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Title: FESTERING FOR YEARS - Economist Joseph Stiglitz: Put Corporate Criminals in Jail
Source:
Daily Finance
URL Source: http://www.dailyfinance.com/story/i ... orate-crooks-to-jail/19684353/
Published: Oct 23, 2010
Author: By SAM GUSTIN See full article from Dai
Post Date: 2010-10-23 01:15:31 by HAPPY2BME-4UM
Keywords: None
Views: 108
Comments: 8
An institutionalized system of skewed incentives allowed Wall Street bankers and other corporate executives to gamble with America's wealth and then get away largely scot-free after the house of cards came tumbling down, plunging the U.S. into the worst economic crisis in decades and destroying trillions of dollars of wealth worldwide. Highly complex financial instruments and off-balance-sheet transactions allowed the bankers to keep much of their activity hidden from woefully understaffed regulators at the SEC and other supposed financial watchdog agencies. And if the regulators did catch some fraud, Stiglitz explained, the system of penalties generally meant a small fine relative to the full ill-gotten gains, often in the hundreds of millions of dollars. Economist Joseph Stiglitz: Put Corporate Criminals in Jail
That's the analysis of Joseph Stiglitz, an internationally renowned economist and winner of the 2001 Nobel Prize in economics. (His latest book, Freefall: America, Free Markets, and the Sinking of the World Economy, is just out in paperback.)
During a wide-ranging interview with DailyFinance at AOL headquarters in New York City this week, Stiglitz, who served as chief economist of the World Bank from 1997-2000 and is currently University Professor at Columbia University, explained how the availability of cheap money (thanks in large measure to former Fed Chairman Alan Greenspan), combined with outright mortgage fraud and deceptive and predatory lending practices put millions of people into homes they couldn't afford and caused real estate prices to skyrocket. That created a bubble that would inevitably pop. (See video below, or read the full interview transcript.)
"Festering For Years"
"We have to understand that the problems have been festering for years, not just the last three years," said Stiglitz. "In the years prior to the breaking of the bubble, the financial industry was engaged in predatory lending practices, deceptive practices. They were optimizing not on producing mortgages that were good for the American families but in maximizing fees."
Meanwhile, stock-based compensation created further skewed incentives by encouraging executives to pursue short-term stock gains at the expense of long-term corporate sustainablity, Stiglitz said, and in some cases encouraged them to deceive their own shareholders.
"Still Home Sitting Pretty"
Legal penalties for financial fraud in the U.S. have become "just a cost of doing business," Stiglitz said. "It's like a parking fine. Sometimes you make a decision to park knowing that you might get a fine because going around the corner to the parking lot takes you too much time."
"We fine them, and what is the big lesson?" said Stiglitz. "Behave badly, and the government might take 5% or 10% of what you got in your ill-gotten gains, but you're still sitting home pretty with your several hundred million dollars that you have left over after paying fines that look very large by ordinary standards, but look small compared to the amount that you've been able to cash in."
Taken together, Stigliz said, this system of widespread fraud, lax regulation and non-deterrent enforcement, created a system of skewed incentives that rewarded criminality, gambling and other bad behavior, and left American workers, investors and homeowners holding the bill.
Meanwhile, the astonishingly disproportionate influence of the big banks and corporations on the American political system has allowed powerful executives to exert their will on the U.S. government at the expense of the people, Stiglitz said.
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#1. To: All (#0)
U.S. Constitution - Article IV, Section 4: NO BORDERS + NO LAWS = NO COUNTRY
Americans are getting angry but only at the other party. In the meantime unemployment is going to increase and real wages will decrease. So what will the Angry Americans do? They will vote one party Democrats or Republicans out of office and replace them with the other party (what they have been doing for years), and expecting different results.
Trillions of wealth as represented in plant, production and earnings have not been destroyed. The West's financial system is largely in the hands of Jews who have found simple ways to transfer paper, representing wealth, to Israel to pay for things like the hundred $100-million/plane F-35s, needed to prevent Arabs from taking back land stolen from Palestinians. So, with all the greedy-for-Israel Jews around Americans should have been watching their wallets rather than the mesmerizing television nonsense (guess who) produced to serve as a distraction.
==================================================== Sad, but true.
U.S. Constitution - Article IV, Section 4: NO BORDERS + NO LAWS = NO COUNTRY
"Politics and Religion are the building blocks of slavery and oppression. Greed is the mortar that bonds them" and bankers are the masons with trowels in hand !
If we were serious about being honest with ourselves we'd outlaw all fiction or fraud especially that which has been created through law. Stiglitz points out the irreparable damage to natural persons by artificial ones like corporations. We've allowed these "things" born in innocence under regulation to mature into FRANKENSTEINs that are ravaging the nation and its natural people. These (artificial) entities are all frauds. Just because we've grown accustomed to them doesn't change anything. They are destructive to our way of life. One lie begets another lie until the lies are plentiful and truth non-existent.
"Politics and Religion are the building blocks of slavery and oppression. Greed is the mortar that bonds them" and bankers are the masons with trowels in hand !
Right now, the shareholders, who are supposed to be the owners, have no say in pay. They have no say in the decision about how much their CEOs get paid. In some countries there is a sense of corporate responsibility. There's a sense that the shareholders own it, and the owners should have the right to vote, at least in an advisory sense. If you're going to rob your shareholders, shouldn't they have the right to say I don't like this? And yet in America, the corporations have been resisting this. I think it's the same thing in the area of advertising and campaign contributions. As a shareholder, I should have the right to make sure the corporation that works for me, that I own, doesn't go against my interest. For instance, as a shareholder in BP -- I'm not, but if I were -- I want them to have safety, I don't want them to pollute the country. And I'm going to say they should act in a socially responsible manner and a responsible way. Shouldn't we have that right? See full article from DailyFinance: srph.it/bSxb8q While the Board of Directors is recruited by management it's the shareholders who confirm their appointment. So shareholders have the ultimate say on who is CEO, how he's paid and so on. The BP exec scores big points with shareholders, especially fund managers, by the profits he produces, not the safety record of the company (until all hell breaks loose, which seldom happens). So that's why the BP joker ignored a subordinate's warning about short cutting a safety issue. Same thing happened in Chile's mine cave in. Lesson: Workers must have the legal right to vacate a site they deem dangerous without suffering a loss of job but perhaps the day's pay.
All institutions of man become corrupted because strict liability is avoided, passed on to others, or simply not observed. Creating corporations in the beginning required a charter that mandated a public benefit be served during a pre-determined limited lifespan. Over time these requirements were changed or ignored because they inhibited the ability of criminals to abuse the public welfare they were supposed to enhance. BP can pollute the Gulf because of their own negligence and no one goes to jail, the real pain is absorbed by their investors or taxpayers and the big shots are hidden away from liability within the corporate structure, while you can be arrested or fined when a piece of paper accidently blows out of your auto while cruising down the highway. There is only one way to prevent men from corrupting corporate institutions and that is to ban them permanently. They are a fictitious invention of which NONE survive man's ability to corrupt them.
"Politics and Religion are the building blocks of slavery and oppression. Greed is the mortar that bonds them" and bankers are the masons with trowels in hand !
Let them eat CAKE!
#2. To: HAPPY2BME-4UM (#0)
#3. To: HAPPY2BME-4UM (#0)
An institutionalized system of skewed incentives allowed Wall Street bankers and other corporate executives to gamble with America's wealth and then get away largely scot-free after the house of cards came tumbling down, plunging the U.S. into the worst economic crisis in decades and destroying trillions of dollars of wealth worldwide.
#4. To: Tatarewicz (#3)
Americans should have been watching their wallets rather than the mesmerizing television nonsense (guess who) produced to serve as a distraction.
#5. To: HAPPY2BME-4UM (#0)
FULL INTERVIEW TRANSCRIPT: MUST READ !!!!! www.dailyfinance.com/stor...view-transcript/19684345/
#6. To: All (#5)
#7. To: noone222 (#6)
#8. To: Tatarewicz (#7)
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