Embezzlement
Posted at 12:20 pm on Tuesday, December 23, 2008, in Uncategorized, and tagged economics.
I’m glad I am not the only one that thinks so (cue Gregg Easterbrook)…
Very high pay to Wall Street managers is justified on the grounds that they are financial geniuses with astonishing expertise. Instead it turns out many financial industry managers made basic blunder after basic blunder. The 2008 financial markets crash belies the entire premise of Wall Street — that the people there deserve huge paychecks for incredible skill in finance. Any fool can make money in a rising market by borrowing! But if the rise stops and you’re leveraged, you hit the wall. This is the short version of how many Wall Street and hedge fund managers appeared to be “financial geniuses” from 2003 to 2006, then ended up destroying their investors. The financial manager with true expertise knows to avoid bubbles, especially bubbles based on borrowing. Many Wall Street and big-bank managers during the housing bubble were taking wild risks or performing no due diligence — and when the risks blew up, they got to keep their bonuses while investors and stockholders got hosed. At this point, it’s totally obvious the system is rigged — lie about returns (or take crazy risks), claim a spectacular year, award yourself a vast bonus. When the scandal hits, so what? You keep the bonuses. TMQ’s basic question: Why isn’t this considered embezzlement, punishable by law? Financial managers have a fiduciary responsibility to act in their investors’ interest. When financial managers instead act against their investors’ interest in order to line their own pockets, that isn’t just cynical — that sounds like a crime.
Of course, I would take this a step further… confiscate all wealth of all money managers on Wall Street that perpetrated any fraudulent activity over the past eight years. Do that and we’d probably have a tax-cut coming.
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December 24th, 2008 at 3:05 am
Their names aren’t Madoff but their actions are no different!
How’s about this thought – ANY person responsible for but fails to exercise oversight, should be charged together with their embezzler!
December 24th, 2008 at 8:14 am
Agreed. Those responsible for the oversight of the trading activities that led to the embezzlement should be held, um, responsible.