Bad Deeds Go Unpunished

Daniel Gross poses the question confounding many Americans, “Why do the banks get away with murder?”

Day after day, our largest financial institutions continue to be revealed as unreformed, largely unrepentant bad actors. Regulators, prosecutors, and plaintiffs in lawsuits continue to unearth scandalous behavior from before, during, and after the credit boom. Bankers conspired with their colleagues, with their counterparts at other banks, and at ratings agencies to milk money through plainly illicit and unkosher means. When caught, frequently indicted by their own emails and instant messages, the banks agree to pay big fines, utter pro forma apologies, and move on. A few people may lose their jobs, and a lot of people may lose their bonuses. But nobody goes to jail.

Why? Prosecutors fear that indicting a highly leveraged, highly indebted institution would trigger a cascade of unwanted outcomes—capital flight, bank runs, disruptions in vital markets. “The greatest triumph of the banking industry wasn’t ATMs or even depositing a check via the camera of your mobile phone,” notes Barry Ritholtz, a money manager and author of Bailout Nation. “It was convincing Treasury and Justice Department officials that prosecuting bankers for their crimes would destabilize the global economy.”

The crime without punishment is as predictable as it is infuriating.

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