which I will convict, until the rule of law applies to everyone in this country equally.

[mod mom]

11. We actually do. Ask Bush, Cheney, Rumsfeld, Rove & the rest of the co-conspirators.

[City Lights]

3. Hell will freeze over first. nt

[xchrom]

4. agreed but not just in jail -- their wealth must be confiscated. nt

[Donnachaidh]

7. we do that to drug dealers -- why not banksters?

They need to be stripped of it all. Let their families feel what their damage did to countless americans. Let them apply for welfare, live off of foodbanks, etc.

It's past due -- JUSTICE.

[PA Democrat]

15. Absolutely. CEOs will continue to steal and destroy the economy

for their own profit as long as they are allowed to keep ANY of their ill-gotten gains.

[corpseratemedia]

6. you do not appoint the criminals to fix the institutions they broke

[chill_wind]

8. Prosecutions for rank fraud and crime? We can't even get a moratorium on it.

eom

[snappyturtle]

9. Not going to happen. What's going to happen is the repubs will

work to pass legislation to make it easier for these criminals to continue their crime spree. imho

[ipaint]

10. If Obama Thinks the Response to the S&L Debacle Failed, Why Is He Adopting it?

William K. Black

Assoc. Professor, Univ. of Missouri, Kansas City; Sr. regulator during S&L debacle



"...President Reagan appointed Richard (Dick) Pratt, an academic finance expert, as Chairman of the Federal Home Loan Bank Board (Bank Board) in 1981. Pratt led the response to the first (interest rate risk) phase of the S&L crisis. He gimmicked the accounting rules, cut the number of examiners, and desupervised the industry. This allowed S&Ls to hide real losses and create fictional income. He championed the entry of "entrepreneurs," primarily real estate developers with intense conflicts of interest.

The administration, Congress, and the media treated these Pratt's fictional "resolutions" and claims of brilliance as real. By allowing S&Ls to hide real losses and create fictional income, deregulating, desupervising, closing none of the control frauds (which were growing in assets at an annual rate of 50%), and making virtually no criminal referrals (which mean there were no prosecutions), Pratt (and several states that won the "competition in laxity") created an intensely criminogenic environment that led to the entry of hundreds of control frauds into the S&L industry. As the National Commission on Financial Institution Reform, Recovery and Enforcement (NCFIRRE) emphasized in its 1993 report, at the "typical large failure" "fraud was invariably present." The NCFIRRE report also explained how deregulation, desupervision, the lack of prosecutions, the accounting scams that hid real losses and created fictional income, the manipulation of professional compensation for appraisers and outside auditors by the fraudulent S&L executives to produce a "Gresham's" dynamic in which bad ethics drove good ethics out of the professions, and the perverse incentives caused by modern executive compensation allowed CEOs to create guaranteed, record (albeit fictional) profits and become wealthy by looting "their" S&Ls. (George Akerlof and Paul Romer concurred in their 1993 article. Looting: the Economic Underworld of Bankruptcy for Profit.) Martin Mayer aptly concluded, if one had to pick a single person most responsible for the S&L crisis becoming a debacle it would be Dick Pratt. Indeed, but for Pratt's successor, Edwin (Ed) Gray's reregulation of the industry, Pratt's policies would have caused a Great Recession.

For reasons that only Summers, Geithner, and Obama can know, they chose to adopt Pratt's disastrous and dishonest anti-regulatory strategy and parrot his dishonest claims of brilliance and success."

More...

http://www.huffingtonpost.com/william-k-black/if-obama-thinks-the-respo_b_776867.html

[Xenotime]

13. Yup.

[chill_wind]

14. Stiglitz: This is indentured servitude.

"But there's a broader sense of collateral damage that I think that has not really been taken on board. And that is confidence in our legal system, in our rule of law, in our system of justice. When you say the Pledge of Allegiance you say, with "justice for all." People aren't sure that we have justice for all. Somebody is caught for a minor drug offense, they are sent to prison for a very long time. And yet, these so-called white-collar crimes, which are not victimless, almost none of these guys, almost none of them, go to prison.


Let me give you another example of where the legal system has gotten very much out of whack, and which contributed to the financial crisis.

In 2005, we passed a bankruptcy reform. It was a reform pushed by the banks. It was designed to allow them to make bad loans to people to who didn't understand what was going on, and then basically choke them. Squeeze them dry. And we should have called it, "the new indentured servitude law." Because that's what it did.

Let me just tell you how bad it is. I don't think Americans understand how bad it is. It becomes really very difficult for individuals to discharge their debt. The basic principle in the past in America was people should have the right for a fresh start. People make mistakes. Especially when they're preyed upon. And so you should be able to start afresh again. Get a clean slate. Pay what you can and start again. Now if you do it over and over again that's a different thing. But at least when there are these lenders preying on you should be able to get a fresh start.

But they said, "No, no, you can't discharge your debt," or you can't discharge it very easily.

***



This is indentured servitude. And we criticize other countries for having indentured servitude of this kind, bonded labor. But in America we instituted this in 2005 with almost no discussion of the consequences. But what it did was encourage the banks to engage in even worse lending practices.

***

The banks want to pretend that they did not make bad loans. They don't want to come into reality. The fact that they were very instrumental in changing the accounting standards, so that loans that are impaired where people are not paying back what they owe, are treated as if they are just as good as a well-performing mortgage.

So the whole strategy of the banks has been to hide the losses, muddle through and get the government to keep interest rates really low.

***

The result of this is, as long as we keep up this strategy, it's going to be a long time before the economy recovers ...."

from http://www.zerohedge.com/article/another-nobel-economist-says-we-have-prosecute-fraud-or-else-economy-wont-recover


(bold emphasis mine)