[sehansen]

Hundreds of financial institutions with greater or lesser responsibility for the crash in 2008 went under in those years[0]. The shareholders in almost all of these companies lost all of their money and the responsible employees lost their jobs. This includes some of the most guilty companies, like Washington Mutual, Countrywide Financial, IndyMac, Lehman Brothers, Merrill Lynch (through First Franklin Financial), Bear Stearns. But all these companies are completely forgotten now.

Instead everyone hates on Goldman Sachs. Sure, Goldman Sachs deserves hate, but of the big banks they were the _least_ guilty of the crash in 2008. Not saying they were saints, but in 2008 they were the least bad.

0: This list only covers banks, not non-banks like Countrywide Financial: https://en.wikipedia.org/wiki/List_of_bank_failures_in_the_U...

[lenerdenator]

When you have people at the top of those institutions who made those decisions, and made enough money during their tenures to weather any length of unemployment and were sometimes even given a severance worth more money than the average American makes in a lifetime, going out of business or losing a job simply isn't enough.

It's one of the only investments of labor and time where the risk is not proportional to the return.

In order to create risk, you have to either claw back their money through civil action - which you can't because the entire point of incorporation is to separate the business entity from one's personal finances - or look at criminal charges. Otherwise, you have created a class of hyper-wealthy people who have no real incentive to perform in a way that is for the best interests of shareholders or society at large.

It's the reason we tie so much for regular people to employment in the US, like healthcare. Many argue that if you give the rank-and-file worker the kind of long-term financial security that just one or two years of being a C-suite executive at a major company, they won't work as hard. They won't make the best decisions. They won't be the dynamic workers our economy supposedly wants. That logic goes right out the window when a board goes hunting for a new CEO.

There's zero real risk involved.

[keernan]

>The shareholders in almost all of these companies lost all of their money

How is that penalizing those responsible?

Isn't it a pretty big leap to go from penalizing those selling packaged fraudulent loans to the public (whom, to my knowledge were never prosecuted) to the shareholders losing money as protection against it happening again?

[sehansen]

The shareholders are responsible for the management of the company who are in turn responsible for their employees. By wiping out the shareholders in these companies hopefully other shareholders in other financial companies will demand more oversight. In the end people respond to incentives and the individual employees that sold the fraudulent loans were implicitly or explicitly incentivized to do so by management, who were in turn rewarded for this by shareholders. Going after the specific employees that sold the loans is of course morally satisfying, but if we want this to not happen again we need to make shareholders and executives keen to avoid a repeat. Looking at how popular Klarna, gambling companies and now private credit has been with investors, it doesn't seem to have worked, unfortunately.

But, yes, it is a travesty that more of the subprime loan salesmen weren't prosecuted. It has a lot of value for a society to actually convict people that have done actual wrong. We all want to live in a just world and seeing that people who have done wrong get what they deserve is part of that. Looking at the US from the outside I think a lot of the polarization we've seen in the US over the past 15 years could have been avoided if more prosecutions had happened in 2008-2012.

IMO this is also why big companies being allowed to do settlements without admissions of wrongdoing is so bad. They fail to fulfill the moral purpose of law enforcement. Ironically Goldman Sachs _did_ admit wrongdoing in their settlement with the SEC over their Abacus CDFs...

[lenerdenator]

The problem is, shareholding is now so abstracted as to make actual corrective action incredibly unlikely.

If you have investments, go and look what your holdings are. There's a real chance you have some sort managed portfolio that will trade equities to maintain growth. It might be algorithmically-driven. Your holdings may very well temporarily include some companies that you don't approve of, but trading happens so fast and so often that you're not going to be able to keep up on what you actually own.

[keernan]

That is a highly abstract theoretical view that is true of private corporations but does not reflect the real world of public traded corporations.

[globular-toast]

The tap went off, but they kept the water they collected from it.