Great Leap Forward

Banks Don’t Commit Fraud; Banksters Commit Fraud: Response to Yglesias

The often interesting Matthew Yglesias wonders “Are Banks Too Big To Prosecute?” See here.

Here’s his thesis. Sure, Megabanks committed tons of fraud. But we cannot prosecute banks for the fraud because that would bring them down. And the bigger they are, the more fraud they perpetrated, but the bigger the insolvency hole if we investigated them. So best to bail them out and look the other way.

But here’s the deal. Banks don’t commit fraud. Banksters commit fraud.

This is what all the gun nuts are teaching us. Guns never kill people. Insane people kill people. Guns are just a tool that allows the insane to kill massive numbers in schools, shopping malls and offices.

Since Sandy Hook, the gun nuts have been out in full force, spraying bullets all over the US to quickly do as much killing as possible before the Communist Obama takes away their guns. Every day another mass murder.

Now a rational person might think this works against the gun-nut NRA lobby. Not at all, folks. It just proves their point. You need more guns to protect yourself from errant gun nuts.

Besides, who would take an AK-47 into a kindergarten or Sears to commit mass murder?

Why, the mentally ill, of course, as the deliciously named Wayne LaPierre keeps telling us (simultaneously recalling the macho John Wayne, while the French pierre—rock or stone—reminds one  variously of The Rock or Rock Hudson, both icons in their own right).

So to preserve the Constitutional right to arm yourself with military assault weapons, we’ve got to lock up anyone suspected of mental illness. Your right to weapons of mass murder trumps the right of the mentally ill to fresh air. They all ought to be locked up to prevent freely available weapons of mass destruction from getting into the wrong hands.

Such is the thinking of the NRA.

One wonders why someone who is not mentally ill should believe that amassing assault rifles is not an indication of mental illness. But I digress.

Back to Iglesias. His argument would appear to be this. We wouldn’t want to punish a bank for fraud because “Had you secured criminal convictions against these megabanks, you’d have had to nationalize them and assume their liabilities or else face an economic catastrophe.”

Ergo, do not prosecute illegal activities at the megabanks.

Here’s the deal. Banks don’t commit fraud; they are used as weapons for fraud by the top bank management to commit fraud. Those in the top management of the megabanks are the ones who are committing the fraud. The banks are just assault rifles, harmless when left in the locked closet. They become dangerous only at the hands of the Hanks, Bobs, Jamies, and Lloyds.

So who do you prosecute? The weapon or the one who pulls the trigger, spraying bullets all over the shopping mall?

The Obama administration (backed by Yglesias) argues that you should just forgive (nay, bail-out) the triggermen who ran the banks. Let them walk away with their hundreds of millions and billions stolen from customers.

That will teach them a lesson!

Now, we don’t want to carry the analogy too far. We’ve got lots of gun nuts accumulating assault rifles and as well lots of banksters accumulating banks. Going forward what do you do to constrain them?

Reduce the lethality of the weapons they have at their disposal.

The NRA is right about one thing. There’s a lot of crazies out there. But you cannot lock them all up in anticipation that some of them might use the weapons at hand.

Makes much more sense to:

a)      Investigate and prosecute to the full extent of the law those that use weapons of mass destruction (such as AK-47s and financial derivatives); and

b)      Remove the weapons of mass destruction (AK-47s and financial derivatives).


8 Responses to “Banks Don’t Commit Fraud; Banksters Commit Fraud: Response to Yglesias”

Ben JohannsonJanuary 31st, 2013 at 12:49 pm

Is Yglesias really that interesting? Everything I've read by him runs like an application for press secretary in the Obama Administration.

SchofieldJanuary 31st, 2013 at 3:22 pm

Sharp as a tack article! The moral of the story being that no economic or political conceptual framework, meme, ideology, call it what you will, should now be constructed that doesn't have as its foundation the fact that human nature is ambivalent and always needs balancing because many individuals struggle to balance self-enhancing and self-transcending behavior. Examples being some mentally ill individuals want to lock up other mentally ill individuals so they can collect assault rifles or some Banksters want you to believe the market can self-regulate so they can loot society.

Keating WillcoxJanuary 31st, 2013 at 3:23 pm

You are correct. Simply suggesting that a bank officer or even a board member is going to be tried for criminal conspiracy gets a lot of attention, and if that person is prosecuted, the bank continues along just fine. I am always astonished at the line,"too big to fail" I think it refers to the campaign contributions that are too big to ignore.

Ed Dolan EdDolanJanuary 31st, 2013 at 7:17 pm

Very good start. I would flesh it out with these specifics:

(1) Mandatory background checks for bank officers. Or do they already have those? It seems to me I remember reading that the "M" in the famous CAMELS approach to bank supervision stands for management quality, and the checklist includes not just criminality but character of bank officers. Maybe, like background checks for guns, this is something that just needs to be enforced better.

(2) Impose a limit for banks of 10 bullets per magazine–with a "bullet" defined as $10 billion dollars and "magazine" described as "total assets." For example, JPMorgan Chase by that standard is currently using a 230 bullet magazine. Too dangerous.

(3) Don't allow any bank to locate within 500 yards of a school.

Dan LynchFebruary 2nd, 2013 at 6:28 am

Interesting analogy.

Conservatives believe (when it suits their convenience) that individuals should be held accountable for their bad behavior (unless the individual in question is a wealthy banker). That mass shootings are the responsibility of the shooter, that the shooter alone should be held accountable. Not other gun owners, not gun manufacturers, etc..

Liberals believe (when it suits their convenience) that we're all in this together and we have to look out for the common good (unless the common good is inconvenient for Democratic donors). That the common good trumps individual rights, unless the individual is gay or an illegal immigrant.

Agree with conservatives that individuals need to take some responsibility for their crimes.

Agree with liberals that we have a social responsibility to regulate and police the financial system to best serve the public good. There is no inalienable right to keep and bear derivatives, but there is a commerce clause.

LRWrayFebruary 2nd, 2013 at 9:09 pm

Clearly we already regulate weapons of mass destruction. We don't let individuals–or even other sovereign nations when we don't like their politics–accumulate nukes. I haven't yet heard the NRA try to make the case that hunters should be able to use nuclear weapons or even drones to hunt deer (altho I wouldn't put it past them–those critters can be darned hard to kill, you know). But we do allow some to hold and use drones.
Ditto financial weapons of mass destruction. I do not call for eliminating credit default swaps, for example. I do call for banning their use by any financial insitution able to borrow at the Fed or to issue insured deposits.