PhillyDeals: Should some bankers be in jail?

Posted: June 24, 2014

Listening to bankers - the local kind - Penn Law professor David Skeel, a historian of bankruptcy, "corporate shaming," and other questions of money and morals, hears two almost contradictory complaints:

They feel "hammered" by tighter federal rules - while big nationwide banks, which have more resources to keep regulators at bay, are lending too much.

"They are making no-document loans again, and lending to people who shouldn't be borrowing."

So says the author of The New Financial Deal (2010) - about President Obama's banking reforms - and Debt's Dominion: A History of Bankruptcy Law in America (2003).

Should the government have put more people in prison for the last banking crisis?

"The effect of sending a couple of prominent people to jail is more powerful than almost anything else you can do," Skeel said.

But what's the charge? "There was massive, unjustifiable risk-taking. It's still not clear to me there was massive illegality," he told me.

Could you say lenders created a criminally "hostile lending environment," to borrow a concept from labor law? It's less difficult to prod a corporation to pay a big fine than to beat its well-financed and well-lawyered individual bosses into prison, Skeel said.

Skeel still thinks - differing with ex-Treasury Secretary Tim Geithner - that "the big mistake in 2008 was bailing out Bear Stearns." A bankrupt financier should reorganize or liquidate like other borrowers, forcing others into line.

"It would have been ugly, but a lot less ugly," Skeel believes.

Could a stronger moral compass help? Skeel's next book, True Paradox, will review "how Christianity makes sense of a complex world."

What did Clinton say?

Bloomberg reporter Richard Rubin in a story noted that Bill and Hillary Clinton, who claim to support inheritance taxes, have hired trust professionals so their heirs won't have to share with the people.

Rubin sifted through would-be President Hillary's official disclosure forms and noted that ex-President Bill earned a quick $200,000 making a speech for the Vanguard Group, the Malvern mutual fund giant, in 2012.

What did Vanguard get for its clients' money?

"Every other year, we host a conference for our institutional clients - companies that hire us to administer their 401(k) and other retirement plans - as an education forum," said spokeswoman Linda Wolohan. "Our clients have asked that we provide diversity of thought, especially on leadership, which is why we bring in speakers such as Mr. Clinton.

"Because this conference was held in Washington in 2012, an election year, we looked for a speaker who could provide perspective on major issues. Mr. Clinton was available and served as our speaker that year."

Please don't get the wrong idea, Wolohan added: "Vanguard is party-neutral; we did not ask him to speak politically, nor did he. He spoke about his foundation and ways to propel social change."

215-854-5194 @PhillyJoeD

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