It’s the 10th anniversary of the start of the Global Financial Crisis. Hooray!
In the New Yorker, Patrick Radden Keefe attempts to answer a question that’s been niggling at the back of my brain for, oh, about 8 years: Why weren’t any of the bankers or lawyers prosecuted? Pro Publica and others have uncovered illegal activity at many of the major banks, illegal activity that contributed to the crisis and caused much pain for people up-and-down the socioeconomic ladder.
So why are almost all of the individuals still running free? I guess I figured that it had something to do with the politicians and their reliance on Wall Street donations.
But the story’s much more interesting than that. Turns out that:
(1) the federal prosecutors have incentives — both financial and reputational — to cut deals with the companies rather than going after individual white-collar criminals
You might suppose that the glory of convicting a blue-chip C.E.O. would be irresistible. But taking such a case to trial entails serious risk. In contemporary corporations, the decision-making process is so diffuse that it can be difficult to establish criminal culpability beyond a reasonable doubt.
Much easier to negotiate a billion-dollar fine with the company in exchange for a commitment to “change the culture.”
(2) The mechanism that prosecutors use is something called “deferred prosecution” which allows the company to admit to wrongdoing without actually pleading guilty to a specific crime. According to Keefe, deferred prosecution was originally a “progressive” tool that allowed individuals to get their lives together and avoid a criminal record.
This gets my “Welfare for the rich” tag, because it’s another example of a progressive policy co-opted to protect the rich and powerful.