Why weren’t the Wall Street executives prosecuted for the 2008 economic crisis?
The financial crisis of 2008 was a severe blow to the banking system of the developed world. Even though in the aftermath of the crash, primary reasons and culprits were identified, the senior executives of the Wall Street – the main offenders – went unpunished, causing a lot of criticism of the Department of Justice. The question is, whether there are any objective factors that explain the impunity of the major players in the corporate world.
One of the main reasons lays into the fundamental principle of the corporate law, namely, the corporations are held accountable for the actions of their employees during the period and scope of their employment, rather than individuals themselves (212 U.S. 481 (1909)). Acting on this rule, prosecutors punish corporations for wrongdoings of their employees. However, corporations have “no soul to be damned, no body to kick” (Coffee, 1981), so they pay with the check.
Generally, since 2009, 49 financial companies were imposed enormous fines and paid about $190 billion to the state and individuals (Cohan, 2015). Nevertheless, this money was derived from the shareholders’ pockets, so basically, no banker suffered from these fines personally.
In the cases, the prosecution process against a corporation is initiated, it often results into the damaged reputation of the defendant company, leading to the slump in its stock price and financial instability of the company. This is why often deferred prosecution agreement takes place when the organization pays fines in order to escape conviction.
To sum up, the main cause of Wall Street executives’ immunity to punishment is an inadequate system of justice, that punishes corporations instead of individual wrongdoers.
- Coffee. J.C. (1981) ‘No Soul to Damn: No Body to Kick’: An Unscandalized Inquiry into the Problem of Corporate Punishment,” Michigan Law Review 79: 386
- Cohan, W.D. (September 2015) How Wall Street’s Bankers Stayed Out of Jail. The Atlantic. Retrieved from http://www.theatlantic.com/magazine/archive/2015/09/how-wall-streets-bankers-stayed-out-of-jail/399368/
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