Not prosecuting those who caused the financial collapse in 2007-8 may also cause future financial crises as the destruction of the Rule of Law breeds distrust in the financial system. If the financial system is seen as exploitive then the economy will continue to falter. The bailing out of Goldman Sachs and other banks makes the economy seem riskier and banks less trustworthy.
Because bank fraud caused the financial crisis, then just asking Goldman (politely) to pay a small fine for its frauds (and never do that again!) confirms the public's perception that the banks are getting away with committing fraud. When wrong doers are punished with criminal prosecutions, then confidence can be restored.
The Lie that Prosecuting Bank Fraud Will Destabilize the Economy Is What is REALLY Destroying the Economy
Failing to Prosecute White Collar Crime Guarantees a Weak and Unstable Economy … and Future Financial CrashesThe Departments of Justice and Treasury are pretending that criminally prosecuting criminal banksters will destabilize the economy.
The exact opposite is true.
Failing to prosecute criminal fraud has been destabilizing the economy since at least 2007 … and will cause huge crashes in the future.
After all, the main driver of economic growth is a strong rule of law.
Nobel prize winning economist Joseph Stiglitz says that we have to prosecute fraud or else the economy won’t recover:
The legal system is supposed to be the codification of our norms and beliefs, things that we need to make our system work. If the legal system is seen as exploitative, then confidence in our whole system starts eroding. And that’s really the problem that’s going on.
I think we ought to go do what we did in the S&L [crisis] and actually put many of these guys in prison. Absolutely. These are not just white-collar crimes or little accidents. There were victims. That’s the point. There were victims all over the world.
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