Some commentators are suggesting that the current economic crisis is a result of amnesia. Too many years have passed since the failure of Long-Term Capital Management, a business that pursued a short term business scam, they say. LTCM followed an economic formula developed among others by Robert Merton and Myron Scholes who both won the Nobel Prize in Economic Sciences in 1997. They won for “a new method to determine the value of derivatives.” Derivatives are a steal for those who do the stealing and costly for the taxpayers who ultimately bail them out. Their “value” to society: pricey. Does the Nobel Committee ever revoke its prize?
The problem, so the thinking goes, is that everyone simply forgot. No one needs to remember. Business types respond to current incentives and disincentives not to moral intoning or calls to virtue. The message being sent today is simple and straight forward: Crime pays. Not only the criminal act itself but the cost of remedying the criminal act.
The Justice Department should hire 1000 new Assistant United States Attorneys (AUSAs) to prosecute the massive fraud that has been perpetrated on Wall Street for the last half dozen years. This is not some undigested populist anger. Without the restoration of the rule of law, the economic culture of the country will continue to rot.
Bumper sticker of the week:
Crime pays in the US of A.
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