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'Individuals are profiting by breaking the law. The point is make sure that these individuals pay a steep personal price.'

Bankers Who Commit Fraud, Like Murderers, Are Supposed to Go to Jail

Dean Baker

 by Beat the Press

Wow, some things are really hard for elite media types to understand. In his column in the Washington Post, Richard Cohen struggles with how we should punish bankers who commit crimes like manipulating foreign exchange rates (or Libor rates, or pass on fraudulent mortgages in mortgage backed securities, or don't follow the law in foreclosing on homes etc.). 

Cohen calmly tells readers that criminal prosecutions of public companies are not the answer, pointing out that the prosecution of Arthur Andersen over its role in perpetuating the Enron left 30,000 people on the street, most of whom had nothing to do with Enron. Cohen's understanding of economics is a bit weak (most of these people quickly found other jobs), but more importantly he is utterly clueless about the issue at hand.

Individuals are profiting by breaking the law. The point is make sure that these individuals pay a steep personal price. This is especially important for this sort of white collar crime because it is so difficult to detect and prosecute. For every case of price manipulation that gets exposed, there are almost certainly dozens that go undetected.

This means that when you get the goods on a perp, you go for the gold -- or the jail cell. We want bankers to know that if they break the law to make themselves even richer than they would otherwise be, they will spend lots of time behind bars if they get caught. This would be a real deterrent, unlike the risk that their employer might face some sort of penalty.

Why is it so hard for elite types to understand putting bankers in jail?


This work is licensed under a Creative Commons Attribution 4.0 International License
Dean Baker

Dean Baker

Dean Baker is the co-founder and the senior economist of the Center for Economic and Policy Research (CEPR). He is the author of several books, including "Getting Back to Full Employment: A Better bargain for Working People,"  "The End of Loser Liberalism: Making Markets Progressive,"  "The United States Since 1980," "Social Security: The Phony Crisis" (with Mark Weisbrot), and "The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer." He also has a blog, "Beat the Press," where he discusses the media's coverage of economic issues.

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