| What in there was actually a crime though? The people who try to sell you timeshares with high-pressure sales tactics are also pretty scummy, but we don't throw them in jail for selling bad investments. The slideshare mentions they couldn't sell them to 'windows and orphans': I'm assuming these needed to be sold to accredited investors. Accredited investors get pitched bad investments all the time; many people here may work for startups that are one of them. Some startups get growth using scummy marketing techniques just to offload the company to investors like Google before it implodes. Some of those investors may be VCs managing, e.g., the Northwest Plumbers' Pension Fund or the Kansas School Board. None of those VCs should go to jail, even if they are mismanaging the money in some cases(I'm not making a claim that they are, overall). The depositors at the banks should be covered by the FDIC, so they aren't really at risk. The FDIC threaten to recover some of their money from the executives and accountants, and agencies tend to follow up on this sort of thing. What exactly is so wrong with selling bad investments to other companies that we should throw them in jail? That the investments were AAA ratings should be irrelevant: they are just rankings from private companies, so they should carry as much legal weight as asking your bartender for advice on the stock market. (edit) My assumption that AAA ratings carry no legal weight is false. I found this, which has a good overview:
http://www.sec.gov/news/studies/credratingreport0103.pdf This is a mess: You can't use private companies to set regulations, even if it appears to work some of the time. It's just as bad as making laws that require me to only use my bartender's highest-rated stocks when investing the local college's endowment fund. They need to either scrap it from the law or set up a separate government agency that does nothing but evaluate creditworthiness of securities. Still though - where is the actual crime? Private companies scumming each other for money is to be expected, and would only be a problem if they actually lied on a contract(rather than merely neglecting to do due diligence). Was the suggestion to send the thousands of people who made fraudulent loan applications - after being egged on by salespeople - to jail(possibly with the salespeople)? That's plausible, but not a crime of the bankers. |
It also meant that bankers could craft poisonous securities, get them rated AAA, and then massively short them. I recall one case like that, though I'm blanking on the details.