Question 12-C in last week’s Time Poll reads as follows:
Agree or Disagree? Executives of financial institutions responsible for the financial meltdown in 2008 should be prosecuted. (Question was asked of respondents familiar with the recent Wall Street protests.)
NO ANSWER/DON’T KNOW 6%
Missing from the options offered, unfortunately, was something along the lines of “Only the ones who have committed crimes.” Wouldn’t you say that’s a pretty serious omission? After all, there is no law on the books against the vague if ominous-sounding offense of being an executive responsible for a financial meltdown.
Some people help bring on financial crashes by committing acts of fraud, in which case it should be straightforward enough to prosecute them for those acts (and if the fraud has contributed to a wider economic calamity, things will probably not go well with them at sentencing). Other people help bring on a crash by insisting on their rights in an entirely lawful way. (“Sorry, Bear Stearns, but we’re declaring you in default on the money you owe us, and we don’t care if the Treasury secretary begs us to hold off till next week. We’re pulling all our money out of Lehman too.”) At least in a financial world where ignoring the Treasury secretary’s pleas is not yet a punishable offense, prosecution of someone in the latter position is probably doomed to acquittal.
And in between? In between are very many persons who behaved rashly or negligently in the period leading up to the crash, bought into bubble psychology, placed risky bets in the correct expectation of future bailouts and federal financial guarantees, built up mortgage businesses on models that were widely approved by experts at the time but now look deeply stupid in retrospect, and so forth. Reprehensible though some of those behaviors were, most of them do not violate any current law. Indeed, even among left-leaning lawmakers it is hard to find much of a serious constituency for broad-brush laws that would attempt to criminalize, say, financial negligence or risk-taking resulting in the need for a bailout. Criminal law needs to lay out more specifically what it is prohibiting.
It’s fair game to question failures to prosecute when the particulars are on the table: Why aren’t A and B facing charges when there’s strong evidence they violated U.S. Code such-and-such? It’s another matter to say we’ve had an economic calamity, someone needs to go to prison for it, and if we can’t identify some law they’ve broken then we should retroactively invent one to fit. If some demagogue out there is hoping to raise the latter demand, he may be smiling to himself at that 71-to-23 poll result.