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View Diary: Too Big to Jail? (158 comments)

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  •  Two separate points (1+ / 0-)
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    1. "Too big to jail."  Even if you believe in TBTF, tossing the CEOs in jail doesn't break up the bank.  At $10 million/year, there's not going to be any shortage of qualified applicants for the job.

    The problem is that it is hard to prosecute banksters, for the same reason that it's hard to prosecute mob kingpins.  We dealt with the latter by passing laws to make it easier, and by simply adding more resources; the mob is getting offshored because it is no longer safe for kingpins to operate in the US.  You need to build a proper organized crime task force -- and use stuff like RICO, the current laws about financial fraud, and some of that wiretap capability (why is it OK to wiretap political dissidents and use informers to spy on them, but it's not OK to do the same thing to bankers suspected of illegal activity?)

    2. "Too big to fail."  Just breaking them up means you'll have forty smaller TBTF banks, which will recombine with the inevitability of a CGI baddie in a "Terminator" flick.  The biggest problem right now is that the separation between investment and commercial banking needs to be put back in place (with high risk trading relegated to specialist hedge funds where it belongs, and closure of the loopholes regarding the ownership of private equity).  The whole experiment with 1999-vintage deregulation is a failure, and should be undone.  Once that happens, you'll eliminate a lot of the incentive for mega-institutions; their CEOs will feast one last time on the windfalls from divesting them and then you'll have more, smaller banks.  The horse is out of the barn regarding restrictions on the size of banks, but you can always do things like allow credit unions to take anyone they like but not allowing them to merge with each other.

    None of the above is rabid socialism.  It is how you reinstate true free-market capitalism in the financial sector.

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