Too Big to Prosecute

William Greider in The Nation:

A better name for the Justice Department’s softened policy might be “too big to prosecute.” Just as the Federal Reserve used the “too big to fail” doctrine to rescue big financial institutions from their mistakes, Justice has created an express lane for businesses and banks to avoid the uglier consequences of their illegal behavior. As a practical matter, the option is reserved for the larger companies represented by the leading law firms. They have the skill and clout to negotiate a tolerable settlement.

The piece is a great look at how corporations, specifically Wall Street banks, have avoided any punishment for their crimes. Usually banks escape with minimal fines that in no way hinder the ability to continue to operate, let alone be deterred from illegal behavior in the future.

“Crime is defined as price rather than punishment,” Greenfield notes. In the new normal, “corporations can say, ‘Well, is the crime worth the price, discounted by the probability of getting caught?’ Because you can’t make a corporation go to prison. They have no morality, no human personality or sense of morals, other than the morality of the market that reduces everything to money. If the only way to punish companies is with money, then the fine sets the price for crime.”

Restoring a corporate death penalty would be a hell of a way to punish corporations who break the law. Of course the odds of that in today’s political environment strike me as just about zero. Greider’s article floats a number of lesser penalties that could be used to rein in corporate malfeasance. He makes a good point towards the end about how we should be thinking about punishing corporations for illegal behavior:

Business failure gets punished unsentimentally. Criminal behavior should be clearly defined as business failure.

Greider’s closing point is that the best way to ensure that there starts to be accountability for corporate criminal behavior is to stay on the course we are on and change nothing. The next collapse will happen and it will likely be caused, at least in part, by criminal behavior at the corporate helm. At that point, the level of outrage will provide sufficient drive towards meaningful reform. Or at least that’s Greider’s expectation. That it requires massive economic pain to become a possibility is obviously a discouraging point. People organizing around this issue would do well to try their best to get change now before there are literally pitchforks and torches coming to get the banksters. This was largely President Obama’s argument in early 2009, that he’s the one standing between banks and the angry masses. Greider’s piece should be a reminder to the President and to corporate leaders that when the next collapse comes, the level of anger will be orders of magnitude greater than it is now. Rather than get to that point, I think it would behoove corporate leaders to come to the table now and take actions that would help avoid another financial collapse.

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