Friday, December 31, 2010

'He used to be a serial rapist. Then he really went bad: He took a job at AIG.'

Lest anyone who stumbles across this morning's tweet thinks I'm being glib ... I'm not. Given events in the financial community as a whole in recent yearsand especially in light of the deplorable counter-market hedging strategy that Goldman-Sachs traders apparently thought would secure its future, and theirsI honestly believe that going from being an equity trader to a bank robber may be a step up in life. It's all in keeping with my theories on the nation's inconsistent and often schizophrenic posture on crime and criminality, as sketched toward the beginning of last year's Skeptic piece on same.

I didn't go too far down that road in the piece, because I didn't want people dismissing me as a nut-job and thus marginalizing the balance of the article. Still, I thought some of those questions bore raising. So I ask you again now: If we reconfigured the penal code based not on a rigid/facile interpretation of the Ten Commandments but rather in recognition of the greatest/most far-reaching damage to the greatest number of people (and the social fabric as a whole), who would draw the most severe penalties? A teenager who kills somebody while holding up a 7-Eleven? A wife who shoots her husband after catching him in bed with another woman? Or an executive at, say, Enron or Bethlehem Steel? Don't give me a knee-jerk answer. Think about it for a while: What should our laws punish most harshly?


Tyro said...

There are a lot of differences - intent, knowledge, violence, etc. Since there are so many execs at these companies, I don't think it's reasonable to generalize (which is also why it's so hard to prosecute corporate execs).

It reminds me of a similar question: which is worse, a person who places a bomb on a plane in order to blow it up and make a political statement or create terror; or a Boeing exec who was told that there may be a defect which could possibly result in a crash but does nothing, only to have a plane crash. Let's further say that the exec convinces himself that the crash would be a lot less likely than the engineers tell him, possibly through some questionable or irrational (but very human) reasoning.

In each case, the result is the same, a plane crashes and a couple hundred people die.

I suspect that most people would be outraged but still understanding of the exec since he wasn't malicious and while stupid, vain, greedy and irrational, was not malicious or violent and whose intent was never to harm anyone. I find myself reluctantly agreeing, how about you?

As to GS, AIG, Lehman & others - the sorts of shenanigans that their traders were doing were hard to understand even by the traders and all execs from the risk management department through the VPs were all shielded by layers of ignorance. Since these companies had all gone public, they had rewards for immediate profitability and ignoring long-term sustainability. It sounds like people were asking some questions and there were some processes in place to deal with risk but everyone's incentive was the same so no one wanted to look too closely especially when the profits were so big and consistent.

There were some lone voices in the wilderness trying to speak some truth and warn them of the dangers but no one wanted to accept this. Let's face it, there are many people doing this right now - some will turn out to be true, many won't. How do we react? We generally tune them out, especially if they're attacking something that is working for us today.

I think that there should be some big changes and there were some revolting instances of deception, realpolitik and cronyism in the aftermath and some incredible lapses of oversight in the lead up but if it was criminal, then what business exec is not?

I think the effect is important but, for better or worse, state of mind and the ability to foresee the consequences must also be factors. That's why I'd say prosecute the Enron manipulators but I'm not sure if Goldman-Sachs can be prosecuted.

Frankly, I think 7/11 holdups are prosecuted more seriously than white-collar crime for the same reason that we still prosecute marijuana possession but ended alcohol prohibition - the people who make & enforce the rules are likely to engage in (or be sympathetic to) white-collar crime while stickups are something poor and powerless (and therefore unsympathetic) people do.

Steve Salerno said...

Tyro: To me your last graph says it all.

Dimension Skipper said...

Interesting perspective and I don't disagree with most of it except to say that one scenario is much easier to point fingers at a specific culprit with absolute malicious intent as Tyro says whereas the other is one, or just as likely a handful of execs, playing odds and perhaps often enough getting away with it, enough so that it simply becomes "the way things are done."

No, I don't like it. It's frustrating too when things come to light that could have been easily avoided with some "common sense," but in the end there probably will never be but wrist-slapping and shoulder shrugging come of it except in the extreme worst-case "perfect storm" examples.

On a slightly related note... I just want to ask if anyone besides me has noticed that in the past year it seems (well, to me anyway) as if insurance ads have easily overtaken beer and car commercials as the most prevalent ads on TV/radio? Mostly P & G auto, but also SF, those "all-hands" folks, and many others, I'm sure. Frankly when anything is advertised that much I tend to surmise it's just an out-and-out ripoff from the get-go. But of course it's mandatory (no matter how much they claim you can "name your own price"). I also wonder what their rates might be if they didn't have to pay for ads during (very close to literally) every commercial break in programs on every channel...

The carpet bombing ad practice is similar to how a certain cable company sends me an ad in the snail mail just about every day, sometimes two in one mailing. They already have the largest portion of the local market and yet I suspect that even their actual customers get the same ads too (though I could be wrong about that, I'm sure).

Hmmm, Now that I think about it, I wonder if the TV/phone/media advertising isn't just as ubiquitous (and annoying). God help me, I think I'd prefer stupid beer commercials back. Beer, there's an app for that... it's called drinking yourself into a stupor.

That being said (tongue in cheekily)... Sgt Phil Esterhaus says "Let's be careful out there!" If you're gonna drink, keep it barely minimal and have a designated driver at least on call anyway just in case. And for the record, I don't drink. Never have. Not wine, beer, or other. Unless you count "birch" and "root" beers and I couldn't tell you the last time I had those either.

Best wishes to all SHAMizens in the new year...

Steve Salerno said...

First of all, I second DimSkip's wish for a happy and safe New Year for all. Well, maybe not all. But most. (Just kidding. I think.)

To get back to the subject matter, and DimSkip's point about the relative ease of establishing culpability in certain types of crimes (e.g. white collar vs. a convenience-store hold-up), I find myself evolving more and more to the point where I see less and less of a distinction between civil and criminal offenses. For the life of me, I do not see why white-collar miscreants who cause financial devastation to thousands if not millions of people--surely encompassing a number of suicides, bankruptcies, foreclosures and the like--should not be held accountable in criminal courts. The problem right now is that a lot of this stuff doesn't rise to the level of a particular crime--and we don't generally enforce criminal penalties against those who are guilty of "mere" recklessness, selfishness, bad planning, etc.

Well then change the damn laws. I worry a lot less about some kid who's gonna stick up the 7-Eleven on the corner than I worry about having someone without a conscience in a position of great power. I repeat: Change the damn laws.

Maybe that can even be somebody's New Year's resolution.

Dimension Skipper said...

I agree in principle with pretty much everything you say here, Steve, but I stop short of saying to change the laws only because I don't know that it would do any (or much) good.

It just seems to me that there's a huge practical difference between security cam footage of the kid robbing a 7-11 vs needing teams of detectives to sift through reams of dry and ambiguous, even contradictory, paperwork and emails (covering years) trying to pin the blame tail on the proper executive donkey(s). And in those years, various execs may have come and gone, any one or several of which could play some part, enough for more than substantial fingerpointing and doubt all around. ("It was like that when I found it.")

I just think it's one of those cases (generally speaking) where there's really no practical way to boil it down to its effective essence and certainly not on a multitude of various flexible examples. Hence the frustration of the overall issue. A specific crime with immediate consequences is one thing, a crime of negligence or greed over years is much harder to pin down and I think any attempts to change the laws will just result mainly in the lawyers getting richer more than anything.

Also, I can't come up with any specific examples off the top of my head (and the business world is far, far from my forte), but I can imagine there could even be devastating cases where despite hearts being essentially in the mostly right places, some disastrous outcome still occurred for whatever reason.

Probably the closest analogy I can think of would be a "legitimate" doctor who wants to help a patient, but errs somehow (not even necessarily through negligence or ignorance) to devastating result. Yes, he can be sued for malpractice, but it's still not a simple open-and-shut case usually. (As far as I know, which admittedly isn't very far and I could easily be wrong.)

For me, intent (in so far as it can be determined) does make a difference when it comes to meting out punishments even though again, I also agree in principle that the scale of consequences involved should somehow be a factor too. But then again, I wouldn't want to be a customer shot in that 7-11 and have the gunman released because, well, only *one* person was really harmed so it's not that big a deal. The argument can be twisted around to work the other way... well, at least by "good" lawyers anyway.

I guess my bottom line is just that I see waaaaay too much gray area and no way to properly codify any new laws to have "teeth." Unfortunately the worst ba****ds know this and no doubt rely on it to help them get away with things as long as possible (to retirement?) with minimal personal consequences (none?).

I admit though that this is the sort of subject matter where I am horribly out of my depth. Basically I'm just shooting my fingers off spouting opinions that I have no clue about as far as any relation to facts. I will easily bow to your and others' expertise in such things. This is all just how my layman's brain sees it at first glance, that's all.

And that's how I'll try to leave it for my part.

Steve Salerno said...

DimSkip: Happy New Year.

Actually, far from being out of your depth, I think you hit upon many of the reasons why the laws are the way they are (apart from, again, those facile interpretations of the Ten Commandments). It's easier to point to someone in a lineup and say "He did it! He's the guy who raped me!"

Although... (minor digression) article in today's paper highlights once again the colossal problems surrounding eyewitness identifications. And anyone who has followed the Innocence Project knows that late-coming DNA results have exonerated a fair number of convicts who were "positively" ID'd at trial.

Another problem, a corollary of that whole thing about the Ten Commandments, is that laws against most major felonies were crafted and codified at a time when lawmakers (and the citizenry as a whole) could not even conceive of some of the quandaries we face today. Identity theft? Covert manipulation of credit-default swaps? Online banking and e-commerce? Who knew?? Same thing with the Constitution. It's a marvelous document for its day, but let's face it, its day is past; there are so many senses in which it is largely and fatally inapplicable to today's world (though you will never hear a politician with any serious office-holding ambitions say such a thing).

Then again, pointing fingers at problems is easy. It's the solution component that often stymies us., anyone?

RevRon's Rants said...

I'm the last one to want to add new laws, especially since the folks who would be breaking these laws are the most likely to have attorneys on retainer capable of finding loopholes for them. I lean toward what may well be an overly simplistic solution, which does involve some governmental involvement.

How about a law stating that whistleblowers who provide concrete proof of criminal behavior not only be protected from retaliatory actions, but be compensated for bringing criminal malfeasance to light. The company that employed the whistleblower would be responsible for paying a substantial reward to the whistleblower, a la Crimestoppers.

Companies would be more motivated to self-police and ensure that their actions are above board, whistleblowers would have something to offset the negative financial impact of their having come forward, and the chain of evidence required to prosecute a case would be significantly more transparent.

We already have a similar mechanism with the IRS, which pays a reward to anyone who snitches on a tax evader.

Dr Benway said...

Hey I think I love this blog. I will be back to read more of it.

I agree with commenters saying it's easier to assign blame to perpetrators of physical violence as compared to the corporate crooks who, although more disruptive of society generally, are likely symptomatic of deeper problems.

I suspect the present madness within the financial industry is related to the invasion of "integrative medicine" within US med schools. That movement has been driven by three factors: narcissism + New Age + criminal clans loosely connected to Scientology's old intelligence/PR/legal network.

1. Narcissism. Patients get two conflicting medical opinions and select the one they *prefer.* Once upon a time they'd have wanted to know which opinion is *correct.* In other words, subjective value now trumps objective value. Ergo, for-profit hospitals offering post-op Reiki.

2. New Age. Law of Attraction. Prosperity gospel. Claim it in the name of Jesus. You create your own reality. "What's true for you is true for you" --that's the first pernicious bit. The second is: "Where two or more of you are gathered in my name," "Reality = Agreement" --i.e., politics and tribalism trump facts.

3. Bad people. Rich ambitious wankers funding criminal networks with back-end access to large databases and ISPs. They're hard to raid because they know about the raids long before the knock on the door.

How to fix?

Well, narcissists are strongly motivated to avoid looking stupid. They experience mockery as akin to serious physical harm. That's why they yell, "hate crime!" at anyone who says bad stuff about them on the Internet.

I think we can push back against those promoting wooly-headed nonsense in finance and healthcare by cranking up the pointing and laughing and general social disapproval. Let the rejection be forceful enough to disrupt any illusion of debate or other signifier of intellectual legitimacy. In other words, don't argue with an MLM proponent or vitamin salesman; tell him to kill himself in a fire. Eventually the blunt message of failure should disrupt the culture of mutual reassurance that now exists between the con artists and their followers.

Anyway that's my plan until I come up with something better.

Steve Salerno said...

Doc: Well, we think we love having you here. ;)

I like your point about the proper push-back against narcissists; and I see the evidence for it. Don't know if you happened to catch my hour-long ABC special on self-help-gone-wrong last summer, but there was one priceless moment where ABC's Dan Harris confronted self-styled guru Joe Vitale with a question that clearly caused some embarrassment, and oh-boy, could you ever see the steam trying to find its way out of Vitale's eye sockets!

By all means, read up and join the parade. It's clear that you have much of value to add.