Bernie Madoff has died(bloomberg.com)
bloomberg.com
Bernie Madoff has died
https://www.bloomberg.com/news/articles/2021-04-14/ap-source-ponzi-schemer-bernie-madoff-dies-in-prison
403 comments
Corporations (which are usually the payer of fines for bad behavior) don't fear prison because they can't be physically imprisoned. You can't put Exxon in jail. And, lawmakers deliberately make it so damn hard to pierce the corporate liability veil and hold shareholders or directors personally liable for the corporation's actions.
So, we need to both move more towards prison and start digging in to which actual people inside bad corporations were responsible for deciding to do wrongdoing.
"BigCo settled and paid an insignificant $20M out of their river of money" is not very satisfying to read. "Joe Bigshot, former SVP at BigCo, was sentenced to 5 years in jail, and had to sell two of his nine houses to pay the $20M fine" is much better.
So, we need to both move more towards prison and start digging in to which actual people inside bad corporations were responsible for deciding to do wrongdoing.
"BigCo settled and paid an insignificant $20M out of their river of money" is not very satisfying to read. "Joe Bigshot, former SVP at BigCo, was sentenced to 5 years in jail, and had to sell two of his nine houses to pay the $20M fine" is much better.
> You can't put Exxon in jail.
If a corporation is a legal person with inalienable rights (as the SCOTUS seems to have decided on), but is intangible and immortal at the same time, what can you do? Any of the below:
* freezing assets (=~ reclamation)
* seizing accounts (=~ civil forfeiture)
* suspend a business license (=~ locking them up)
* introduce a revenue cap (=~ prison labour)
* remove lobbyists (=~ losing voting rights)
* dissolve or nationalise the company (=~ death penalty)
This is by no means an exhaustive list.
If a corporation is a legal person with inalienable rights (as the SCOTUS seems to have decided on), but is intangible and immortal at the same time, what can you do? Any of the below:
* freezing assets (=~ reclamation)
* seizing accounts (=~ civil forfeiture)
* suspend a business license (=~ locking them up)
* introduce a revenue cap (=~ prison labour)
* remove lobbyists (=~ losing voting rights)
* dissolve or nationalise the company (=~ death penalty)
This is by no means an exhaustive list.
Require all c-level execs and board members to sign affidavits proving they had zero knowledge of the illegal activity, any who were found to commit perjury later on will get 5x the original sentence that normally is given for the crime.
Anyone who provides proof of perjury on another member of the board/execs will receive leniency/clemency.
All felonies against corporations must hold at least one person in jail for a minimum of 3 years. Every c-level exec must serve a minimum of 1 year, with very few exceptions... (e.g. CTO started work one day before everything went to shit, literally had no knowledge)...
I also think cops who cover up for, or are "quiet" about other cops who've committed crimes, if it comes out they "knew" and didn't tell anyone should serve the same sentence.
People in authority need to have consequences, the only way to stop corruption is for corruption to be painful and very complicated so that only a "few" get away with it, the more people get away with it the more it happens.
Anyone who provides proof of perjury on another member of the board/execs will receive leniency/clemency.
All felonies against corporations must hold at least one person in jail for a minimum of 3 years. Every c-level exec must serve a minimum of 1 year, with very few exceptions... (e.g. CTO started work one day before everything went to shit, literally had no knowledge)...
I also think cops who cover up for, or are "quiet" about other cops who've committed crimes, if it comes out they "knew" and didn't tell anyone should serve the same sentence.
People in authority need to have consequences, the only way to stop corruption is for corruption to be painful and very complicated so that only a "few" get away with it, the more people get away with it the more it happens.
> If a corporation is a legal person with inalienable rights (as the SCOTUS seems to have decided on)
Please stop repeating this nonsense. Corporate Personhood is a legal idea, and does not mean a "corporation is a legal person". Without corporate personhood, you wouldn't be able to sue a company for wrongdoing if the guilty employee quit, or even enforce basic contracts.
There are serious problems with corporations not being held liable, but the situation would be worse without Corporate Personhood, not better.
Please stop repeating this nonsense. Corporate Personhood is a legal idea, and does not mean a "corporation is a legal person". Without corporate personhood, you wouldn't be able to sue a company for wrongdoing if the guilty employee quit, or even enforce basic contracts.
There are serious problems with corporations not being held liable, but the situation would be worse without Corporate Personhood, not better.
You can sue the government even though they aren't granted personhood.
Its harder to sue the government than you might think, see for example: https://en.wikipedia.org/wiki/Sovereign_immunity_in_the_Unit...
Regardless, the argument there isn't that you can't sue the government at all, but instead that the government is granted immunity for some subset of actions.
Going back to the original point, personhood is clearly not a requirement for being named in a suit. For more examples you can also see in rem cases, where the government sues property itself for civil forfeiture. 11 1/4 Dozen Packages of Articles Labeled in Part Mrs. Moffat's Shoo-Fly Powders for Drunkenness did not need personhood to be named in a lawsuit. https://en.wikipedia.org/wiki/United_States_v._11_1/4_Dozen_...
Going back to the original point, personhood is clearly not a requirement for being named in a suit. For more examples you can also see in rem cases, where the government sues property itself for civil forfeiture. 11 1/4 Dozen Packages of Articles Labeled in Part Mrs. Moffat's Shoo-Fly Powders for Drunkenness did not need personhood to be named in a lawsuit. https://en.wikipedia.org/wiki/United_States_v._11_1/4_Dozen_...
> but instead that the government is granted immunity for some subset of actions.
It's actually the opposite. You can only sue the government when they explicitly give you permission.
https://en.wikipedia.org/wiki/Sovereign_immunity_in_the_Unit...
It's actually the opposite. You can only sue the government when they explicitly give you permission.
https://en.wikipedia.org/wiki/Sovereign_immunity_in_the_Unit...
The whole point I'm making here is that you can sue an entity without personhood.
That's right. I just pointed out the one of the pieces of evidence you used is slightly wrong. Suing the government is a very special case.
See the "Exceptions and abrogation" section of your own citation. It is indeed a (albeit large) subset of actions to which they can apply sovereign immunity.
Yes. All I'm trying to say is it's opt-in, not opt out. I don't find this particularly interesting or important so this is the last comment I'll make here.
Civil forfeiture where govt sues "property" to seize it so they don't have to have a trial for the person owning said property is a shady dark pattern that shouldn't be cited as an ethical approach at all. Just my opinion.
It's not being cited as an ethical approach, only that the court system clearly doesn't require something to have full personhood in order to be sued.
‘Granted personhood’ doesn’t mean anything. The relevant legal term is ‘legal personality’. Governments certainly have legal personality. If they didn’t they wouldn’t be able to enter into contracts, file lawsuits, or... really make any claim to exist in any meaningful way.
Is the government itself granted first amendment protections as an association of citizens?
Or is it thought of a fundamentally different sort of entity, that yes can enter some sorts of legal arrangements, but isn't granted all the rights of a citizen?
Or is it thought of a fundamentally different sort of entity, that yes can enter some sorts of legal arrangements, but isn't granted all the rights of a citizen?
[deleted]
The details of that probably haven't been settled by supreme court rulings, but the basic principle is that when a corporate entity says something, what's actually happening is that a person in the company is saying this thing, on the behalf of other people in that company, on behalf of, etc until you get to the shareholders. It's people all the way down, and people have rights. The same could be said of the government.
Note I'm a British Citizen, but the same basic legal principles apply over here, and have done for hundreds of years. I know there's a widely held conspiracy theory that this is all new, but jurists and legal scholars have been discussing and applying these principles for a very long time.
Note I'm a British Citizen, but the same basic legal principles apply over here, and have done for hundreds of years. I know there's a widely held conspiracy theory that this is all new, but jurists and legal scholars have been discussing and applying these principles for a very long time.
I think the (now deeply ingrained) confusion stems from a misconception surrounding the Citizens United vs. FEC ruling, where the majority opinion in part cited campaign finance restrictions as a violation of First Amendment rights.
Since the Bill of Rights are protections of citizens rights, it has widely been misreported that this meant the SCOTUS ruling de jure recognized corporations to be citizens themselves.
This, of course, is not correct. The majority opinion in part says that "if the First Amendment has any force, it prohibits Congress from fining or jailing citizens, or associations of citizens, for simply engaging in political speech." The key phrase here being "associations of citizens", which the majority interpreted broadly to include corporations. This does not at all bestow personhood or citizenship upon corporations, legal or otherwise. It does afford corporations some protections as they are now legally recognized as "associations of citizens".
Since the Bill of Rights are protections of citizens rights, it has widely been misreported that this meant the SCOTUS ruling de jure recognized corporations to be citizens themselves.
This, of course, is not correct. The majority opinion in part says that "if the First Amendment has any force, it prohibits Congress from fining or jailing citizens, or associations of citizens, for simply engaging in political speech." The key phrase here being "associations of citizens", which the majority interpreted broadly to include corporations. This does not at all bestow personhood or citizenship upon corporations, legal or otherwise. It does afford corporations some protections as they are now legally recognized as "associations of citizens".
At the end of the day the corporation is still enjoying those rights. The majority chose to ignore the veil and freely pass along citizens rights the to association.
I agree, it was too broad an interpretation, since corporations already have a legal representation and are an economic entity, not a civil society association through which citizens relate to or exercise their political will.
You would sue guilty employees even if they quit and move to another company. I feel that would be much better for personal responsibility.
And the best part about this would be people cannot hide behind "I am just following orders."
And the best part about this would be people cannot hide behind "I am just following orders."
Also, it would mean you usually would not recover anything since a corporation usually has deep pockets and your average employee is not even worth suing even if you could win.
True, but that may be a good thing. This may prevent people from suing for small infractions.
On other hand, let's say, if your average software developer knows that they can be sued into bankruptcy, then they will not release unfinished code and voice strong opposition to it. Thus shifting responsibility to middle managers. Now if middle managers know that they can be sued into bankruptcy, they will not override developers concerns and extend deadline and refuse to push unfinished product. Executives may try to override managers decisions but then responsibility shifts to them and they would not want to lose significant portion of their net worth. Board or managing-owners may try to override CEO, but then they will be responsible and they would not want to be personally sued and lose a portion of their personal wealth.
Yes this may not impact billionaire owners but that is a small number. Most companies will be more ethical and people will have a high degree of personal responsibility.
On other hand, let's say, if your average software developer knows that they can be sued into bankruptcy, then they will not release unfinished code and voice strong opposition to it. Thus shifting responsibility to middle managers. Now if middle managers know that they can be sued into bankruptcy, they will not override developers concerns and extend deadline and refuse to push unfinished product. Executives may try to override managers decisions but then responsibility shifts to them and they would not want to lose significant portion of their net worth. Board or managing-owners may try to override CEO, but then they will be responsible and they would not want to be personally sued and lose a portion of their personal wealth.
Yes this may not impact billionaire owners but that is a small number. Most companies will be more ethical and people will have a high degree of personal responsibility.
I think my issue with your hypothetical is that is assumed a company is already viable and in business. One of the primary advantages of a corporation or LLC is it’s limited liability. I.e., you can take a risk and if things don’t work out you can still personally recover. I suspect if we took the approach of your post, many, many fewer people would try their hand at starting a business because there are no limits to liability and much less capital to fund businesses if shareholders downside wasn’t capped.
I'm open to having misinterpreted the situation. How is corporate personhood not the same as a corporation being a legal person? I mean functionally, not semantically. If you would, help me understand why this is not a difference without distinction.
Please note I didn't pass any judgement on whether a corporate person is a useful construct or whether it should be abolished. I agree it serves a purpose and should continue to exist.
What I would argue is "limited liability" as it applies to and shields company owners shouldn't mean "free from consequences" for the corporation as an aggregate. If I'm reading your post correctly, we don't disagree there.
Please note I didn't pass any judgement on whether a corporate person is a useful construct or whether it should be abolished. I agree it serves a purpose and should continue to exist.
What I would argue is "limited liability" as it applies to and shields company owners shouldn't mean "free from consequences" for the corporation as an aggregate. If I'm reading your post correctly, we don't disagree there.
Order the company to operate out of a prison complex, under guard surveillance, with monitored phone calls, the works. Every employee must go there for his entire shift, no telecommuting.
They'll carve out exceptions for the ones responsible at the top. You'll just be penalizing the common wage earner who have to feed their families.
Even if they didn't make any exceptions, still, why should regular level employees get punished for something over which they've never held any responsibility whatsoever?
I think "never held any responsibility whatsoever" is going too far. There's one company I know that narrowly avoided the RICO act and paid out a huge amount in a lawsuit, and admitted to having behaved criminally, only to commit the same crime in the same way, in some cases, to the same persons. You're telling me, their employees had no idea, no impact, no responsibility?
This reminds me of 2006. The subprime bubble. In California, everyone had six magazines about real estate on their brand new coffee table. You'd go to someone's house, they'd talk about their house. And the houses around them. Anybody people admired, it was because she bought 4 years ago and sold 6 months ago, or better still, because she owned 2 houses and not merely 1. "Real estate agent" was one of the "careers" people rattled off as being respectable, along with doctors and firefighters (lawyers barely, engineers not at all). Everyone was afraid of being priced out of the market, and there was a constant cycle between selling your house at a huge profit, paying out the realtor's fees and taxes and costs of the fixer-upper-ing, and then the dread of having all this money but no house, and buying an expensive new house. With a lot of leverage, but somehow the Ferrari-driving hotshots at the mortgage refinancing found a way to get you a HELOC (home equity line of credit, possible because of the appreciation) so you could buy a hummer. And nobody did anything! Nobody could explain their job then, if what you did for a living made sense outside the bubble you were missing out. I couldn't understand how so many people could contribute to society through sales, retail banking, transactions, appraisers was another one. Unbelievable.
The middle class may not have benefitted like the upper class (as it was then called, now you'd say "the rich" or "the 1%"), but they were still avidly playing the game when the music stopped. And they ended up suffering much more for it, (some rich people suffered too), jobs became much more demanding, but they were in on it. It wasn't just Wall Street that kept repeating "real estate never goes down", it absolutely was Main Street too.
With that said, the regular employees probably have something to do with the dirty work the business engages in. Otherwise they'd be contractors or outsourced, like the janitors and moderators are.
This reminds me of 2006. The subprime bubble. In California, everyone had six magazines about real estate on their brand new coffee table. You'd go to someone's house, they'd talk about their house. And the houses around them. Anybody people admired, it was because she bought 4 years ago and sold 6 months ago, or better still, because she owned 2 houses and not merely 1. "Real estate agent" was one of the "careers" people rattled off as being respectable, along with doctors and firefighters (lawyers barely, engineers not at all). Everyone was afraid of being priced out of the market, and there was a constant cycle between selling your house at a huge profit, paying out the realtor's fees and taxes and costs of the fixer-upper-ing, and then the dread of having all this money but no house, and buying an expensive new house. With a lot of leverage, but somehow the Ferrari-driving hotshots at the mortgage refinancing found a way to get you a HELOC (home equity line of credit, possible because of the appreciation) so you could buy a hummer. And nobody did anything! Nobody could explain their job then, if what you did for a living made sense outside the bubble you were missing out. I couldn't understand how so many people could contribute to society through sales, retail banking, transactions, appraisers was another one. Unbelievable.
The middle class may not have benefitted like the upper class (as it was then called, now you'd say "the rich" or "the 1%"), but they were still avidly playing the game when the music stopped. And they ended up suffering much more for it, (some rich people suffered too), jobs became much more demanding, but they were in on it. It wasn't just Wall Street that kept repeating "real estate never goes down", it absolutely was Main Street too.
With that said, the regular employees probably have something to do with the dirty work the business engages in. Otherwise they'd be contractors or outsourced, like the janitors and moderators are.
And what actions should Joe Schmoe with a mortgage, two kids and their college funds, and a wife who was laid off and has no health insurance take against his employer. What do you consider a reasonable level of risk for him to undertake? How much should he be punished for continuing to feed and house his family while the CEO embezzles or otherwise abuses his power?
My point is this, why should we punish people who feel they (and in many cases truly) have no choice in whether criminal action was taken? If I held a gun to your head and said, "Just ignore that or I will take everything from you and plunge your life into chaos", what do you do? What is the responsible thing to do? For you? For your family? Your children? Society? The company? The government? For the most part, people working in these companies don't do so becaus they love to work, they do so because they have to to survive and to keep their families afloat.
Joe Schmoe executed the orders because he's terrified if he doesn't, there will be retaliation and his life and the lives of those he loves will be severely damaged. CEO person gave the orders because they know a fine is just the cost of doing business and they don't give a fuck who or what they hurt, what laws they break, what damage they do. Do you see the power imbalance here? Why should we not use "who had the power" as a determination for who to prosecute? Unless you provide protection from explicit retaliation and even the power dynamic some I don't see reason to prosecute Joe over CEO. Even then, there are other forms of retaliation that are harder to verify or see. Think about trying to get rid of bullying in a middle or high school.
My point is this, why should we punish people who feel they (and in many cases truly) have no choice in whether criminal action was taken? If I held a gun to your head and said, "Just ignore that or I will take everything from you and plunge your life into chaos", what do you do? What is the responsible thing to do? For you? For your family? Your children? Society? The company? The government? For the most part, people working in these companies don't do so becaus they love to work, they do so because they have to to survive and to keep their families afloat.
Joe Schmoe executed the orders because he's terrified if he doesn't, there will be retaliation and his life and the lives of those he loves will be severely damaged. CEO person gave the orders because they know a fine is just the cost of doing business and they don't give a fuck who or what they hurt, what laws they break, what damage they do. Do you see the power imbalance here? Why should we not use "who had the power" as a determination for who to prosecute? Unless you provide protection from explicit retaliation and even the power dynamic some I don't see reason to prosecute Joe over CEO. Even then, there are other forms of retaliation that are harder to verify or see. Think about trying to get rid of bullying in a middle or high school.
I think this may create asymmetries between risk/reward for those (real) people making the decisions.
Think about it with a sports analogy. If I cheat and take performance enhancing drugs, there’s huge potential upside: I can drastically increase my salary. If the consequence was spread to the team rather than concentrated on the individual it encourages the individual to take that risk. Maybe the team would be forced out of the playoffs. So the team lost their (smallish) chance at a trophy but I get a (largish) chance to increase my salary. In rare cases maybe the individual becomes a pariah. Regardless, if the individual isn’t held disproportionately accountable it incentivizes bad behavior. I think there’s a reason leagues ban individuals for certain behavior.
Think about it with a sports analogy. If I cheat and take performance enhancing drugs, there’s huge potential upside: I can drastically increase my salary. If the consequence was spread to the team rather than concentrated on the individual it encourages the individual to take that risk. Maybe the team would be forced out of the playoffs. So the team lost their (smallish) chance at a trophy but I get a (largish) chance to increase my salary. In rare cases maybe the individual becomes a pariah. Regardless, if the individual isn’t held disproportionately accountable it incentivizes bad behavior. I think there’s a reason leagues ban individuals for certain behavior.
If workers had to worry about the ethics of their employer getting the whole company in trouble, that would be a good thing in the sense of drying up the labor pool for dubiously run companies. On the other hand, the Justice Dept doesn't always land on the side of justice, so smaller companies could end up victims of abuse of the court system in the name of competitive advantage.
> smaller companies could end up victims of abuse of the court system in the name of competitive advantage.
The same already goes for things like IP and trademark, so that's a fair bet. Good point.
The same already goes for things like IP and trademark, so that's a fair bet. Good point.
> I think this may create asymmetries between risk/reward for those (real) people making the decisions.
Those asymmetries wouldn't be new, because the corporation as a construct already shields the real people making the decisions, along with the jurisprudence of slaps on the wrist. Are companies held accountable for their "externalities" today, like mass foreclosures in real estate, exploitative labour conditions, poisoning the water supply, oil spills, climate change or destruction of habitats?
In keeping with the prison metaphor, would you work for an "ex-con" company? How about one on "probation" when you've got a family to support? Would you invest in one? As I see it, the potential for self-corrective behaviour is greater with my (admittedly, off-the-cuff) suggestions than the status quo.
Those asymmetries wouldn't be new, because the corporation as a construct already shields the real people making the decisions, along with the jurisprudence of slaps on the wrist. Are companies held accountable for their "externalities" today, like mass foreclosures in real estate, exploitative labour conditions, poisoning the water supply, oil spills, climate change or destruction of habitats?
In keeping with the prison metaphor, would you work for an "ex-con" company? How about one on "probation" when you've got a family to support? Would you invest in one? As I see it, the potential for self-corrective behaviour is greater with my (admittedly, off-the-cuff) suggestions than the status quo.
I think we’re in agreement. The asymmetric risk I was speaking of is the status quo where individuals are not held accountable but rather the corporate “team” is via fines etc. It makes risky decisions more palatable to an executive officer because they have less downside skin in the game.
Doesn't it have a different effect, though?
Let's assume you have a company like Volkswagen and the corporate executives have decided they play the game of not getting informed about some really shady business practices which are helping the company to earn good money.
Would it make sense for Germany to punish Volkswagen by any of the means you mention, thus weakening the company in relation to foreign car makers, vs. to hold all (or the relevant) executives responsible, seize all their assets, prevent them from working in any administrative position ever again, limiting their income to a certain amount. Like really sanction them.
The company would continue to run, shareholders would be affected minimally, the problem would have been corrected. Of course this is a blue-eyed look at it, but seriously, you also can't do the comparison you are making. They just don't have the same effect.
Let's assume you have a company like Volkswagen and the corporate executives have decided they play the game of not getting informed about some really shady business practices which are helping the company to earn good money.
Would it make sense for Germany to punish Volkswagen by any of the means you mention, thus weakening the company in relation to foreign car makers, vs. to hold all (or the relevant) executives responsible, seize all their assets, prevent them from working in any administrative position ever again, limiting their income to a certain amount. Like really sanction them.
The company would continue to run, shareholders would be affected minimally, the problem would have been corrected. Of course this is a blue-eyed look at it, but seriously, you also can't do the comparison you are making. They just don't have the same effect.
> thus weakening the company in relation to foreign car makers
Now you are getting into too big to fail territory where applying the letter of the law affects the workers/citizens
Similar things would happen due to gross incompetence from workers causing and oil spill (Exxon-Valdez disaster)
Now you are getting into too big to fail territory where applying the letter of the law affects the workers/citizens
Similar things would happen due to gross incompetence from workers causing and oil spill (Exxon-Valdez disaster)
Punish the shareholders, but let the company continue working. In the minimal case this is a tax on profits, in the maximal case this is a nationalization with no compensation.
> to hold all (or the relevant) executives responsible, seize all their assets, prevent them from working in any administrative position ever again, limiting their income to a certain amount. Like really sanction them.
All for it, if it actually happened anywhere in recent history. I'm not being facetious, but I'm not aware of any examples or am failing to recall them. Do you have any in mind?
> the problem would have been corrected.
I'm not so sure. Suppose the company made massive profits (or avoided capital expenditure, or limited losses) by cheating at something like emissions. Then, the C-level execs get fired, their assets get seized and they're barred from holding administrative functions again. Did the company not still gain massive profits? Do you think it wouldn't be able to find another set of fall guys, if it pays them enough? Wouldn't the company do it again, if the risk is offset to a bunch of figureheads? Your suggestion would only rule out bad behaviour by those same actors in the future. In a more charitable reading: it would lead to better outcomes than today's rules.
Meanwhile, the damage through emissions and particular matter has been done. According to the WHO (0), about 25 people died of particulate and ambient pollution per 100k people in Germany in 2016. That puts it at 2000 people country wide that year. Did Volkswagen kill anyone by doing this? If so, how many of those could have been avoided had they not cheated on their tests? What about the impact on climate change? How were these problems theoretically addressed by seizing C-level execs' assets without giving them jail time?
> Would it make sense for Germany to punish Volkswagen by any of the means you mention, thus weakening the company in relation to foreign car makers
Yes, because the infractions were socially destructive. After all, the German government's first responsibility is towards the greater good for its citizens. According to Volkswagen's website (1), 44% of their employees or 292,378 people work for them in Germany itself. Directly, of course. Applying a fairly generous, tenfold knock-on effect, less than 4% of the total population - 2% of the active population - works for or with them. According to CNN (2), it represented 2.7% of Germany's GDP.
Also, it would hurt and stimulate competition. Not being able to pay out dividends for a year due to revenue caps, not being able to sell products in Germany that year due to cheating at exchaust measurements, etc might change shareholder voting and investment behaviour. It would damage the brand's image, reduce its ability to attract employees, etc. Maybe market forces would then finally be able to correct bad behaviours. Today's "cost of doing business" slaps on the wrist simply don't seem to have any corrective effect whatsoever.
> you also can't do the comparison you are making.
I was being hyperbolic for effect. When staying within the confines of pragmatism, surely some kind of revision to corporate/criminal law (or its enforcement) is warranted. Most people don't get the death penalty, either, or go to jail. Hell, apparently some people don't even get speeding tickets! The same would probably go for corporate actors even if the consequences were steeper.
[0] https://www.who.int/data/gho/data/indicators/indicator-detai...
[1] https://annualreport2018.volkswagenag.com/group-management-r...
[2] https://money.cnn.com/2015/09/22/news/economy/volkswagen-ger...
All for it, if it actually happened anywhere in recent history. I'm not being facetious, but I'm not aware of any examples or am failing to recall them. Do you have any in mind?
> the problem would have been corrected.
I'm not so sure. Suppose the company made massive profits (or avoided capital expenditure, or limited losses) by cheating at something like emissions. Then, the C-level execs get fired, their assets get seized and they're barred from holding administrative functions again. Did the company not still gain massive profits? Do you think it wouldn't be able to find another set of fall guys, if it pays them enough? Wouldn't the company do it again, if the risk is offset to a bunch of figureheads? Your suggestion would only rule out bad behaviour by those same actors in the future. In a more charitable reading: it would lead to better outcomes than today's rules.
Meanwhile, the damage through emissions and particular matter has been done. According to the WHO (0), about 25 people died of particulate and ambient pollution per 100k people in Germany in 2016. That puts it at 2000 people country wide that year. Did Volkswagen kill anyone by doing this? If so, how many of those could have been avoided had they not cheated on their tests? What about the impact on climate change? How were these problems theoretically addressed by seizing C-level execs' assets without giving them jail time?
> Would it make sense for Germany to punish Volkswagen by any of the means you mention, thus weakening the company in relation to foreign car makers
Yes, because the infractions were socially destructive. After all, the German government's first responsibility is towards the greater good for its citizens. According to Volkswagen's website (1), 44% of their employees or 292,378 people work for them in Germany itself. Directly, of course. Applying a fairly generous, tenfold knock-on effect, less than 4% of the total population - 2% of the active population - works for or with them. According to CNN (2), it represented 2.7% of Germany's GDP.
Also, it would hurt and stimulate competition. Not being able to pay out dividends for a year due to revenue caps, not being able to sell products in Germany that year due to cheating at exchaust measurements, etc might change shareholder voting and investment behaviour. It would damage the brand's image, reduce its ability to attract employees, etc. Maybe market forces would then finally be able to correct bad behaviours. Today's "cost of doing business" slaps on the wrist simply don't seem to have any corrective effect whatsoever.
> you also can't do the comparison you are making.
I was being hyperbolic for effect. When staying within the confines of pragmatism, surely some kind of revision to corporate/criminal law (or its enforcement) is warranted. Most people don't get the death penalty, either, or go to jail. Hell, apparently some people don't even get speeding tickets! The same would probably go for corporate actors even if the consequences were steeper.
[0] https://www.who.int/data/gho/data/indicators/indicator-detai...
[1] https://annualreport2018.volkswagenag.com/group-management-r...
[2] https://money.cnn.com/2015/09/22/news/economy/volkswagen-ger...
I'm against the death penalty, but I would have no problem with seeing a corporation put to death in the worst situations.
Real consequences for the officers and a complete rejection of "we had no idea this was happening!"
I guess the corporate equivalent would be the forced shutdown of all company infrastructure for N months.
that just burns all the regular people working regular jobs at that org.
So fix the social safety net, too big to fail is not something we want to have, especially when it comes to actively harmful companies...
Jailing the people responsible seems like a way better option than putting potentially tens of thousands of people on welfare.
Managing the long term cost of reforming entire organizations is probably not worth it, better to destroy it AND jail the leaders.
Who not both? Just because it’s normal that low level workers are fired and get nothing doesn’t mean that’s how it has to be. Severance could be generous enough to make this work out.
Part of the punishment could be that the company still has to pay all salaries and hourly wages while it’s shut down.
With what earnings would they do this?
Their cash balance, debt, or equity raise. Or they go bankrupt. That would be part of the risk of doing something that got your company this punishment.
To be clear, I’m not advocating these shutdowns as a good idea, there are a lot of implications that I haven’t thought through.
To be clear, I’m not advocating these shutdowns as a good idea, there are a lot of implications that I haven’t thought through.
Who is going to invest cash into a business that has to stop operating for N months, while maintaining everyone on payroll?
Perhaps one of the many professionals working in distressed debt or special situations? If you're not familiar, there are desks at Goldman, etc called "Special Situations" that focus on relatively niche investment opportunities. Investors just need the price to be right. Would likely be bad for the shareholders, but again, that's part of the punishment.
There could be a price that worked but I don't think there are many businesses that can go offline for several months and come back fine. I'm most familiar with the industry I work in, (O&G), where a day not operating is an incredible loss. Is shutting down the oil refineries and petrochemical complexes what is best for the country? I just struggle to see how this wouldn't just punish normal workers and furthermore just make the economy worse off as a whole
Why would anyone invest anything in this scenario? Most companies in the world operate without any investment whatsoever.
As we saw with the covid market crash, a lot of companies (like airlines) don't keep a lot of cash on hand. If they had 0 revenue for several months but still had operating costs, I am assuming they would need a loan
Banking? Raw materials? Shipping?
How do people think that all corporations/companies are discretionary?
How do people think that all corporations/companies are discretionary?
>Joe Bigshot, former SVP at BigCo, was sentenced to 5 years in jail, and had to sell two of his nine houses to pay the $20M fine" is much better.
Well, they sort of do that in Russia. So the CEO/founder of almost any sketchy company is a homeless person that signed the paperwork in exchange for some free vodka. Didn't particularly solve the problem.
Corporate fines just need to be sufficient to make such "business" unprofitable. "BigCo fined for 5% of its market cap" would be quite a deterrent. Except, it won't be happening as long as the regulators are in bed with the big business they are supposed to regulate.
Well, they sort of do that in Russia. So the CEO/founder of almost any sketchy company is a homeless person that signed the paperwork in exchange for some free vodka. Didn't particularly solve the problem.
Corporate fines just need to be sufficient to make such "business" unprofitable. "BigCo fined for 5% of its market cap" would be quite a deterrent. Except, it won't be happening as long as the regulators are in bed with the big business they are supposed to regulate.
oh, regulators are playing the market both ways. congressmen and senators don't have any issue with trading options.
The second paragraph of the post you are replying to seems to anticipate this response:
"So, we need to both move more towards prison and start digging in to which actual people inside bad corporations were responsible for deciding to do wrongdoing."
In the post-Enron world, however, executives have learned how to use incentives to motivate their minions to break the law without being explicitly told to do so. On the one hand, this makes it difficult to prosecute those who bear most responsiblity; on the other hand, more effective prosecution might curtail the supply of minions who can be motivated to be compliantly criminal.
"So, we need to both move more towards prison and start digging in to which actual people inside bad corporations were responsible for deciding to do wrongdoing."
In the post-Enron world, however, executives have learned how to use incentives to motivate their minions to break the law without being explicitly told to do so. On the one hand, this makes it difficult to prosecute those who bear most responsiblity; on the other hand, more effective prosecution might curtail the supply of minions who can be motivated to be compliantly criminal.
"Will no one rid me of this turbulent priest?"
Also "Working Towards the Führer" [1].
[1] https://en.wikipedia.org/wiki/Ian_Kershaw#%22Working_Towards...
[1] https://en.wikipedia.org/wiki/Ian_Kershaw#%22Working_Towards...
So - stochastic dictatorial regime? (stolen from: stochastic terrorism).
> Well, they sort of do that in Russia. So the CEO/founder of almost any sketchy company is a homeless person that signed the paperwork in exchange for some free vodka. Didn't particularly solve the problem.
Can you find me a reference to this? I could believe it, but by default I'd be surprised if it were true at any real scale.
Can you find me a reference to this? I could believe it, but by default I'd be surprised if it were true at any real scale.
We refer to such person as "зиц-председатель" which means chairperson-to-be-jailed
> Corporate fines just need to be sufficient to make such "business" unprofitable.
This seems untenable because large businesses will then be forced to break individual business units into separate corporations to manage risk. At first glance this might seem fine, but you'd basically be creating huge drag on the economy bc large businesses benefit from economies of scale.
This seems untenable because large businesses will then be forced to break individual business units into separate corporations to manage risk. At first glance this might seem fine, but you'd basically be creating huge drag on the economy bc large businesses benefit from economies of scale.
I’d also like to see more fines in the range of multiple years’ worth of revenue, but it wouldn’t change directors’ incentives since they still have limited downside exposure and therefore asymmetric payoffs. Even if a CEO runs a company into the ground they’ll probably still be rich since they only have levered exposure on the upside (through ISOs, etc.) and comparatively limited exposure on the downside.
Normalization imprisonment of boards of directors and executive officers of companies that break the law.
I tend to agree, but how do you deal with sketchy companies installing a sham board and executives?
Why try to stop it? Pretty sure a sufficiently enabled and incentivized prosecutor will be able to find the actual culprits. "Discovery" exists as a legal process after all.
Sham boards/executives only are issues if the prosecution itself is a sham, more concerned with the appearance of the thing than deterrence.
Sham boards/executives only are issues if the prosecution itself is a sham, more concerned with the appearance of the thing than deterrence.
My interpretation of the GP was that if companies are guilty of wrongdoing, boards and executives should be imprisoned without any additional burden of proof required to establish individual culpability. This sounds somewhat appealing, as how can these people _not_ be responsible in some way?
Otherwise, no need to single out the board.
Otherwise, no need to single out the board.
Yes, target the leaders responsible for criminal activities.
But perhaps the shareholders should bear responsibility as well.
But perhaps the shareholders should bear responsibility as well.
Maybe if certain percentage of ownership can be proven, by any route. Let's say 1%. So you own 1% of company and it does some criminal. You will suffer 1% of penalty.
This is one reason why CEO pay has skyrocketed: hazard pay. Something goes wrong, even if the CEO had no idea about it, and who gets vilified and maybe even prosecuted? The CEO. Just saying...there are trade offs for everything.
Is that really a reason for skyrocketing pay though? Struggling to come up with any instances where this actually happened and such "hazard pay" was "justified."
It's an excuse but not a good reason. The reason is more that people on top of the income/wealth divide have the power to give themselves more power and keep growing the divide, and they're unafraid of the risks that come with the reward. Populist uprisings are a thing of the past in the info age. The little people are sufficiently surveiled and controlled by the network, by partisan propaganda that keeps them infighting, etc.
Hazard pay? Why this sounding like CEOs do deep sea diving, welding huge oil pipes while squid and sharks look at you in a tiny cage with a few thousand amps of arc.
Let's call it what it is, It's a golden parachute.
I'd postulate that taking responsibility and leading the effort to genuinely right the wrongs would earn the company way more godwill from the people and media than activating your trump card which in this case is a mountain of cash to land on after successfully escaping responsibility.
Let's call it what it is, It's a golden parachute.
I'd postulate that taking responsibility and leading the effort to genuinely right the wrongs would earn the company way more godwill from the people and media than activating your trump card which in this case is a mountain of cash to land on after successfully escaping responsibility.
> So, we need to both move more towards prison and start digging in to which actual people inside bad corporations were responsible for deciding to do wrongdoing.
And that's like turkeys voting for Christmas. In most Western countries, governments, political parties and businesses are so intertwined, your member of congress/senate/parliament is probably a businessman (Trump!), or is lobbied by businesses, or the party is funded by business.
That's not to say it won't happen, but it takes something fairly seismic to make governments act.
And that's like turkeys voting for Christmas. In most Western countries, governments, political parties and businesses are so intertwined, your member of congress/senate/parliament is probably a businessman (Trump!), or is lobbied by businesses, or the party is funded by business.
That's not to say it won't happen, but it takes something fairly seismic to make governments act.
You may enjoy reading this press release, then.
https://www.justice.gov/archive/opa/pr/2008/September/08-at-...
Unfortunately, there aren't too many of those.
https://en.wikipedia.org/wiki/List_of_companies_convicted_of...
https://www.justice.gov/archive/opa/pr/2008/September/08-at-...
Unfortunately, there aren't too many of those.
https://en.wikipedia.org/wiki/List_of_companies_convicted_of...
There's no need to put Exxon in jail. Exxon is what the C-level executives make it. If they decide that Exxon is going to break the law (or permit it to happen), and are held personally responsible, that is all you would need to do to see a large change in behavior.
Shareholders are too far removed from personal responsibility, and holding them responsible beyond the financial risk they already carry would basically destroy the rationale for the existence of limited liability corporations.
Shareholders are too far removed from personal responsibility, and holding them responsible beyond the financial risk they already carry would basically destroy the rationale for the existence of limited liability corporations.
Yeah, personal responsibility is great and all; a vital piece of the puzzle. Someone will always be willing to be the fall guy for money, though. It doesn't seem to make logical sense, because what's the point of having millions and being locked up? but people aren't logical.
I do fear shifting too much responsibility to individuals will just absolve the people really pushing for this stuff, in favor of just finding employees to blame, and constantly making individuals fear for their jobs (and being blacklisted), or prison... but the ones responsible will have nothing to fear.
I do fear shifting too much responsibility to individuals will just absolve the people really pushing for this stuff, in favor of just finding employees to blame, and constantly making individuals fear for their jobs (and being blacklisted), or prison... but the ones responsible will have nothing to fear.
When a car runs over a pedestrian the car is not jailed, the driver is.
When a corporation runs over a town, why is the person or people "steering" the corporation not jailed?
When a corporation runs over a town, why is the person or people "steering" the corporation not jailed?
Fines are also fine (no pun intended) if they are massively more expensive than the action they are punishing. In short they must make the risk-adjusted cost of doing $illegal_thing larger than the benefit from doing it.
Fining a corporation 20 million for stealing 500 million... I mean I don't need to point how ridiculous this is.
Of course, direct personal responsibility for the people calling the shots. Someone robbing a liquor store causes an infinitesimal amount of damage and misery compared to what powerful corpos lead by powerful men can cause.
Fining a corporation 20 million for stealing 500 million... I mean I don't need to point how ridiculous this is.
Of course, direct personal responsibility for the people calling the shots. Someone robbing a liquor store causes an infinitesimal amount of damage and misery compared to what powerful corpos lead by powerful men can cause.
that is not the number one learning and I think you are wrong.
The real powerful and rich do not fear jail.
They fear people like madoff that targets them.
That is why Madoff ended his life in jail while banks/funds CEO in the 2008 are now richer than ever stealing money from the poors and taking 0 accountability for the subprime crisis that destroyed a whole decade. In my book he was better than any of those bankers. He shown to the world that some people are smarter than the banks and that they will be severely punished if they do not abide by the laws that helps those banks to win.
That is why Madoff ended his life in jail while banks/funds CEO in the 2008 are now richer than ever stealing money from the poors and taking 0 accountability for the subprime crisis that destroyed a whole decade. In my book he was better than any of those bankers. He shown to the world that some people are smarter than the banks and that they will be severely punished if they do not abide by the laws that helps those banks to win.
Oh, please. Madoff ruined plenty of "normal" people's life savings. Say what you will about other bankers, but please don't try to elevate someone who destroyed the life savings of others.
EDIT: Yes, non-profits and pension funds as well. That's not taking from the rich. Madoff was not Robin Hood.
EDIT: Yes, non-profits and pension funds as well. That's not taking from the rich. Madoff was not Robin Hood.
Many non-profits who invested their endowments with him got hurt too.
no he did not. 75% of what he robbed was recovered also. Wouldnt call it ruining life...
if he did steal to "normal people" that is to a much smaller percentage than he robbed the rich ones.
thousands of people that are still in wall street today robbed poor people and are still trading/working in the industry today.
While I am not elevating him I am elevating the fact that he rot in jail for robbing the rich. Just look at the papers from 2008 if you don't believe it.
https://www.npr.org/2018/12/23/678238031/for-madoff-victims-... (NPR: For Madoff Victims, Scars Remain 10 Years Later)
So, it's ok to steal from people as long as most of them are rich?
And, it's ok to steal as long as you only steal 25% of it?
And, it's ok to steal as long as you only steal 25% of it?
I never said it was ok. I said he is in jail because he stole the rich. If he stole the poor he'd be on the trading desk of some bank in wall street. Who is in jail today for the subprime crisis?
How exactly are sell-side trading desks stealing from the poor?
I meant Madoff would be free to do whatever he wants.
But ill bite. Just look at all the robinhood millenials getting robbed by Citadel that literally has insider knowledge of all the robinhood transactions.
The more fundamental problem is that interest is usury and usury is theft. And naturally, the entire modern banking system runs on interest (which is probably the least egregious of all the wacky financial instruments out there). You'll hear nonsense about the opportunity cost and risk, none of which have any relevance to or rebut the notion that charging interest (as opposed to just fixed administrative fees) is theft. Time isn't a commodity, so why am I paying you more the longer it takes me to pay back my loan?
Is your gold and silver ewes and rams? Shylock cannot tell. He makes it breed as fast.
Is your gold and silver ewes and rams? Shylock cannot tell. He makes it breed as fast.
Of course time is a commodity. A (potentially false promise of a) dollar in one year is less useful than a dollar tomorrow which is less useful than a dollar right now.
If you do believe interest is theft and time has no value, you can act as a kind of Robin Hood by putting all of your money into bonds from Goldman Sachs, the US government or whoever you deem the worst perpetrator of this theft. You'll literally be stealing from them!
If you do believe interest is theft and time has no value, you can act as a kind of Robin Hood by putting all of your money into bonds from Goldman Sachs, the US government or whoever you deem the worst perpetrator of this theft. You'll literally be stealing from them!
That's not what I'm asking about. They specifically said trading desks at banks, Citadel is a market maker.
But what's really you're just parroting baseless conspiracy -- Citadel is a legitimate business which provides a great service to Robin Hood users. Payment for order flow is very good for the retail investor, reducing commissions and improving prices, the recent episode of Bloomberg's Odd Lots podcast with Doug Cifu went explained exactly how this works, it's a classic example of incentives aligning. Also by design no market maker gets access to all Robinhood transactions.
But what's really you're just parroting baseless conspiracy -- Citadel is a legitimate business which provides a great service to Robin Hood users. Payment for order flow is very good for the retail investor, reducing commissions and improving prices, the recent episode of Bloomberg's Odd Lots podcast with Doug Cifu went explained exactly how this works, it's a classic example of incentives aligning. Also by design no market maker gets access to all Robinhood transactions.
sure. they dont get access to all robinhood transactions. their trading algorithms do the work. if you know a few ms in advance the trades you can literaly make money out of it. and this should be clearly advertised when getting into robinhood.
Your argument that it is to help retail traders to enter for cheap into trading is fallacious. It is exactly like saying getting into real estate nowadays is a no brainer due to low interest loans. even tho the loan means borrowing money for 30years and living like a slave to pay a rent that the generation before you got in 10years. In the same ways FB makes money out of people Citadel and Robinhood does it 0 conspiracy there
Your argument that it is to help retail traders to enter for cheap into trading is fallacious. It is exactly like saying getting into real estate nowadays is a no brainer due to low interest loans. even tho the loan means borrowing money for 30years and living like a slave to pay a rent that the generation before you got in 10years. In the same ways FB makes money out of people Citadel and Robinhood does it 0 conspiracy there
It's nothing to do with knowing the trades 'in advance', they're the ones doing the trades! Market makers like Citadel are regulated to improve the prices offered in the market place. A stock may trade for $50 on the exchange, but Citadel can sell it for $49.50, they must improve prices and they do. Part of the reason they can do this is that Robin Hood orders are 'safe'. If a huge hedge fund comes to Citadel and wants to trade a million shares in TSLA, they likely know something Citadel doesn't and will rip their face off. That's why Robin Hood orders are valuable, luckily, the incentives of the retail investor (buying a stock as cheap as possible) and the market maker (selling to someone who isn't about to pummel them) line up.
If you think Citadel and its ilk are bad, you should see the guys they replaced! Market making is as old as the market itself, the modern advancements allow commission-free trading, massive liquidity and tiny spreads, before you'd be paying commission and buying a stock for dollars more than you could sell it for. They're good for the market and it's a shame this crazy conspiratorial thinking (which is never backed up by any real understanding) has taken hold of so many people.
If you think Citadel and its ilk are bad, you should see the guys they replaced! Market making is as old as the market itself, the modern advancements allow commission-free trading, massive liquidity and tiny spreads, before you'd be paying commission and buying a stock for dollars more than you could sell it for. They're good for the market and it's a shame this crazy conspiratorial thinking (which is never backed up by any real understanding) has taken hold of so many people.
You re right. they do the trades for robinhood users. What do you think they do between the time they receive the order and execute it? don't forget that the default trade on robinhood has no limit to it. you buying market value. now try doing that on millions of users just like madoff did playing with the cents.
They make their cents (or less) on the bid-ask spread, as do all market makers. They do this while also improving the execution of the trade for the end user. Some of that spread goes back to Robin Hood via PFOF. Citadel allows people to buy stocks for less than they would normally, this is an irrefutable fact.
What do you think they're doing in that time? Please be specific because I have no idea what part of this mutually beneficial, standard operating procedure is meant to be a criminal conspiracy. The people losing out are institutional investors who cannot access the same execution quality as a retail investor, because they trade in greater volume and are more likely to be behind a market move.
What do you think they're doing in that time? Please be specific because I have no idea what part of this mutually beneficial, standard operating procedure is meant to be a criminal conspiracy. The people losing out are institutional investors who cannot access the same execution quality as a retail investor, because they trade in greater volume and are more likely to be behind a market move.
If there was only one person orchestrating and solely benefitting from the subprime crisis it would be easy to put them in jail but there are too many to be put in jail, it’s the equivalent of ‘too big to fail’ but for people, ‘too many to pinpoint blame’ type of thinking. All these people knew it was going nowhere but they kept imflating the bubble because all their peers were doing it also and that despite numerous people raising res flags at the same time.
Maddoff was a dumb thief, and very cunning indeed but he operated in silence. That’s not to say the same thing about the others who ‘gamged up’ knowing that in case of failure many fingers would be pointed out in too many directions.
Maddoff was a dumb thief, and very cunning indeed but he operated in silence. That’s not to say the same thing about the others who ‘gamged up’ knowing that in case of failure many fingers would be pointed out in too many directions.
I’d be ok if even some of the guilty people went to prison. We don’t imprison every single drug user.
75% - opportunity cost - inflation.
If you plan your life around having $1 million in savings because that's what your statements from Madoff say, recovering 75% of the fraction you put in is pretty bad.
If you plan your life around having $1 million in savings because that's what your statements from Madoff say, recovering 75% of the fraction you put in is pretty bad.
"That is why Madoff ended his life in jail"
That's an interesting point and probably true. The identity of your victim matters as much as the crime. It isn't like a serial car thief would receive the same sentence.
I've always wondered if jail was appropriate for purely financial crimes. Maybe simply pauperizing people is the right answer and keep them pauperized from some time.
Just imagine a prison system that doesn't contain financial criminals or drug cases. Transfer a certain amount of punishment to Singapore-style caning (probably a better mind-modifier than 6 months in the county clink) and you could shrink the whole industry to a tiny fraction of it's current size.
That's an interesting point and probably true. The identity of your victim matters as much as the crime. It isn't like a serial car thief would receive the same sentence.
I've always wondered if jail was appropriate for purely financial crimes. Maybe simply pauperizing people is the right answer and keep them pauperized from some time.
Just imagine a prison system that doesn't contain financial criminals or drug cases. Transfer a certain amount of punishment to Singapore-style caning (probably a better mind-modifier than 6 months in the county clink) and you could shrink the whole industry to a tiny fraction of it's current size.
Doesn’t seem to be like Madoff feared jail. He did everything in his power to end up there.
Do you think that a system of public service / community service requirements instead of fines would be better for common offenses?
Without any real research I have often thought that instead of fines for parking violations, noise complaints, (other misdemeanors) etc - having someone spend time instead of money would make those sorts of punishments more equitable.
There are issues - child care if a parent has to spend time. This system would need to accommodate peoples schedules, shouldn't have to miss work for a parking ticket, etc. Much harder to administer than mailing fines.
Without any real research I have often thought that instead of fines for parking violations, noise complaints, (other misdemeanors) etc - having someone spend time instead of money would make those sorts of punishments more equitable.
There are issues - child care if a parent has to spend time. This system would need to accommodate peoples schedules, shouldn't have to miss work for a parking ticket, etc. Much harder to administer than mailing fines.
The criminal justice system already does this extensively. Often people are sentenced to community service.
So I guess your question is really should this be extended to more low-level offenses like minor traffic violations?
It's an interesting question. In Switzerland, for example, speeding above a certain level ceases to be a fixed fine and is instead a percentage of your income. I'm a fan of that. Fixed fines tend to discriminate against the poor disproportionately.
I can imagine there are many people who would be better off and would prefer 2-4 hours of community service over a $100 fine. So that should certainly be an option instead of paying the fine.
Yeah I think the idea probably does have merit.
So I guess your question is really should this be extended to more low-level offenses like minor traffic violations?
It's an interesting question. In Switzerland, for example, speeding above a certain level ceases to be a fixed fine and is instead a percentage of your income. I'm a fan of that. Fixed fines tend to discriminate against the poor disproportionately.
I can imagine there are many people who would be better off and would prefer 2-4 hours of community service over a $100 fine. So that should certainly be an option instead of paying the fine.
Yeah I think the idea probably does have merit.
I like the % of income idea.
What do you do with crimes committed by people who have little in earnings (students, unemployed, etc.) or folks who earn “$1” in income but obviously are otherwise wealthy?
It would be based on the income of all of the money attached to you, including interest/dividends/appreciation within trusts with you as the grantee. Since wealth makes more money in virtually every way it can be stored, and since not investing it results in the "inflation tax," inflation + income tax = wealth tax.
Interesting question.
I imagine someone has already thought of this from a tax point of view.
Maybe some % of their net worth divided by their age (working age?) - say if they have 100 million dollars and are 60. 60-18 = 42. We would fine X% of 2,380,952.38? The idea being an attempt to come up with what their yearly salary could have been based on current value.
I am sure there are some excellent flaws with that approach as well.
Fun to ponder.
I imagine someone has already thought of this from a tax point of view.
Maybe some % of their net worth divided by their age (working age?) - say if they have 100 million dollars and are 60. 60-18 = 42. We would fine X% of 2,380,952.38? The idea being an attempt to come up with what their yearly salary could have been based on current value.
I am sure there are some excellent flaws with that approach as well.
Fun to ponder.
I hope the government doesn't keep track of everyones net worth, it's bad enough they know everyone's income.
In Finland where all larger fines are day-fines the minimum day-fine is 6€.
Calculation is based in your total income (including capital income). Most rich people would be affected due to capital income.
Calculation is based in your total income (including capital income). Most rich people would be affected due to capital income.
I like it simply because screwing the rich and middle as hard as the poors on trivial issues is gonna make it real clear real quick how excessive penalties for common civil offenses are and pretty soon thereafter the laws will change.
HN has this fantasy of $10k speeding tickets. In reality it's gonna look like 100mph speed limits, $100 fines for you and $10 fines for your nanny.
HN has this fantasy of $10k speeding tickets. In reality it's gonna look like 100mph speed limits, $100 fines for you and $10 fines for your nanny.
Don't excessive speeding tickets lead to a loss of license? This is the perfect response. Perhaps a more sophisticated society will one day know our fears and punish us accordingly (cue film script).
>Don't excessive speeding tickets lead to a loss of license?
Usually.
>Perhaps a more sophisticated society will one day know our fears and punish us accordingly (cue film script).
That was a plot line in 1984 and IMO flies in the face of equality under law.
Usually.
>Perhaps a more sophisticated society will one day know our fears and punish us accordingly (cue film script).
That was a plot line in 1984 and IMO flies in the face of equality under law.
For a normal person, yes.
If you have money to light on fire you can hire attorneys to delay, appeal, etc. Eventually, it will catch up.
If you have money to light on fire you can hire attorneys to delay, appeal, etc. Eventually, it will catch up.
Other countries have $10k speeding tickets for the rich who ignore traffic rules. It’s not such a fantasy, it’s a real world way to reduce emissions and automobile deaths.
Even $100k tickets.
https://www.theatlantic.com/business/archive/2015/03/finland...
https://www.theatlantic.com/business/archive/2015/03/finland...
The problem is that above a certain level even that doesn't work. Like, answer me this - if you catch Jeff Bezos speeding, what possible fine can we impose on him to "hurt"? Compared to his wealth, we'd probably need to fine him like $1B for it to have any effect, right? And someone would still argue that it doesn't hurt him like a $500 ticket hurts a poor person.
But then literally no court anywhere in the world would agree that a $1BN fine for speeding is "punishment fitting the crime". It's just not.
Like, I like idea in general, but there will ways be people immune to it. Like others have said - the only real punishment is time. And not even necessarily prison - just make a CEO do 300 hours of community service, see how that works out.
But then literally no court anywhere in the world would agree that a $1BN fine for speeding is "punishment fitting the crime". It's just not.
Like, I like idea in general, but there will ways be people immune to it. Like others have said - the only real punishment is time. And not even necessarily prison - just make a CEO do 300 hours of community service, see how that works out.
This is true of much of the justice system. Penalties aren't meant to curb certain specific behaviors, they're meant to be used as general control mechanisms for people who can't wiggle out of punshiment by one means or another. I think the advance of physical and digital surveillance is eventually going to force a reevaluation of what behavior we criminalize, because either otherwise-upstanding people start to get caught in the web (see: piracy for personal use in the 00s), or we see an increasing number of highly public instances of clearly malicious or neglectful actors sliding (which we're arguably already seeing wrt police brutality cases).
We're inadvertently about to make the dystunction of our legal system everyone's problem, which is when you'll see change.
We're inadvertently about to make the dystunction of our legal system everyone's problem, which is when you'll see change.
> $100 fines
Where I live, that's what you pay when you drive 10mph too fast.
Where I live, that's what you pay when you drive 10mph too fast.
>gonna make it real clear real quick how excessive penalties for common civil offenses are and pretty soon thereafter the laws will change.
I like you. This is good.
I like you. This is good.
You're referring to reported income, that in Switzerland is a national tradition to hide.
Same in Finland I believe. The fine is a % of your annual income.
Calculate daily income, minus some protected cut and then multiplied by number of days. For drunk driving for example 50 "day fines". So at net monthly wage of 1800€ would be 1288. At 10k€ monthly netwage 8128€...
Also Finland does have option to turn some of these day fines to prison time at rate of 4 to 1..
Also Finland does have option to turn some of these day fines to prison time at rate of 4 to 1..
I'd much rather pay a $100 fine for whatever it is, than waste 2-4 hours of my time.
One of my past bosses had a supercar as his daily driver. He had a specific law firm on retainer purely to handle speeding tickets. He'd call them when pulled over, and apparently they knew what to say to discourage cops from writing the ticket. People with the kind of wealth to routinely retain services like that effectively play by different rules than the rest of us in the US.
losing your driving license seems also a good deterrent to avoid speeding
Have a friend who got a driving related offense in a Bay Area county. He asked to go to jail for two or three weeks as he had a good job and income and could make it work with his boss. It was denied and he had to do weekend community service for 8 months.
As a traveling consultant, this was a real wrench into his job and for his employer. He'd have to travel back every Thursday because he could not afford a Friday flight cancellation and missing service. Now, this court and county insists they structure it this way so to have the least impact on people. But he would arrive and watch all his crime peers arrive by taxi, foot or bike (bus service to that area on Saturday morning was a no-op).
The vast majority of his peers were not people who could afford $20 each-way taxi or uber trips and worked jobs on weekends. They lost their jobs because their licenses were suspended. He suspected many of them gave up trying to comply and parked 1/2 mile away, driving their cars with with suspended licenses.
Community service is basically a racket and not necessarily a better work/life deal than prison.
As a traveling consultant, this was a real wrench into his job and for his employer. He'd have to travel back every Thursday because he could not afford a Friday flight cancellation and missing service. Now, this court and county insists they structure it this way so to have the least impact on people. But he would arrive and watch all his crime peers arrive by taxi, foot or bike (bus service to that area on Saturday morning was a no-op).
The vast majority of his peers were not people who could afford $20 each-way taxi or uber trips and worked jobs on weekends. They lost their jobs because their licenses were suspended. He suspected many of them gave up trying to comply and parked 1/2 mile away, driving their cars with with suspended licenses.
Community service is basically a racket and not necessarily a better work/life deal than prison.
I want to see FAANG CEOs do public service, instead of being fined pennies.
I do, it would also be more fair than fines because it wouldn't be worse on the poor. I also think we should have corporal punishment, not because I believe in it per se, but because I think it is more humane than prison and would satisfy societies need for punishing the guilty.
I can see an argument that poor folks have less free time - if someone worked a couple part time jobs, has kids or other family that rely on them, several hours picking up litter is a pretty big deal. Vs my 9-5 M-F job, no dependants, etc. several hours picking up litter is a bummer or inconvenience.
I think that corporal punishment proposal is batshit insane.
I think that corporal punishment proposal is batshit insane.
Common? Sure.
Well educated, comfortable people who rob others of their livelihood? They deserve state penns, just like the poor folks who got three strikes for walking off with hedge clippers.
Well educated, comfortable people who rob others of their livelihood? They deserve state penns, just like the poor folks who got three strikes for walking off with hedge clippers.
What is this obsession with jailing people?
Prison is pretty inhumane, especially in the context of a limited lifespan. Even if we're immortal, it's still inhumane.
Moreover, how does making people go to prison fixes anything? It's just a way to assign punishment and blame people.
Prison is pretty inhumane, especially in the context of a limited lifespan. Even if we're immortal, it's still inhumane.
Moreover, how does making people go to prison fixes anything? It's just a way to assign punishment and blame people.
You can't just fine billionaires and expect that they'll reform.
Or maybe we could. Just make them go enough to negative without option of bankruptcy... Paying at couple billion back after selling all the holdings and property don't sound too unreasonable. We could even leave them some money to live like sum equal to minimum wage.
Time is the only asset we all mostly have in common. If your laws and the enforcement thereof are just (big if), then why shouldn't the punishment be exacted in a way that generally affects everyone equally?
Beyond that, prison is inhumane as a rough function of where you are. Maybe you're thinking of a particular prison system.
How does it fix anything? It should primarily be a deterrent, and secondarily a way to protect society from dangerous people.
Beyond that, prison is inhumane as a rough function of where you are. Maybe you're thinking of a particular prison system.
How does it fix anything? It should primarily be a deterrent, and secondarily a way to protect society from dangerous people.
I have a sneaking suspicion that if more billionares spent time in prison, we'd see massive reform on the prison system towards the humane.
Or a class system for prisons.
Probably depends on how many prisons are private vs public.
I could definitely see a class system forming in private prisons (it is sort of there already). For public prisons, that's harder. They have to convince law makers to pass laws to enable them to get special treatment. That'd be pretty unpopular.
But, then again, MJ legalization is very popular and it still hasn't happened yet so who knows if policy popularity even sways politicians at this point.
I could definitely see a class system forming in private prisons (it is sort of there already). For public prisons, that's harder. They have to convince law makers to pass laws to enable them to get special treatment. That'd be pretty unpopular.
But, then again, MJ legalization is very popular and it still hasn't happened yet so who knows if policy popularity even sways politicians at this point.
Rich people already go to low security VIP prisons. Visits with family in parks, better food, internet, and everyone is non-violent. Billionaires aren't put in general population.
What the US most commonly jail's people for (drug offenses) is barbaric.
That said, the reason for jail is to not only rehabilitate but also to deter.
The problem we have is that white collar crimes almost never result in jail time for the rich. The financial deterrent is just ineffective at stopping bad behavior. They can run the risk/rewards calculations and often come up with the conclusion that "we'll make more money than we lose to a fine" and they proceed to do the bad behavior.
A good example of this is fireworks at disneyland. They pay fines for their daily displays and write it off as a cost of doing business. So what's the point of the fine? Weren't we trying to stop them from launching fireworks or was it just to extract money from a theme park?
Now imagine if the action for launching fireworks was the general manager of disneyland or their manager serving 2 days in jail. I can assure you, those fireworks would be stopped the next day.
That's the point. If the law is only a set of rules for the poor how can anyone be confident that it is going to work or be applied fairly? If you can buy your way out of compliance then what's the point?
That said, the reason for jail is to not only rehabilitate but also to deter.
The problem we have is that white collar crimes almost never result in jail time for the rich. The financial deterrent is just ineffective at stopping bad behavior. They can run the risk/rewards calculations and often come up with the conclusion that "we'll make more money than we lose to a fine" and they proceed to do the bad behavior.
A good example of this is fireworks at disneyland. They pay fines for their daily displays and write it off as a cost of doing business. So what's the point of the fine? Weren't we trying to stop them from launching fireworks or was it just to extract money from a theme park?
Now imagine if the action for launching fireworks was the general manager of disneyland or their manager serving 2 days in jail. I can assure you, those fireworks would be stopped the next day.
That's the point. If the law is only a set of rules for the poor how can anyone be confident that it is going to work or be applied fairly? If you can buy your way out of compliance then what's the point?
I actually feel like Disney would be willing to pay people to spend 2 days in jail in order to keep their fireworks show. You’ve just moved the cost from a fine to a salary.
>> What the US most commonly jail's people for (drug offenses) is barbaric.
If you're talking about prisons, nearly 4 times as many people are in prison for violent crimes (robbery, assault, rape, murder...) than drug charges.
https://www.prisonpolicy.org/reports/pie2020.html
If you're talking about prisons, nearly 4 times as many people are in prison for violent crimes (robbery, assault, rape, murder...) than drug charges.
https://www.prisonpolicy.org/reports/pie2020.html
Great link, thanks.
oversimplify much?
My prediction: Start giving perpetrators of financial crimes real prison time and you'll see major prison reform within a few years.
In Norway, a "life" sentence used to be 21 years, with parole possible after 14. Now there is a stricter option that in theory can end up being actual life, but it requires extension by 5 years at a time after evaluation to determine if the prisoner is still an active threat to society, and it's rarely used.
US sentencing has always seemed absolutely crazy to me, to the point where if I through some magic found myself on a US jury I'd have a hard time justifying a vote to convict, and the sentences seem to be more about vengeance than about rehabilitation or making society safer.
US sentencing has always seemed absolutely crazy to me, to the point where if I through some magic found myself on a US jury I'd have a hard time justifying a vote to convict, and the sentences seem to be more about vengeance than about rehabilitation or making society safer.
I see, so Breivik can go kill a bunch of children and hang out in "prison" with his XBox and hope to leave on parole? And that's normal for you?
I mean, if you think that isn't an insult to the victims, their families, etc.; if you don't think that's absolutely crazy, and I don't know what to tell you, man. Heck, if killing someone, let alone that many people, isn't so bad, why do we care about any other crime as much as we do? Why all this ridiculous outrage in the public square about all sorts real and imagined sins when life itself is so cheap?
Whatever the flaws in the American justice system (and there are many), Norwegian law and the sensibilities behind it are insane in this respect.
> sentences seem to be more about vengeance than about rehabilitation or making society safer.
Justice has more than one aim. Deterrence and rehabilitation are two of them, so is the preservation of social order. But justice is also retributive. Retribution isn't about hate, whatever modern confusion tells you. That's why we aim to have qualified impartial third-parties (judges) who are supposed to adjudicate such things instead of leaving things up to a hate-filled lynch mob, one that often confuses envy with anger at injustice.
I mean, if you think that isn't an insult to the victims, their families, etc.; if you don't think that's absolutely crazy, and I don't know what to tell you, man. Heck, if killing someone, let alone that many people, isn't so bad, why do we care about any other crime as much as we do? Why all this ridiculous outrage in the public square about all sorts real and imagined sins when life itself is so cheap?
Whatever the flaws in the American justice system (and there are many), Norwegian law and the sensibilities behind it are insane in this respect.
> sentences seem to be more about vengeance than about rehabilitation or making society safer.
Justice has more than one aim. Deterrence and rehabilitation are two of them, so is the preservation of social order. But justice is also retributive. Retribution isn't about hate, whatever modern confusion tells you. That's why we aim to have qualified impartial third-parties (judges) who are supposed to adjudicate such things instead of leaving things up to a hate-filled lynch mob, one that often confuses envy with anger at injustice.
> if you don't think that's absolutely crazy, and I don't know what to tell you, man
> to adjudicate such things instead of leaving things up to a hate-filled lynch mob
See the duality of your own post.
If I try to be impartial, I can hardly see the point to any sentence larger than a couple decades. When you get to those levels of sentencing where you basically decimate the total useful lifetime of someone, you might as well kill the person.
... and I guess I understand something now.
> to adjudicate such things instead of leaving things up to a hate-filled lynch mob
See the duality of your own post.
If I try to be impartial, I can hardly see the point to any sentence larger than a couple decades. When you get to those levels of sentencing where you basically decimate the total useful lifetime of someone, you might as well kill the person.
... and I guess I understand something now.
> > if you don't think that's absolutely crazy, and I don't know what to tell you, man
> > to adjudicate such things instead of leaving things up to a hate-filled lynch mob
> See the duality of your own post.
That reads as though you scored some virtual point, but I can't figure out what you're saying. Can you clarify?
> See the duality of your own post.
That reads as though you scored some virtual point, but I can't figure out what you're saying. Can you clarify?
It's been a long long time (if it ever existed) where US prisons gave a crap about rehabilitation. It's always been about punishment first, then keeping society "safe" second. And studies have consistently shown that the death penalty acts as no deterrent to murder; I would suspect the same would show that other crimes are not deterred by the threat of prison. Too many crimes are a result of impulse control failures in individuals.
Justice has more than one aim. Deterrence and rehabilitation are two of them, so is the preservation of social order. But justice is also retributive. Retribution isn't about hate, whatever modern confusion tells you. That's why we aim to have qualified impartial third-parties (judges) who are supposed to adjudicate such things instead of leaving things up to a hate-filled lynch mob, one that often confuses envy with anger at injustice.
And Norwegian society operate just fine with Breivik playing xbox in prison.
In the end, retribution still doesn't fix anything. We're machines. We should act like this is true, not surrender to our monkey brain.
And Norwegian society operate just fine with Breivik playing xbox in prison.
In the end, retribution still doesn't fix anything. We're machines. We should act like this is true, not surrender to our monkey brain.
> I see, so Breivik can go kill a bunch of children and hang out in "prison" with his XBox and hope to leave on parole? And that's normal for you?
Breivik is unlikely to get out because he is likely to continue to be deemed a threat on every re-evaluation. But if he demonstrates that he is reforming and is no longer likely to be a threat, then yes, that is not just normal to me but desirable.
It is a system that works given that re-offending rates in Norway are low.
I'd consider it an absolute insult to victims of violent crime to focus on things like retribution over policies shown to actually reduce the rates of future crime.
Valuing the perpetuation of violence for the sake of retribution over reducing the number of victims seems to me the height of barbaric and immoral behaviour.
But even without any benefits to re-offending rates I'd still consider it barbaric to threat prisoners badly for retributive purposes. Free will is a fiction, and so when we are punishing people for anything other than the practical purposes of keeping society safe we are no better than those we assign blame for crimes, we just tell ourselves we are.
Breivik is unlikely to get out because he is likely to continue to be deemed a threat on every re-evaluation. But if he demonstrates that he is reforming and is no longer likely to be a threat, then yes, that is not just normal to me but desirable.
It is a system that works given that re-offending rates in Norway are low.
I'd consider it an absolute insult to victims of violent crime to focus on things like retribution over policies shown to actually reduce the rates of future crime.
Valuing the perpetuation of violence for the sake of retribution over reducing the number of victims seems to me the height of barbaric and immoral behaviour.
But even without any benefits to re-offending rates I'd still consider it barbaric to threat prisoners badly for retributive purposes. Free will is a fiction, and so when we are punishing people for anything other than the practical purposes of keeping society safe we are no better than those we assign blame for crimes, we just tell ourselves we are.
If free will is a fiction, how can you pass judgement on "us" for punishing people? If free will is a fiction then what good is saying things like "if we do X we are no better than people who do Y" when nobody has any choice in what they do?
Well, the obvious answer is that there is no choice in that either, but that in most context it serves us best to act as if we do have choice, because the effects of our actions still affect us.
If we "step into the fiction" so to speak, there is reason for passing judgement if passing judgement leads to better outcomes. A lack of agency does not shield us from those outcomes.
But it makes retribution as a justification fundamentally immoral. Of course, there's recursion here - retribution for retribution would be no better.
If we "step into the fiction" so to speak, there is reason for passing judgement if passing judgement leads to better outcomes. A lack of agency does not shield us from those outcomes.
But it makes retribution as a justification fundamentally immoral. Of course, there's recursion here - retribution for retribution would be no better.
Yes, most US prisons are inhumane. That doesn’t apply to the minimum security resort prisons that white collar criminals get sent to.
> Prison is pretty inhumane, especially in the context of a limited lifespan. Even if we're immortal, it's still inhumane.
You have a very warped view of justice. Rape isn't "inhumane"? Murdering someone isn't "inhumane"?
In the case of premeditated murder the murderer forfeits the right to life, so the death penalty, especially for especially egregious acts, is entirely just. To claim it isn't is unjust and an insult to the victim. Mercy only has meaning when the penalty is deserved and prudence will dictate whether the peantly ought to be exercised in the given circumstances given the best account of the facts and our limited knowledge (hence the need for judges who have the authority and the perspective to better adjudicate dispassionately instead of fueling some Sicilian family feud or a lynch mob that confuses envy with anger at injustice).
> Moreover, how does making people go to prison fixes anything? It's just a way to assign punishment and blame people.
Uh, yes? OBVIOUSLY, if someone is GUILTY, he DESERVES blame and punishment. I don't know why this is so difficult for you to understand or how you could possibly think this is wrong or that a world without them is preferable or even feasible. If someone has freely committed a crime, if he has chosen to commit that crime and has carried it out, then OBVIOUSLY he bears responsibility for it and is culpable for his actions.
You have a very warped view of justice. Rape isn't "inhumane"? Murdering someone isn't "inhumane"?
In the case of premeditated murder the murderer forfeits the right to life, so the death penalty, especially for especially egregious acts, is entirely just. To claim it isn't is unjust and an insult to the victim. Mercy only has meaning when the penalty is deserved and prudence will dictate whether the peantly ought to be exercised in the given circumstances given the best account of the facts and our limited knowledge (hence the need for judges who have the authority and the perspective to better adjudicate dispassionately instead of fueling some Sicilian family feud or a lynch mob that confuses envy with anger at injustice).
> Moreover, how does making people go to prison fixes anything? It's just a way to assign punishment and blame people.
Uh, yes? OBVIOUSLY, if someone is GUILTY, he DESERVES blame and punishment. I don't know why this is so difficult for you to understand or how you could possibly think this is wrong or that a world without them is preferable or even feasible. If someone has freely committed a crime, if he has chosen to commit that crime and has carried it out, then OBVIOUSLY he bears responsibility for it and is culpable for his actions.
As I posted a couple days ago, I have my doubts about whether Madoff actually was that worried about prison. Seems to me like he lived like a literal king until he was 70, then went to jail. Maybe 70 year old Madoff didn’t want to go to jail, but 40 year old Madoff may have been more than happy to make that deal. Seems to me that someone who was trying to avoid jail time would have spend more effort trying to ameliorate the situation rather than cover anything up.
And he fell on the sword so his sons could walk. There is absolutely no way they were both in the dark.
[deleted]
I disagree.
--
“Bernie really was a successful businessman with quite original insights into the market, and he’s continued applying his business instincts in prison,” Fishman said. “At one point, he cornered the hot chocolate market. He bought up every package of Swiss Miss from the commissary and sold it for a profit in the prison yard. He monopolized hot chocolate! He made it so that, if you wanted any, you had to go through Bernie.”
https://www.marketwatch.com/story/new-series-casts-bernie-ma...
--
Bernie wasn't trapped with them. They were trapped with Bernie.
--
“Bernie really was a successful businessman with quite original insights into the market, and he’s continued applying his business instincts in prison,” Fishman said. “At one point, he cornered the hot chocolate market. He bought up every package of Swiss Miss from the commissary and sold it for a profit in the prison yard. He monopolized hot chocolate! He made it so that, if you wanted any, you had to go through Bernie.”
https://www.marketwatch.com/story/new-series-casts-bernie-ma...
--
Bernie wasn't trapped with them. They were trapped with Bernie.
Assuming that's actually true, what an amazing picture it paints of him just being a complete fucking dick. It's not like the money he was making from that mattered at all... he did it just for shits and giggles. What an unbelievable asshole.
Not at all. Now he has more buying power in the yard than anyone else.
He successfully managed to leverage market forces to create economic inequality and make himself 'rich' in the micro context he operated in.
Which is a great example for why great wealth is not a virtue, a 'free market' is not a savior, and why greater regulation and taxation on the super wealthy is acceptable - they got there by being, as you say, unbelievable assholes.
He successfully managed to leverage market forces to create economic inequality and make himself 'rich' in the micro context he operated in.
Which is a great example for why great wealth is not a virtue, a 'free market' is not a savior, and why greater regulation and taxation on the super wealthy is acceptable - they got there by being, as you say, unbelievable assholes.
Also goes to prove that system was broken. It should not be possible for single individual to corner any market in prison. Either spendable money or amount of items sold per prisoner should be limited...
>There are many other scandals: the whole subprime disaster, pollution from plants and the like where no one went to prison and people really should've.
not true. people did go to jail for their role in the 2008 banking crisis
not true. people did go to jail for their role in the 2008 banking crisis
> the whole subprime disaster... no one went to prison and people really should've
This is a pretty common sentiment, but nobody can really articulate specifically who should go to prison and what crime they committed.
Being stupid, arrogant, reckless and willfully ignorant with money is not illegal. Just because hundreds of billions was lost does not mean that there's any criminal act. Major companies, and even financial institutions, fail all the time without there being any sort of crime.
It's easy to fall into the trap of looking for mustache-twirling villains when you see a broken system. More likely the real culprit are misaligned incentives and dysfunctional institutions. If you actually dig into the details of the subprime crisis, the latter story is the much more plausible one.
If you disagree, you have to specify who you think were the criminal masterminds behind the crisis. And more important, you have to show that you can prove criminal action and intent beyond a reasonable doubt. (And don't forget any would-be defendants will have access to the best legal defense teams on the planet.) I've never heard anyone actually present this case instead of just giving vague platitudes about how "the bankers should go to jail".
The only real candidate for viable criminal prosecution are the mortgagees themselves. Many fraudulently misrepresented their income, assets or employment on their applications. And it would probably be hard for them to claim that they weren't aware. (In contrast the mortgage brokers could always claim they didn't bother verifying income because they genuinely trusted the applicants. That's obviously BS, but criminal liability is held to a much higher standard.)
This is a pretty common sentiment, but nobody can really articulate specifically who should go to prison and what crime they committed.
Being stupid, arrogant, reckless and willfully ignorant with money is not illegal. Just because hundreds of billions was lost does not mean that there's any criminal act. Major companies, and even financial institutions, fail all the time without there being any sort of crime.
It's easy to fall into the trap of looking for mustache-twirling villains when you see a broken system. More likely the real culprit are misaligned incentives and dysfunctional institutions. If you actually dig into the details of the subprime crisis, the latter story is the much more plausible one.
If you disagree, you have to specify who you think were the criminal masterminds behind the crisis. And more important, you have to show that you can prove criminal action and intent beyond a reasonable doubt. (And don't forget any would-be defendants will have access to the best legal defense teams on the planet.) I've never heard anyone actually present this case instead of just giving vague platitudes about how "the bankers should go to jail".
The only real candidate for viable criminal prosecution are the mortgagees themselves. Many fraudulently misrepresented their income, assets or employment on their applications. And it would probably be hard for them to claim that they weren't aware. (In contrast the mortgage brokers could always claim they didn't bother verifying income because they genuinely trusted the applicants. That's obviously BS, but criminal liability is held to a much higher standard.)
so you're suggesting that there should be different punishments based on how much money someone has?
How do you know this? Who exactly do you mean by "the rich"
> Fines are just the cost of doing business.
Isn’t that just because the fines aren’t high enough?
I think we should make more fines based on an individual’s (or company’s) net worth.
Isn’t that just because the fines aren’t high enough?
I think we should make more fines based on an individual’s (or company’s) net worth.
One other thing worth observing: Bernie Madoff had nothing whatsoever to do with causing the Global Financial Crisis. Yes he committed a financial crime and defrauded a few investors with a ponzi, but he wasn’t behind the systemic financial mass destruction of the GFC.
Yet the media implicitly made him into a scapegoat for the GFC with heavy coverage of his trial filling the airwaves just as the public was authorities hold the perpetrators responsible. The media never explicitly claimed Madoff was part of the cause of the GFC, but rather used constant coverage of him to deflect attention from the real perpetrators of the crisis, who got away clean.
What the media doesn’t report is often more telling about its integrity and agenda than what they do report.
Yet the media implicitly made him into a scapegoat for the GFC with heavy coverage of his trial filling the airwaves just as the public was authorities hold the perpetrators responsible. The media never explicitly claimed Madoff was part of the cause of the GFC, but rather used constant coverage of him to deflect attention from the real perpetrators of the crisis, who got away clean.
What the media doesn’t report is often more telling about its integrity and agenda than what they do report.
The only reason this guy got charged is because he was a plain scam artist running everything out of his personal bank account.
Unfortunately, the highest levels of financial crime are tied to lawmakers and corruption of the highest authorities of white collar law enforcement.
It's usually outsiders and smaller operations that get caught. Corporations are in charge of a corporate oligarchy, which is the United States.
These entities are "too big to fail". They are so essential to the economy that the best you can hope for from the government is maybe a scapegoat going to a comfortable prison or a hefty fine.
TL;DR
Bringing down the largest corporations for crime is like trying to arrest the US president for war crimes.
Unfortunately, the highest levels of financial crime are tied to lawmakers and corruption of the highest authorities of white collar law enforcement.
It's usually outsiders and smaller operations that get caught. Corporations are in charge of a corporate oligarchy, which is the United States.
These entities are "too big to fail". They are so essential to the economy that the best you can hope for from the government is maybe a scapegoat going to a comfortable prison or a hefty fine.
TL;DR
Bringing down the largest corporations for crime is like trying to arrest the US president for war crimes.
> These entities are "too big to fail". They are so essential to the economy that the best you can hope for from the government is maybe a scapegoat going to a comfortable prison or a hefty fine.
Norway faced a banking crisis in the 90s; to solve it, the government simply invalidated the shares and took control of the bank.[1] The government later reprivatized it - i.e. sold new shares - once it was no longer failing.
That seems a pretty okay approach for entities that are too big to fail: let the shareholders, not the public, pay the price of failure.
(You need a sufficiently strong government to do it, obviously.)
[1] https://en.wikipedia.org/wiki/Christiania_Bank
Norway faced a banking crisis in the 90s; to solve it, the government simply invalidated the shares and took control of the bank.[1] The government later reprivatized it - i.e. sold new shares - once it was no longer failing.
That seems a pretty okay approach for entities that are too big to fail: let the shareholders, not the public, pay the price of failure.
(You need a sufficiently strong government to do it, obviously.)
[1] https://en.wikipedia.org/wiki/Christiania_Bank
I remember when this happened, I was running a hedge fund. Supposedly he was doing collars (split-strike conversions) to make this money, but it just seemed implausible to me at the time, since I traded options. I figured he just punted futures, nice and easy way to sorta hug the index (I hadn't seen his "returns"), maybe Martingale it and get lucky until you're not so lucky.
But then it turned out he wasn't doing anything at all.
This was a bit of an insight for me, because I'd been through investor meetings, and they ask a lot of things. Mostly the wrong things, but they do ask things that you need to actually have had a fund to answer, like "who does your audits". So I was pretty amazed when it turned out he got away with some DIY audit (through a friend?) or something like that.
One thing that did seem to happen immediately was that investors seemed to play it safe. Not great for little funds. I think a lot of them were spooked by some quite big names getting scammed.
But then it turned out he wasn't doing anything at all.
This was a bit of an insight for me, because I'd been through investor meetings, and they ask a lot of things. Mostly the wrong things, but they do ask things that you need to actually have had a fund to answer, like "who does your audits". So I was pretty amazed when it turned out he got away with some DIY audit (through a friend?) or something like that.
One thing that did seem to happen immediately was that investors seemed to play it safe. Not great for little funds. I think a lot of them were spooked by some quite big names getting scammed.
Can you please explain what it means to "do a collars" and "punt futures to hug the index"?
I'm partly interested and partly think you're making these words up :)
I'm partly interested and partly think you're making these words up :)
> Supposedly he was doing collars (split-strike conversions) to make this money, but it just seemed implausible to me at the time, since I traded options. I figured he just punted futures, nice and easy way to sorta hug the index (I hadn't seen his "returns"), maybe Martingale it and get lucky until you're not so lucky.
For all I know you might as well be talking about a Rockwell Retro Encabulator[1]
1. https://youtu.be/RXJKdh1KZ0w?t=50
For all I know you might as well be talking about a Rockwell Retro Encabulator[1]
1. https://youtu.be/RXJKdh1KZ0w?t=50
That is a brilliant video, perfectly cromulent.
He also went for unsophisticated (though sometimes with large tickets) investors.
From Wikipedia:
"On June 22, 2009, Sorkin hand-delivered a customary pre-sentencing letter to the judge requesting a sentence of 12 years, because of tables from the Social Security Administration that his life span was predicted to be 13 years."
Letter was submitted 11.81 years ago.
"On June 22, 2009, Sorkin hand-delivered a customary pre-sentencing letter to the judge requesting a sentence of 12 years, because of tables from the Social Security Administration that his life span was predicted to be 13 years."
Letter was submitted 11.81 years ago.
Now that's an actuary.
> clients entrusted him with more than $19 billion in principal
> Irving Picard, the trustee appointed to unwind the accounts, had recovered more than $14.3 billion
Wait WHAT?? That's only a 25% loss. Not the 100% loss I assumed. Does anyone know more?
> Irving Picard, the trustee appointed to unwind the accounts, had recovered more than $14.3 billion
Wait WHAT?? That's only a 25% loss. Not the 100% loss I assumed. Does anyone know more?
principal -- they probably thought their accounts were worth considerably more due to accumulated returns.
Matt Levine recently observed, when talking about another Ponzi scheme, that it would be nice if newspapers would quote the net and not just the gross.
Though that wouldn't tell the whole story, either. You would have the earnings of people who managed to get out of the scheme before it collapsed offsetting the losses of those who didn't. You're also not taking into account the opportunity cost of having that money in the Ponzi scheme instead of, say, VTSMX.
Though that wouldn't tell the whole story, either. You would have the earnings of people who managed to get out of the scheme before it collapsed offsetting the losses of those who didn't. You're also not taking into account the opportunity cost of having that money in the Ponzi scheme instead of, say, VTSMX.
That's not too surprising. Matt Levine wrote about the recent 1inMM ponzi scheme recently[1] and the scammer's "take" was only 10%. It makes sense if you think about it. For a ponzi scheme to work you need to constantly circulate cash (from new investors to old investors), so it's hard for you to take a lot without collapsing the whole scheme.
[1] https://www.bloomberg.com/opinion/articles/2021-04-08/archeg...
[1] https://www.bloomberg.com/opinion/articles/2021-04-08/archeg...
does this account for time? They might get their $10m back but if they invested it anywhere else it would be $30m now and inflation has eaten a chunk.
I do know some people that pulled their fund before the collapse had their gains taken back to the principal amount.
I do know some people that pulled their fund before the collapse had their gains taken back to the principal amount.
[deleted]
Madoff made his ponzi scheme last 17 years with a limited network. Imagine how long a ponzi scheme accessible by the whole world could last.
Possibly forever (or at least longer than my lifetime). I am thinking about Bitcoin here.
Possibly forever (or at least longer than my lifetime). I am thinking about Bitcoin here.
Bitcoin isn't really a ponzi scheme though, just an asset that gets bid up. In a ponzi you pay in x and are promised x+50% or some such and the scheme fails when there isn't money to pay out x+50%. With bitcoin you buy for price x and sell for price y which may be higher or lower. Different thing. It can't fail, just go up or down in price.
Eh, I'm comfortable calling Bitcoin a Ponzi scheme because all profits extracted by early investors come from later investors.
That's, like, a very specific and applicable definition.
That's, like, a very specific and applicable definition.
So you just redefined a the name „Ponzi” to mean something else than the commonly accepted definition.
Here, let me google that for you: https://www.google.com/search?q=ponzi+scheme+definition
Pon·zi scheme
/ˈpänzē ˌskēm/
noun
a form of fraud in which belief in the success of a nonexistent enterprise is fostered by the payment of quick returns to the first investors from money invested by later investors.
Pon·zi scheme
/ˈpänzē ˌskēm/
noun
a form of fraud in which belief in the success of a nonexistent enterprise is fostered by the payment of quick returns to the first investors from money invested by later investors.
Well you used to be able to buy drugs and child porn with it so it's not a nonexistent enterprise. /s
Ponzi is also derogatory. You should not dismiss the fact that Bitcoin kicked off blockchain as a technology, got a lot of people into a sort of financial playground, had questionable value and utility initially, and all that.
All that considered, you might still call it a Ponzi scheme if you really wanted to, but it certainly isn’t only a Ponzi scheme.
All that considered, you might still call it a Ponzi scheme if you really wanted to, but it certainly isn’t only a Ponzi scheme.
> Bitcoin kicked off blockchain as a technology
"Started at the bottom, now we a little bit above the bottom"
"Started at the bottom, now we a little bit above the bottom"
Pretty spot-on! I think it's fair to call Bitcoin a ponzi scheme, it is not and will not be a stable currency, it's value isn't backed by anything and it needs constant new investment to work at all.
There is no nonexistent enterprise in this case. Nobody is claiming that the returns of cryptocurrency speculators are coming from a business venture.
the nonexistent enterprise is the use of bitcoin as a medium of exchange
Bitcoin actually functions as a medium of exchange and that's not an enterprise anyway.
Is there an expectation that by buying Bitcoins, you are funding the growth of a business which creates profits by using your investment, and those profits are where your investment return is coming from? If that's not the case, then it isn't a Ponzi scheme.
Is there an expectation that by buying Bitcoins, you are funding the growth of a business which creates profits by using your investment, and those profits are where your investment return is coming from? If that's not the case, then it isn't a Ponzi scheme.
Yeah, but ... I am constantly told that Bitcoin (et al) is the future, that it is revolutionary, that it is going to be big in some way -- that it will replace "fiat" currencies, for instance, although the exact way it is going to be big has changed over time.
That some people are making money hand over fist by investing is then used as proof that it is a good investment.
That the fake enterprise is just lazy meta-financial-jargon rather than a more effort-full fake building project or an imaginary hedge fund with fake books and blueprints and a fancy office and whatnot isn't enough to make the definition inaccurate IMO.
Quacks like a duck, etc.
That some people are making money hand over fist by investing is then used as proof that it is a good investment.
That the fake enterprise is just lazy meta-financial-jargon rather than a more effort-full fake building project or an imaginary hedge fund with fake books and blueprints and a fancy office and whatnot isn't enough to make the definition inaccurate IMO.
Quacks like a duck, etc.
Misleading people about the power of a technology doesn't make something a Ponzi scheme. You need to mislead investors about the origin of their returns. Purposeful speculation isn't a Ponzi scheme even if the speculators were misled about the thing they are speculating on.
> Is there an expectation that by buying Bitcoins, you are funding the growth of a business which creates profits by using your investment, and those profits are where your investment return is coming from?
If you think this isn't a common viewpoint, you need to lurk on some bitcoin forums and discord servers.
If you think this isn't a common viewpoint, you need to lurk on some bitcoin forums and discord servers.
That's not the only condition though. It is not enough for some crackpot evangelists to believe that. It must be a purposeful deception in order to get the investor to give you money for something different than what you claimed.
That's not really a good definition, dragged up by the Google bot without a link to the source. It says "Definitions from Oxford Languages" but I'm having a job finding where that was from.
https://www.oxfordlearnersdictionaries.com/definition/englis...
was kind of similar and has " a plan for making money that involves encouraging people to invest by offering them a high rate of interest and using their money to pay earlier investors. When there are not enough new investors, people who have recently invested lose their money."
which I think is what is usually meant by a ponzi scheme and is different from bitcoin.
Even with your definition bitcoin doesn't really fit:
"form of fraud" - bitcoin was completely open about what you were getting from the start
"nonexistent enterprise" - the first and largest decentralized digital payments system. The more legit complaint is the enterprise is wrecking the environment more than it doesn't exist.
https://www.oxfordlearnersdictionaries.com/definition/englis...
was kind of similar and has " a plan for making money that involves encouraging people to invest by offering them a high rate of interest and using their money to pay earlier investors. When there are not enough new investors, people who have recently invested lose their money."
which I think is what is usually meant by a ponzi scheme and is different from bitcoin.
Even with your definition bitcoin doesn't really fit:
"form of fraud" - bitcoin was completely open about what you were getting from the start
"nonexistent enterprise" - the first and largest decentralized digital payments system. The more legit complaint is the enterprise is wrecking the environment more than it doesn't exist.
I'll admit, Ponzi schemes could be considered centralized by definition. It might be more accurate to describe it as a pyramid scheme -- because investors become a part of the scheme, actively seeking more investors from whom they hope to recoup their investment -- or a pump-and-dump, focusing on the market component.
Re: Bitcoin as a digital payments, my complaint there would be that Bitcoin is not structured to return transaction fees to people buying Bitcoin as an investment.
Re: Bitcoin as a digital payments, my complaint there would be that Bitcoin is not structured to return transaction fees to people buying Bitcoin as an investment.
I don't think Bitcoin is any type of scheme. It's just a typical bubble. As a new asset class. Nothing special or schemis about it.
Possibly fair to exclude Bitcoin from that definition, being the first and essentially a research project let loose... but what about 1000+ dead coins?
That's how the stock market works as well.
There is certainly zero-sum speculation within the stock market, dwarfing that in Bitcoin, sure, but the S&P 500 also pays out half a trillion dollars in dividends a year, and buys back a similar amount of stock from the profits of the actual businesses being invested in through the stock market.
A trillion dollars a year funneling from business profits to investors is the difference between the S&P 500 and Bitcoin.
A trillion dollars a year funneling from business profits to investors is the difference between the S&P 500 and Bitcoin.
Gold might be a better example then.
Eh, gold is probably more analogous to houses.
The current price is largely a product of the speculation in the market, but at the same time ... a lot of people buy houses just because they want to live in them. So you have people buying houses at two, three times the price they'd be paying without the pure real estate investors speculating up the price, but at the same time, they're just buying them because they want a house and will pay the absurd price.
Likewise, there's a huge amount of speculation in the gold market, and that's probably what defines the price of gold, but at the same time, something like 50% of newly-mined gold goes to make jewelry, and most people buy it because they want it, even though [or because] it is over-priced, and they aren't buying it as an investment, just a pretty thing to have.
That doesn't mean that gold or houses are good investments, or that the markets aren't going to crash to a tenth of their current valuations next month or ten years from now, but it does mean there is a second component to the market -- you have speculators interacting with consumers, and the speculators can extract money from consumers who will buy the underlying good even at a bad price.
(Oddly, I'd say house buyers are more-expecting to get the money they invested back at some time in the future, compared to gold jewelry buyers.)
[But what do I know, I'm just a jerk on the internet saying things.]
The current price is largely a product of the speculation in the market, but at the same time ... a lot of people buy houses just because they want to live in them. So you have people buying houses at two, three times the price they'd be paying without the pure real estate investors speculating up the price, but at the same time, they're just buying them because they want a house and will pay the absurd price.
Likewise, there's a huge amount of speculation in the gold market, and that's probably what defines the price of gold, but at the same time, something like 50% of newly-mined gold goes to make jewelry, and most people buy it because they want it, even though [or because] it is over-priced, and they aren't buying it as an investment, just a pretty thing to have.
That doesn't mean that gold or houses are good investments, or that the markets aren't going to crash to a tenth of their current valuations next month or ten years from now, but it does mean there is a second component to the market -- you have speculators interacting with consumers, and the speculators can extract money from consumers who will buy the underlying good even at a bad price.
(Oddly, I'd say house buyers are more-expecting to get the money they invested back at some time in the future, compared to gold jewelry buyers.)
[But what do I know, I'm just a jerk on the internet saying things.]
It doesn't matter if all the activity is 100% speculative, that is still not a Ponzi scheme. Maybe you might call it a bubble, but it isn't a Ponzi scheme.
In order for it to be a Ponzi scheme, speculators would have to believe they are actually investing in a business which uses their investment to generate profit, and not simply speculating against other investors. The investors must be misled about the actual source of their returns.
In order for it to be a Ponzi scheme, speculators would have to believe they are actually investing in a business which uses their investment to generate profit, and not simply speculating against other investors. The investors must be misled about the actual source of their returns.
In the book Lying for Money (which I recommend to anyone), Dan Davies makes the point that “paying off early investors with later investor’s money” isn’t sufficient to make something a Ponzi because that’s really the nature of nearly all financial fraud (cheque kiting, for example).
I think we agree on the mechanism at play though, it’s just a semantic distinction.
I think we agree on the mechanism at play though, it’s just a semantic distinction.
Does he discuss MLM schemes?
[deleted]
[deleted]
This is how literally every financial asset works.
If you want to make a customer cash-flow argument, Ethereum has $9B of ARR. Same story.
If you want to make a customer cash-flow argument, Ethereum has $9B of ARR. Same story.
So the only difference is that returns aren't guaranteed at either the upper or lower bounds? Sounds like a Ponzi scheme just with more risk.
What about tether?
So your theory is that unlike Ponzi members, bitcoin buyers aren't paying in $x hoping to take $x+500% out in the future? Intriguing.
I hope lots of things I own will go up in value. That doesn't make them ponzi schemes.
Well, probably the biggest thing is it's not promised, and any returns are not being fabricated (a ponzi scheme will generally promise X% return, and will claim to have made X% on the invested money, when in reality they have made no return. When you buy bitcoin you get some bitcoin, which may or may not go up in price, but it's clear what you do and don't have).
Bitcoin is not, in any way, a Ponzi scheme.
It may be the subject of a bubble, it may be subject to market manipulation, it may still play a part in any number of scams or frauds beyond the ones that have already been identified, some of which themselves may be Ponzi schemes. But, even if, for the sake of argment, all of those and more were true, Bitcoin itself would still not be a Ponzi scheme. It is and would still be just a digital commodity.
It may be the subject of a bubble, it may be subject to market manipulation, it may still play a part in any number of scams or frauds beyond the ones that have already been identified, some of which themselves may be Ponzi schemes. But, even if, for the sake of argment, all of those and more were true, Bitcoin itself would still not be a Ponzi scheme. It is and would still be just a digital commodity.
Bitcoin may or may not intentionally be a Ponzi scheme.
But that doesn't matter, because functionally, there is no difference between an intentional Ponzi scheme and Bitcoin.
Bitcoin trading is a negative-sum game. All winning that anyone gets comes out of the pockets of newer investors. There is no net inflow of value or money that could cover the gains people make trading, other than the money being put in by other people. There is a net outflow of money, in the form of trading and mining fees, but there is no inflow.
So functionally, with Bitcoin, old entrants are paid off with the money invested by newer entrants. This is exactly how a Ponzi scheme works.
Again, it may not be intentional, but it works the same nonetheless.
But that doesn't matter, because functionally, there is no difference between an intentional Ponzi scheme and Bitcoin.
Bitcoin trading is a negative-sum game. All winning that anyone gets comes out of the pockets of newer investors. There is no net inflow of value or money that could cover the gains people make trading, other than the money being put in by other people. There is a net outflow of money, in the form of trading and mining fees, but there is no inflow.
So functionally, with Bitcoin, old entrants are paid off with the money invested by newer entrants. This is exactly how a Ponzi scheme works.
Again, it may not be intentional, but it works the same nonetheless.
That's still not a Ponzi scheme unless you are also lying to investors by telling them that the returns are coming from some kind of business venture or something. Investors willingly speculating on commodities because they think they will rise isn't a Ponzi scheme.
The lie is that your bitcoins are worth, today, 62000 USD each.
Again, this is not an organised Ponzi scheme, but it is functionality identical anyway.
Again, this is not an organised Ponzi scheme, but it is functionality identical anyway.
That isn't a lie, I think you are just misunderstanding what you are looking at.
When Coinbase (or whoever) shows a bitcoin price of 62000, what they are saying is that in their order book they have customers waiting to buy and sell bitcoins at that price right now. It is not just a made up number, it is actually the place where the demand between buyers and sellers is being met right now.
If you think that price is too high, then sell some for cheaper and you will take some of the high-price buyers off the market, therefore lowering the actual fair price of bitcoin.
> this is not an organised Ponzi scheme, but it is functionality identical anyway.
Functionally, a Ponzi scheme requires that investors are being deceived about the origins of their returns. What you are describing just isn't anything like a Ponzi scheme at all and it is a misunderstanding of what they are.
When Coinbase (or whoever) shows a bitcoin price of 62000, what they are saying is that in their order book they have customers waiting to buy and sell bitcoins at that price right now. It is not just a made up number, it is actually the place where the demand between buyers and sellers is being met right now.
If you think that price is too high, then sell some for cheaper and you will take some of the high-price buyers off the market, therefore lowering the actual fair price of bitcoin.
> this is not an organised Ponzi scheme, but it is functionality identical anyway.
Functionally, a Ponzi scheme requires that investors are being deceived about the origins of their returns. What you are describing just isn't anything like a Ponzi scheme at all and it is a misunderstanding of what they are.
The possible ponzi is people claiming Bitcoin will replace the existing financial system due to its intrinsic superior qualities and will go to $1 million and beyond. The HODLers don’t believe they are merely speculating.
Of course that could be true, and people saying it may well believe it. Ponzi believed his international reply coupon scheme would actually pay out. So to some extent it will only be proveable in hindsight.
Of course that could be true, and people saying it may well believe it. Ponzi believed his international reply coupon scheme would actually pay out. So to some extent it will only be proveable in hindsight.
That's not a Ponzi scheme. Misleading investors about the potential of a technology isn't a Ponzi scheme. You have to mislead them about the origin of the returns they are getting.
If the technology in fact has no such potential I fail to see the distinction.
Particularly when the actual mechanism of raising value for early investors is convincing more to come in based on that narrative, but old investors can only cash out from new ones.
Particularly when the actual mechanism of raising value for early investors is convincing more to come in based on that narrative, but old investors can only cash out from new ones.
The distinction is that any investor can form their own opinion about the technology equally well. We don't, and can't dictate to investors what technologies they ought to consider worth investing in.
The mechanism you are describing is the mechanism by which every speculative investment works. That's not what identifies a Ponzi scheme. In fact it specifically can't be a Ponzi scheme if the old investors are aware that the returns are coming from new investors.
The mechanism you are describing is the mechanism by which every speculative investment works. That's not what identifies a Ponzi scheme. In fact it specifically can't be a Ponzi scheme if the old investors are aware that the returns are coming from new investors.
> The mechanism you are describing is the mechanism by which every speculative investment works.
That’s not true. Most speculative investment promise revenues if they succeed.
For your last sentence, why would that be true? In the case of bitcoin, the early investors have been led to believe that later investors will need to invest. But this can easily be false.
That’s not true. Most speculative investment promise revenues if they succeed.
For your last sentence, why would that be true? In the case of bitcoin, the early investors have been led to believe that later investors will need to invest. But this can easily be false.
> That’s not true. Most speculative investment promise revenues if they succeed.
That wouldn't be speculative then (at least not completely)
> For your last sentence, why would that be true?
Because it's not a Ponzi scheme unless you are lying about the origin of the returns which you are giving to investors.
That wouldn't be speculative then (at least not completely)
> For your last sentence, why would that be true?
Because it's not a Ponzi scheme unless you are lying about the origin of the returns which you are giving to investors.
> That wouldn't be speculative then (at least not completely)
Can you give an example of non crypto speculative investments which are not expected to produce revenues? That’s how 100% of business promise to eventually provide returns.
Even real estate is rents. Collectibles such as sports cards and art are the one exception category I can think of.
> Because it's not a Ponzi scheme unless you are lying about the origin of the returns which you are giving to investors.
Yes that was my point. Bitcoin could be a distributed Ponzi, where people make representations about bitcoin’s eventual value through network value, but it turns out there is nothing to it. There’s no single agent telling a lie but it has the same effect.
To make the limit argument: if bitcoin was run by a single person selling coins and claiming their value would go up because of network value, but this claim was not true, this would be a ponzi correct? Assuming the proferred proof was reported coin value appreciation to date. (I.e. the returns)
Can you give an example of non crypto speculative investments which are not expected to produce revenues? That’s how 100% of business promise to eventually provide returns.
Even real estate is rents. Collectibles such as sports cards and art are the one exception category I can think of.
> Because it's not a Ponzi scheme unless you are lying about the origin of the returns which you are giving to investors.
Yes that was my point. Bitcoin could be a distributed Ponzi, where people make representations about bitcoin’s eventual value through network value, but it turns out there is nothing to it. There’s no single agent telling a lie but it has the same effect.
To make the limit argument: if bitcoin was run by a single person selling coins and claiming their value would go up because of network value, but this claim was not true, this would be a ponzi correct? Assuming the proferred proof was reported coin value appreciation to date. (I.e. the returns)
> where people make representations about bitcoin’s eventual value through network value, but it turns out there is nothing to it.
That's not a Ponzi scheme, that's a market bubble.
There's nothing gained by misappropriating existing jargon just to try and lend more credence to an assertion that a thing is bad.
Imagine if someone were trying to argue that a MacBook's motherboard is just one big integrated circuit because it's a circuit (natch), and solder has been used to integrate it all together. On the one hand, sure I can why someone who isn't a computer techie might see it that way. On the other hand, that's simply not what that term means.
That's not a Ponzi scheme, that's a market bubble.
There's nothing gained by misappropriating existing jargon just to try and lend more credence to an assertion that a thing is bad.
Imagine if someone were trying to argue that a MacBook's motherboard is just one big integrated circuit because it's a circuit (natch), and solder has been used to integrate it all together. On the one hand, sure I can why someone who isn't a computer techie might see it that way. On the other hand, that's simply not what that term means.
> Can you give an example of non crypto speculative investments which are not expected to produce revenues?
How about any commodity or foreign currency? Gold, oil, etc.
> That’s how 100% of business promise to eventually provide returns.
Exactly. Since Bitcoin obviously isn't a business, it couldn't be a Ponzi scheme (because investors in Bitcoin aren't being mislead into believing that the returns are coming from a business activity).
> To make the limit argument: if bitcoin was run by a single person selling coins and claiming their value would go up because of network value, but this claim was not true, this would be a ponzi correct? Assuming the proferred proof was reported coin value appreciation to date. (I.e. the returns)
No, that couldn't be a Ponzi scheme because the person isn't lying about the origin of the returns. They really do come from other investors. That might be considered a pyramid scheme, though.
How about any commodity or foreign currency? Gold, oil, etc.
> That’s how 100% of business promise to eventually provide returns.
Exactly. Since Bitcoin obviously isn't a business, it couldn't be a Ponzi scheme (because investors in Bitcoin aren't being mislead into believing that the returns are coming from a business activity).
> To make the limit argument: if bitcoin was run by a single person selling coins and claiming their value would go up because of network value, but this claim was not true, this would be a ponzi correct? Assuming the proferred proof was reported coin value appreciation to date. (I.e. the returns)
No, that couldn't be a Ponzi scheme because the person isn't lying about the origin of the returns. They really do come from other investors. That might be considered a pyramid scheme, though.
Bitcoin is as much or as little a ponzi scheme as things like the US dollar.
Absolute nonsense.
If we look strictly at present mechanisms (ignoring the fact that the definition of the dollar could be changed as it has several times in the past), the dollar is much closer to a Ponzi scheme than Bitcoin is.
Again: Absolute nonsense.
You keep saying that but increasingly more and more people are wisening up to what the central bankers have pulled off and you calling it nonsense won’t change the mathematics
Bitcoin is in some ways preferable, since you’re not subjected to violence if you choose not to participate in it.
I think you've made a distinction without a difference. Bitcoin assets, and income that is denominated in Bitcoin, is every bit as taxable under US law.
It's true that attempting to conduct your entire financial life in Bitcoin won't save you from receiving tax bills that are denominated in dollars. I think your more immediate problem, though, would be that it's probably impossible for someone living in the US to participate in Bitcoin without owing someone a bill that they will expect to be paid in USD. It's difficult to transact Bitcoin without Internet access, for example. And that'll get you long before the IRS sends police to knock on your door.
It's true that attempting to conduct your entire financial life in Bitcoin won't save you from receiving tax bills that are denominated in dollars. I think your more immediate problem, though, would be that it's probably impossible for someone living in the US to participate in Bitcoin without owing someone a bill that they will expect to be paid in USD. It's difficult to transact Bitcoin without Internet access, for example. And that'll get you long before the IRS sends police to knock on your door.
This is a comment someone who doesn't understand how Bitcoin fundamentally works would write. Just because people like to call it a cryptocurrency it does not have much in common with the US Dollar.
Gold works the same way: the mining of new gold creates a downward pressure on the value of existing gold. Dilution is not the same thing as fraud.
USD also has some similar effects at play. But inflation is also not fraud.
USD also has some similar effects at play. But inflation is also not fraud.
Whataboutism.
Those who got in early made almost infinitely more than those who got in later (or who lost) - classic Ponzi scheme.
That is something that applies to all sorts of situations, and is in no way a litmus test for whether or not something is a Ponzi scheme.
For it to be a Ponzi scheme, you first have to have some sort of centralized control of the ledger so that you can lie to people about the volume of assets they have in your care. And already we have made a complete departure from what Bitcoin is and how it works.
For it to be a Ponzi scheme, you first have to have some sort of centralized control of the ledger so that you can lie to people about the volume of assets they have in your care. And already we have made a complete departure from what Bitcoin is and how it works.
But there is a lie. The lie is the supposed value in USD of the bitcoins you hold.
Like I said up above, even if, for the sake of argument, it were subject to market manipulation, that would still not make it a Ponzi scheme. Not every financial crime is a Ponzi scheme.
The market manipulation is not the issue here. The issue is that Bitcoin acts exactly like a Ponzi scheme in practice, even if there is no central fraudster driving it.
[deleted]
I mean, if the person can transfer them right now for that amount in USD how is it a lie?
In a Ponzi scheme, you can transfer your funds right now in USD as well. Exactly the same situation.
It also works when buying successful startup shares. In fact, it applies to almost everything that is successful: get in early and reap the benefit.
Those who got in early made almost infinitely more than those who got in later (or who lost) - classic Ponzi scheme.
So did people who invested early in Apple, domain names, or property in Manhattan. I think the bare minimum you'd need to define something as being a Ponzi scheme is, well, a scheme - that is, an intention to defraud people, and I don't see such intent in the creation of Bitcoin.
So did people who invested early in Apple, domain names, or property in Manhattan. I think the bare minimum you'd need to define something as being a Ponzi scheme is, well, a scheme - that is, an intention to defraud people, and I don't see such intent in the creation of Bitcoin.
The nature of ponzi schemes necessitate exponential growth, even if the doubling time can be made long, perhaps on the scale of years. This places a short bound on how long they can last. The US has about 1/20th of the worlds population, so that's less than 5 doubling periods before you run out of new marks. Maybe an additional decade or two at best?
compounded interest has exponential growth and is as risk free of an investment as one can find.
The key difference is that banks aren't ponzi schemes. They use your money to actually do things in the world to make a profit, and give you a cut in the form of interest. A ponzi scheme doesn't make any new money, it only redistributes money among its members. This is the fundamental reason they can never be sustainable, and require the majority of those invested to be relatively new to the scheme.
Why is Bitcoin different than gold though? Is gold also a Ponzi scheme?
Not GP, here is my thesis.
Right now, on coinbase, rate of bitcoin purchases paid in dollars > rate of dollars purchased in bitcoin. Anyone who wants to exit bitcoin today is getting dollars from people buying into bitcoin.
When this changes (for whatever reason), coinbase and other exchanges have a limited capacity to buy back bitcoins for dollars, assuming they would even want to do that in the middle of a run on crypto exchanges.
If bitcoin was a viable currency, then people buying bitcoin today would never want to trade it back for dollars. But that’s not happening- everyone still buys groceries, coffee, gas, tools and computer software with dollars. A run on coinbase is a problem when bitcoin is an “investment” and not an actively used currency.
Finally, Monero has shown that there is still plenty of room for innovation beyond what bitcoin currently implements. If crypto currencies are the future, already Monero looks like a more viable option than btc (note that all the illegal stuff that used to happen with btc is now happening with xmr on the dark web). It’s very possible that even Monero isn’t the final incarnation of the ultimate crypto currency and something even better will replace it one day.
A new crypto doesn’t threaten people who want to transact with that currency. Everyone on the darkweb markets switched from btc to xmr and business continues as usual, and it will continue even when the next evolution arrives. But those who see it as a store of value are at the mercy of everyone else buying that currency more than how much everyone else is selling- a classic ponzi scheme.
Right now, on coinbase, rate of bitcoin purchases paid in dollars > rate of dollars purchased in bitcoin. Anyone who wants to exit bitcoin today is getting dollars from people buying into bitcoin.
When this changes (for whatever reason), coinbase and other exchanges have a limited capacity to buy back bitcoins for dollars, assuming they would even want to do that in the middle of a run on crypto exchanges.
If bitcoin was a viable currency, then people buying bitcoin today would never want to trade it back for dollars. But that’s not happening- everyone still buys groceries, coffee, gas, tools and computer software with dollars. A run on coinbase is a problem when bitcoin is an “investment” and not an actively used currency.
Finally, Monero has shown that there is still plenty of room for innovation beyond what bitcoin currently implements. If crypto currencies are the future, already Monero looks like a more viable option than btc (note that all the illegal stuff that used to happen with btc is now happening with xmr on the dark web). It’s very possible that even Monero isn’t the final incarnation of the ultimate crypto currency and something even better will replace it one day.
A new crypto doesn’t threaten people who want to transact with that currency. Everyone on the darkweb markets switched from btc to xmr and business continues as usual, and it will continue even when the next evolution arrives. But those who see it as a store of value are at the mercy of everyone else buying that currency more than how much everyone else is selling- a classic ponzi scheme.
"rate of bitcoin purchases paid in dollars > rate of dollars purchased in bitcoin"
Why don't these two numbers have to be equal?
Why don't these two numbers have to be equal?
“Rate” here meant the first derivative of the number of transactions. Not the “btc <—> usd exchange rate”
An equivalent way to say the same thing is:
“number of bitcoins being purchased with USD per hour > number of USDs being purchased with bitcoin per hour”.
An equivalent way to say the same thing is:
“number of bitcoins being purchased with USD per hour > number of USDs being purchased with bitcoin per hour”.
There's one buyer and one seller in every transaction.
Right. One of them is coinbase.
Arguably nothing.
Except with gold, there's a history of greater or lesser fools buying it from you that goes back thousands of years; there are a great many non-scam businesses trading in it, and they ain't come out with many new precious metals in my lifetime.
Cryptocurrencies have a much shorter history, an exceptionally large number of scams, and nigh-limitless supply of new types of coin and token.
Except with gold, there's a history of greater or lesser fools buying it from you that goes back thousands of years; there are a great many non-scam businesses trading in it, and they ain't come out with many new precious metals in my lifetime.
Cryptocurrencies have a much shorter history, an exceptionally large number of scams, and nigh-limitless supply of new types of coin and token.
Gold has material use. You can make things with it.
Okay, but the value of gold has basically zero relationship to it's industrial or commercial uses, so that isn't really relevant here.
Gold is also the most reasonable element to use as a store of value. It isn't very reactive or radioactive, so it's stable for long periods of time, it's a solid at room temperature, it's not hazardous to human health, it's easily manipulated and formed, and it's not super abundant but also not super rare. Silver is the only other element that comes close, and it tarnishes.
There could be some value attributed to being able to use gold as a store of value and currency in the event of a dissolution of modern society such that the internet or widespread electricity is no longer around.
Sure, but this is based on the idea that the innate uses and value of gold would be similar (or "relatively high") after such a transformation of the world. This is not clear to me at all, compared to say, a similar wealth invested into a large cache of firearms and ammo. Or whatever will happen to be useful, depending on the scenario.
It reminds me of an anecdote from my grandfather from the end of WW2, people were giving away gold rings for loaves of bread. (Clearly, only when in desperate need, but it did happen.)
It reminds me of an anecdote from my grandfather from the end of WW2, people were giving away gold rings for loaves of bread. (Clearly, only when in desperate need, but it did happen.)
Firearms and ammo are a necessity, but one person/small tribe can only defend against so many others. What you really need is a community (or bigger tribe) that will come to your aid, and the community will need to be able to trade between themselves and others, which is where gold comes in.
In that situation, the inability to eat it or shoot something with it is probably going to make gold/silver pretty close to worthless as well until society re-exists.
Even if the US government ceases to exist, the features of non reproducibility built into cash dollars (watermarks, intaglio printing) would still exist although they won't be as ultimately durable into the future as an element. At least you can also use them as fire starters.
Even if the US government ceases to exist, the features of non reproducibility built into cash dollars (watermarks, intaglio printing) would still exist although they won't be as ultimately durable into the future as an element. At least you can also use them as fire starters.
Paper money has a lower bound of material value equal to $(toilet paper - utility value for the comfort of toilet paper over a dollar bill) per square inch.
By that point you're going to have bigger things to worry about, like where to get fresh water and go to bathroom.
And people with guns are going to quickly steal your gold anyway.
And people with guns are going to quickly steal your gold anyway.
The value of gold is supported by huge militaries all around the world, including the US military. Just like fiat currency, it derives its value in part from the large group of people with guns willing to commit violence to support its value.
Bitcoin doesn't have an army of people willing to commit violence to support its value. At least not yet.
Bitcoin doesn't have an army of people willing to commit violence to support its value. At least not yet.
You do realise the gold standard was abandoned a long time ago. What are they going to do, force people to buy it at gunpoint?
Back in the 60s the gold trade was highly regulated. That's why the plot of Goldfinger doesn't really make any sense from a moderns perspective. It seemed quaint even to me as a teenager in the 80s. Nowadays gold is just posh bitcoin.
Back in the 60s the gold trade was highly regulated. That's why the plot of Goldfinger doesn't really make any sense from a moderns perspective. It seemed quaint even to me as a teenager in the 80s. Nowadays gold is just posh bitcoin.
I'm aware that we aren't on the gold standard, but the US still has the largest store of gold in the world, and uses its army (and courts) to defend the value of gold. Along with the next top three holders, Germany, France, and Italy.
As I said, what are they actually doing to achieve this?
Gold is found in nature. We can’t manufacture it or change its atomic number. Bitcoin is human code run on human machines. If society or the powers that be see fit to generate infinite Bitcoin, they can (ie forks are political power plays and we can’t control how the powerful will coopt Bitcoin in the future).
>If society or the powers that be see fit to generate infinite Bitcoin
But not real ones. It's like saying you can make infinite Mona Lisas with a colour photocopier.
But not real ones. It's like saying you can make infinite Mona Lisas with a colour photocopier.
No. Real ones. The supply cap is just decided by a coded algorithm. That algorithm can change and the social consensus can and will accept that change. Democracies moved off of the gold standard didn’t they?
It won't be the real one, it will be a fork.
Not everyone will accept such a change, so the original 21 million version of the network will still exist and will by many be considered the real bitcoin.
Not everyone will accept such a change, so the original 21 million version of the network will still exist and will by many be considered the real bitcoin.
Sure, and I can try paying for gas with gold but at some point I’m forced to do what the herd is doing, and the herd doesn’t care about arguments of “sound money”, they’ll just follow whatever monetary policy the ruling class decides is best.
The herd coming into Bitcoin as we speak implies a weakening of its founding values.
The herd coming into Bitcoin as we speak implies a weakening of its founding values.
You can buy gas in a depreciating currency and save in something else, like people have been doing with gold for thousands of years.
Who decides what is a "real" bitcoin? This is the point parent commenter is making. The only difference between Bitcoin OG and Bitcoin Cash or Segwit or any of the others is some kind of vague consensus that everyone agrees to pretend one magic bean is more special and valuable than the other, less-special magic bean with the same name.
The real Bitcoin will be the one that the market prefers.
Why is Gold coins more valuable than copper coins?
Why is the original Bitcoin more valuable than any of its forks?
Why is Gold coins more valuable than copper coins?
Why is the original Bitcoin more valuable than any of its forks?
You're agreeing with me and the grandparent comment.
It's not some kind of vague consensus, just like it's not some vague consensus that gold coins are worth more than copper coins.
> the one that the market prefers
What do you think markets are? They're a method for people to come to a vague consensus about the value of something.
What do you think markets are? They're a method for people to come to a vague consensus about the value of something.
Nature created Bitcoin.
There's absolutely no reason why humans can't create a store of value with superior qualities vs gold.
Humans are of nature. Everything we do is of nature accordingly. There is no separating humanity from nature, we are contained within it and we were created by it.
Nature = that which exists, all encompassing, no exceptions. It's not a technicality, it's the fact of what nature actually is (versus what some people like to pretend it is: fantasy pristineness, perfection, devoid of humans).
There's absolutely no reason why humans can't create a store of value with superior qualities vs gold.
Humans are of nature. Everything we do is of nature accordingly. There is no separating humanity from nature, we are contained within it and we were created by it.
Nature = that which exists, all encompassing, no exceptions. It's not a technicality, it's the fact of what nature actually is (versus what some people like to pretend it is: fantasy pristineness, perfection, devoid of humans).
We can't manufacture it or change its atomic number, but the powerful can (and have) manipulated its "value" in all the same ways as they could manipulate bitcoin. They can buy up supply, insist that taxes be paid in it, or threaten to lock up anyone who mysteriously comes across a large amount of it.
Gold's status as a physical element is basically irrelevant. Bitcoin is basically gold you can email.
Gold's status as a physical element is basically irrelevant. Bitcoin is basically gold you can email.
In an abstract enough sense, Jeff Bezos is a Ponzi scheme :D
…okay, then: Elon Musk.
…okay, then: Elon Musk.
The current iteration of crypto yield farming seems more like a classic ponzi scheme to me.
"Here I invented this new coin. If you buy it and lock it up, you can generate new ones which you'll be able to sell to others who'll want to get in on it to. This coin serves no other purpose than this though."
"Here I invented this new coin. If you buy it and lock it up, you can generate new ones which you'll be able to sell to others who'll want to get in on it to. This coin serves no other purpose than this though."
I'm not sure that I see how it could be a ponzi scheme. Ultimately, everyone has as many bitcoins as they believe that they have. The only question is how valuable are those coins? That should always be a function of market demand.
Money goes in, with the promise that you will get more money out at the end. While this works in some cases (e.g. investing in a business that produces value), in this case the only other money in the system comes from other people buying into it. Therefore, I believe bitcoin to be equivalent to a ponzi scheme.
Implicit in this is the assumption that bitcoin does not provide value in itself, which is another discussion altogether.
Implicit in this is the assumption that bitcoin does not provide value in itself, which is another discussion altogether.
When you buy bitcoin, you get a share of the whole of bitcoin. You buy this at the current market value. You may hope it goes up, but it may not. You buy 1 bitcoin at market price, you have 1 bitcoin at market price.
In a ponzi scheme, you buy in at a fictional price and are paid interest derived from the investments of future investors. Bitcoin purchasers don't receive anything from future investments unless they actually sell, again at market price.
The word here is speculation, not ponzi. It's no different than buying/selling land that people may or may not want.
In a ponzi scheme, you buy in at a fictional price and are paid interest derived from the investments of future investors. Bitcoin purchasers don't receive anything from future investments unless they actually sell, again at market price.
The word here is speculation, not ponzi. It's no different than buying/selling land that people may or may not want.
> Money goes in, with the promise that you will get more money out at the end.
Who promises?
Who promises?
> Money goes in, with the promise that you will get more money out at the end.
I'm not aware of any such promise.
I'm not aware of any such promise.
The stock market in general. The last few years have really swoon us that the stock market is 100% "funny money" that goes up and down purely based on opinion.
> goes up and down purely based on opinion.
Not opinion as much as fear and greed.
Not opinion as much as fear and greed.
Buying equities in our society is done on a voluntary basis. What other possible pricing mechanism could there be other than people's opinion of what an equity is worth? If you want to throw your hands up in the air and call it funny money, because you don't understand what you're seeing, that's fine I guess. But understand the deficiency is yours, not the nature of the market.
[deleted]
The challenge there (and the exploit being attempted) is the 'too big to fail' concept.
If you don't have enough people signed up, your ponzi can fail because a sufficient number of people who haven't fallen for it, can object.
If you manage to get everybody signed up, it becomes necessary to not break your scheme, since everybody loses.
I think this is like an unholy hybrid of the ponzi scheme and the Silicon Valley unicorn. It's the great exploit: if you can burn everybody, hard enough, you win forever. You blow up past the point where there is any possible remedy.
If you don't have enough people signed up, your ponzi can fail because a sufficient number of people who haven't fallen for it, can object.
If you manage to get everybody signed up, it becomes necessary to not break your scheme, since everybody loses.
I think this is like an unholy hybrid of the ponzi scheme and the Silicon Valley unicorn. It's the great exploit: if you can burn everybody, hard enough, you win forever. You blow up past the point where there is any possible remedy.
Tether, which is apparently backed by Bitcoin itself, fits the bill. They've printed $20 billion (BILLION!) new USDT since the start of the year, and the rate of Tether printing is currently over 4x faster than the rate at which new Bitcoin is being mined. And like Madoff's scheme, it can keep going until the tide goes out and we find out who's been swimming naked.
I sold a month or so ago. I'd rather not hold the bag in the end, but at the same time I figured this thing can keep running so long as Tether is there to prop it up.
Tether just printed another 2 billion USDT today, and didn't they print another billion USDT a few days ago?
Tether just printed another 2 billion USDT today, and didn't they print another billion USDT a few days ago?
Pay-as-you-go retirement systems depend on having enough young people entering the workforce. Preferrably qualified ones that can be taxed.
Now that developed countries have mostly sunk below 2 kids per woman and most developing countries do not have school systems good enough to provide enough qualified workers to immigrate, we are feeling the slow press of unsustainability of the system.
Unless we can offload a lot of that press on robots, people will have to work until their late 70s. The original Bismarck pension scheme calculated with only 2 years of survival in pension on average. We have expanded it to almost 20, it will have to be reduced again.
Now that developed countries have mostly sunk below 2 kids per woman and most developing countries do not have school systems good enough to provide enough qualified workers to immigrate, we are feeling the slow press of unsustainability of the system.
Unless we can offload a lot of that press on robots, people will have to work until their late 70s. The original Bismarck pension scheme calculated with only 2 years of survival in pension on average. We have expanded it to almost 20, it will have to be reduced again.
Funny thing is that a bunch of human activities are pyramid schemes. From academia, pension funds, real estate or whatever.
Is a ponzi scheme that lasts forever... a ponzi scheme? Because if it lasts forever, there's no loser!
S’funny, I was thinking about fractional reserve banking and post-2008 economic stimuli.
lol it's called fiat currency.
or the $USD.
I was always fascinated by how violently people felt toward Madoff. Madoff reminds me of a character in a Woody Allen movie. Martin Landau in Crimes and Misdemeanors.
In Dosteovsky, the perpetrator feels real guilt, confesses, and finds salvation in God. In Woody Allen, the perpetrator gets over his guilt and lives happily ever after, avoiding punishment. In Madoff's case, the perpetrator dies in prison and his family is destroyed.
Of the three, Madoff killed no one. In some sense I think he was a scapegoat for the 2008 financial crisis. That's not to say that he was innocent or that his crimes were insignificant. Only that, due to the timing, he became a convenient target for the public's understandable outrage over the financial crisis.
In Dosteovsky, the perpetrator feels real guilt, confesses, and finds salvation in God. In Woody Allen, the perpetrator gets over his guilt and lives happily ever after, avoiding punishment. In Madoff's case, the perpetrator dies in prison and his family is destroyed.
Of the three, Madoff killed no one. In some sense I think he was a scapegoat for the 2008 financial crisis. That's not to say that he was innocent or that his crimes were insignificant. Only that, due to the timing, he became a convenient target for the public's understandable outrage over the financial crisis.
I think the general understanding is that the visceral animosity has to do with the nature of the betrayal. His fund was shopped around largely to other wealthy people in his community; they thought they were making money hand-over-fist (particularly for all of the charities and whatnot they could have just been funding directly), with an "in" that people outside couldn't access. Finding out that Madoff had actually lost all of their money wasn't just a hit to their pocketbooks: it struck at the solidarity of their community, at their sense of self and goodness, at their egos. In short, it stripped them of everything that being part of the fund was supposed to magnify. It's not just embarrassing, it's devastating; all of your psychic and material fallbacks have been wiped in one fell swoop. When something like that happens, you don't want to admit that you were taken for a fool; you need a scapegoat, and you need him to be a demon.
I think a lot of it is simply there's a lot of frustration that crimes like this go on every day. Many people see the top levels of finance as all being tainted by fraud, stealing from ordinary workers, and this acts as confirmation for that.
Bernie's fraud imploding did motivate several suicides. Not exactly killing by his own hand, but he does bear some responsibility. We also shouldn't ignore he cravenly focused on charities as their legal requirements would give his ponzi scheme the longest runway. He also leveraged his reputation in the ultra wealthy NE Jewish community to find victims. So independent of the common outrage, I can see how a lot of people would see this as a particularly ugly betrayal.
Bernie's fraud imploding did motivate several suicides. Not exactly killing by his own hand, but he does bear some responsibility. We also shouldn't ignore he cravenly focused on charities as their legal requirements would give his ponzi scheme the longest runway. He also leveraged his reputation in the ultra wealthy NE Jewish community to find victims. So independent of the common outrage, I can see how a lot of people would see this as a particularly ugly betrayal.
Of the three, Madoff killed no one.
Also of the three, Madoff was a real person, not a fictional character, which is probably where the comparisons start to fall apart.
Also of the three, Madoff was a real person, not a fictional character, which is probably where the comparisons start to fall apart.
Always worth reading:
The World's Largest Hedge Fund is a Fraud [PDF] Nov 7, 2005 Submission to the SEC - Harry Markopolos
https://www.math.nyu.edu/faculty/avellane/madoffmarkopoulos....
The World's Largest Hedge Fund is a Fraud [PDF] Nov 7, 2005 Submission to the SEC - Harry Markopolos
https://www.math.nyu.edu/faculty/avellane/madoffmarkopoulos....
It is really called out:
"Scenario #2 (Highly Likely) Madoff Securities is the world's largest Ponzi scheme"
"Scenario #2 (Highly Likely) Madoff Securities is the world's largest Ponzi scheme"
What happened to his General Electric fraud allegations?
The accusation sounded credible - his main idea seemed to be that GE oversold insurance schemes that were detrimental to GE if the average lifespan increased. Which it has.
On the other hand, there were some conflict of interest issues - I am not sure what the exact issue was.
But on the whole, the issue seems to have disappeared with the great Covid bust-boom of the stock market.
On the other hand, there were some conflict of interest issues - I am not sure what the exact issue was.
But on the whole, the issue seems to have disappeared with the great Covid bust-boom of the stock market.
I learned a few years ago that I actually worked closely with one of the two programmers who worked with Madoff and was part of the "Madoff Five" the year before he started with Madoff. I feel the judge went too easy on the programmers involved as there is no way they did not understand what they were helping to orchestrate. I also worked closely with another programmer a couple of years later who wound up being a drug kingpin. I hope that it ended with those two!
What were they coding? Sounded to me like nothing at all was going on inside.
They built software to create a fake history of the trading and also imitated certain software from other companies and regulators so the customer could check the trades were real. There is a decent book on Madoff called 'Wizard of Lies'
Yeah and knowing the programmer personally at the time I have no reason to believe he would not have known what he was helping to facilitate. Eventually the two programmers asked for their pay to be in diamonds like they were working for a James Bond villain and that is not how you do if you are ignorant of what they were doing.
I was wondering how he got into this, did he set out to run a ponzi scheme from the get go? Interesting to see that it was not like that. He was running an honest fund that ran into some trouble during a down turn. He convinced himself that he could just fudge things a little, just until the downturn passed and then he'd go straight again. Of course he never went straight again. Life lessons for everyone there.
Madeoff's claim has always been that it was meant to be a temporary, short term thing and he believed he could get himself out of it before anyone else realized his fraud.
Yeah, that's a weak defense.
I mean, "meant to be a temporary" means he knew it was wrong/illegal.
He gets no pass for that.
I mean, "meant to be a temporary" means he knew it was wrong/illegal.
He gets no pass for that.
Hopefully he serves as an example to other Ponzi schemers in Wall Street. It's rare in the US white collar guys like this die in prison.
Putting one of them in prison isn't threatening when we let hundreds of others walk around free.
"Look what happens when we choose to catch you"
Hopefully, but to be blunt, if that model of punition actually worked, then the homicide rate would have been lower back when gibbeting was still a thing.
Financial criminals and murderers are not comparable. Prison is like a death sentence to a rich person.
True, they aren't, but we're not talking about the class of crime. We're talking about a particular kind of incentive model.
The "incentive" for murder is usually that someone is angry and not thinking about consequences at all.
Financial crimes are usually slow-burning and almost never crimes of passion.
Prison doesn't stop murderers, but that has no bearing on whether it stops Madoffs.
Financial crimes are usually slow-burning and almost never crimes of passion.
Prison doesn't stop murderers, but that has no bearing on whether it stops Madoffs.
Alternatively, we could look at the empirical studies, which seem to indicate that, regardless of the different ways one could hypothesize that in some contexts but not in others, the reality is that, across the board, making sentences tougher has little deterrent effect.
https://nij.ojp.gov/topics/articles/five-things-about-deterr...
https://nij.ojp.gov/topics/articles/five-things-about-deterr...
"They call me either Uncle Bernie or Mr. Madoff. I can't walk anywhere without someone shouting their greetings and encouragement, to keep my spirit up. It's really quite sweet, how concerned everyone was about my well being, including the staff... It's much safer here than walking the streets of New York."
The same day of Coinbase IPO.
The scapegoat. The only one who ripped off the rich instead of the poor. I would like to see people like Paul Singer die in prison, who made the lives of millions of people miserable, but I guess it's all legal what he did...
Scamming rich people is not exclusive of scamming poor people unfortunately. Poor always, always pay the bill.
To quote another Bernie, there's a fair bit of socialism for the rich in the US through bailouts when big corporations lose too much money/are too big to fail.
I'm not sure why you're being downvoted, as that's as true of a statement as almost anything. This weird, hypermasculine obsession with capitalism amongst this forum (and tech community at large) just perpetuates injustices.
Well I don't know about you, but I am merely a temporarily embarrassed founder
Haha :) I've been on HN for 12+ years, and yes, statements on capitalism don't always go over very well (unsurprising given links to YCombinator). Although I will say that HN has a wider diversity of opinion on quite a range of topics than other tech forums.
Madoff had no problem defrauding charities and pension funds. Hardly Robin Hood.
To be fair, most robinhood-esque folk heroes had no qualms about robbing the poor along with the rich, e.g. depression-era bank robbers.
I'm sorry, but how are "depression-era bank robbers" in any "robinhood-esque"? They all did their actions for personal gain.
If you're talking about this guy: https://en.wikipedia.org/wiki/Paul_Singer_(businessman) I don't get any clear understanding of why someone would wish to see him die in prison.
I think this is about the "pari passu" saga. It's one thing to hound individuals for their debts, quite another to hound an entire country - and in some cases there had already been a creditor resolution which he overturned.
Still I feel that asking him to die in jail for doing legal if nasty things is going a bit far.
Still I feel that asking him to die in jail for doing legal if nasty things is going a bit far.
[deleted]
Argentina was paying off debts when he pushed them into default to force a full payout on a debt he only paid a fraction for.
The IMF puppet president that got installed after that and that paid him off in full doubled the Argentinian foreign debt, resetting the economic situation to 2001.
An entire generation will know nothing but a broken country and regression without hope for future. People were dying of hunger in 2001 and people are dying of hunger now.
But Paul Singer got his 500% ROI.
And read up about what he did in Detroit if you think he only does it to some 3rd world countries.
The IMF puppet president that got installed after that and that paid him off in full doubled the Argentinian foreign debt, resetting the economic situation to 2001.
An entire generation will know nothing but a broken country and regression without hope for future. People were dying of hunger in 2001 and people are dying of hunger now.
But Paul Singer got his 500% ROI.
And read up about what he did in Detroit if you think he only does it to some 3rd world countries.
[deleted]
> He was soft spoken and an intellectual. Bernie was by no means perfect. But no man is.
Actually in comparison to Madoff and as someone who hasn't stolen $19 billion dollars I feel relatively perfect. It's funny how someone who might steal something worth a few hundred dollars in an instant are somehow not given the second chances of people like Madoff who was operating a much larger criminal scheme over 15 years.
Actually in comparison to Madoff and as someone who hasn't stolen $19 billion dollars I feel relatively perfect. It's funny how someone who might steal something worth a few hundred dollars in an instant are somehow not given the second chances of people like Madoff who was operating a much larger criminal scheme over 15 years.
He couldn't have done it without the software developers who wrote clever code to generate fake but plausible trades.
I hope this provides at least a little comfort for all those whose old age and retirement were ruined for his profit.
The most interesting thing to me was that he was punished more than some murderers...
After watching the movie "The Wizard of Lies", i changed my mind if Madoff.
He was a prisoner of his own vice and it consumed him and killed his whole family
even his son who died of cancer?
He brings to my mind the man who loses his job, but, too ashamed to tell his wife, continues to leave the house in his suit every morning, his wife not discovering the true situation until the house is foreclosed, at which point it is too late.
A tragic figure, who unfortunately brings down others with him.
A tragic figure, who unfortunately brings down others with him.
Exactly. He was not brave enough to stop by himself and made everything worse as a result. Sometimes everyone is a victim.
Even 1st degree murderers, serial rapists, and producers of kid porn get smaller sentences . I think only serial killers get a worse sentence. It goes to show how when it comes to money, prosecutors , judges, and juries do not mess around . Lost money ruins and harms lives as badly as actual violence. Some of the longest sentences are handed out to people who do non violent crimes of a financial nature, often because of how the charges are stacked (wire fraud, laundering, mail fraud, etc.) and then there are multiple counts. SO it is easy to get a very long sentence.
Still blown away that he was basically just putting the funds in a Chase bank account and not even investing it.
> In a 2013 email to CNBC from prison, Madoff claimed the break in the market that started the Great Recession led to his scam.
> “I thought this would be only a short-term trade which could be made up once the market became receptive,” he wrote. “The rest is my tragic history of never being able to recover.”
> In fact, investigators said, Madoff did not execute a single trade for his advisory clients for years. Rather than employing a so-called split-strike conversion strategy as he claimed, he simply deposited investors’ funds in a Chase bank account, paying off new customers with funds from earlier customers — a classic pyramid scheme — and providing his clients with falsified account statement. The investment “returns” shown on those statements — some $50 billion in all — were pure fiction.
> The scandal at Bernard L. Madoff Investment Securities shattered investor confidence, which was already damaged by the financial crisis. And it led to sweeping changes at the Securities and Exchange Commission, which missed the fraud for years despite repeated warnings, including from independent investigator Harry Markopolos, who set out to analyze Madoff’s improbable returns and pronounced them fraudulent as early as 2000.
It was also a failure of regulators, the whole thing could have been avoided with some basic checks.
> A subsequent investigation by the agency’s inspector general, H. David Kotz, found that rather than following up on clear evidence of fraud, SEC enforcement staffers decided to take Madoff’s word that his operation was legitimate.
> “When Madoff provided evasive or contradictory answers to important questions in testimony, they simply accepted as plausible his explanations,” Kotz wrote.
Chase eventually ended up having to pay some fines and changed reporting, but ultimately it is amazing he pulled it off with just money in an account. Banks will do pretty much anything it seems as long as you are capitalizing them as FinCEN reports show.
>In the end, in addition to Madoff, more than a dozen individuals, including Peter Madoff, were convicted of federal crimes, but none of the others was accused of knowing about the fraud. JPMorgan Chase, Madoff’s primary bank, paid $2.6 billion to the U.S. government and Madoff victims in 2014 to settle allegations that it did not maintain adequate controls. After Chase instituted some unspecified reforms, prosecutors dropped charges against the bank.
[1] https://www.cnbc.com/2021/04/14/bernie-madoff-dies-mastermin...
> In a 2013 email to CNBC from prison, Madoff claimed the break in the market that started the Great Recession led to his scam.
> “I thought this would be only a short-term trade which could be made up once the market became receptive,” he wrote. “The rest is my tragic history of never being able to recover.”
> In fact, investigators said, Madoff did not execute a single trade for his advisory clients for years. Rather than employing a so-called split-strike conversion strategy as he claimed, he simply deposited investors’ funds in a Chase bank account, paying off new customers with funds from earlier customers — a classic pyramid scheme — and providing his clients with falsified account statement. The investment “returns” shown on those statements — some $50 billion in all — were pure fiction.
> The scandal at Bernard L. Madoff Investment Securities shattered investor confidence, which was already damaged by the financial crisis. And it led to sweeping changes at the Securities and Exchange Commission, which missed the fraud for years despite repeated warnings, including from independent investigator Harry Markopolos, who set out to analyze Madoff’s improbable returns and pronounced them fraudulent as early as 2000.
It was also a failure of regulators, the whole thing could have been avoided with some basic checks.
> A subsequent investigation by the agency’s inspector general, H. David Kotz, found that rather than following up on clear evidence of fraud, SEC enforcement staffers decided to take Madoff’s word that his operation was legitimate.
> “When Madoff provided evasive or contradictory answers to important questions in testimony, they simply accepted as plausible his explanations,” Kotz wrote.
Chase eventually ended up having to pay some fines and changed reporting, but ultimately it is amazing he pulled it off with just money in an account. Banks will do pretty much anything it seems as long as you are capitalizing them as FinCEN reports show.
>In the end, in addition to Madoff, more than a dozen individuals, including Peter Madoff, were convicted of federal crimes, but none of the others was accused of knowing about the fraud. JPMorgan Chase, Madoff’s primary bank, paid $2.6 billion to the U.S. government and Madoff victims in 2014 to settle allegations that it did not maintain adequate controls. After Chase instituted some unspecified reforms, prosecutors dropped charges against the bank.
[1] https://www.cnbc.com/2021/04/14/bernie-madoff-dies-mastermin...
I have no idea how he coped knowing that he was bound to get caught. Whenever I told any white lies as a kid I felt SO exposed, nervous and vulnerable. I wonder how on earth he could live his life for nearly a couple of decades knowing the was bound to get caught. Was he torn apart by anxiety, or was he just a “LOL YOLO” type of guy?
Sounds like I'm gonna have a beer and rewatch "The Other Guys" tonight
I don't see the connection. A cursory search of that movie's wikipedia page doesn't return anything for 'mado'...
Why?
Why?
It's funny. You should watch it too. It isn't a documentary, but it's about a forensic accountant who is chasing down a crooked billionaire, while colleagues who focus on flashy street-level enforcement get all the accolades.
>> "Bernie was by no means perfect. But no man is."
Compared to Madoff most of us ARE perfect. I have no doubt he felt sorry for his actions once caught and punished, ut this is not the same thing as regretting them enough to voluntarily work at change your ways. Good riddance.
Compared to Madoff most of us ARE perfect. I have no doubt he felt sorry for his actions once caught and punished, ut this is not the same thing as regretting them enough to voluntarily work at change your ways. Good riddance.
> Madoff’s big-name investors included ... Kevin Bacon ...
Of course. Ponzi scheme. Wow.
Of course. Ponzi scheme. Wow.
Interesting. I thought he was already dead, or in house arrest. He just sort of went away after that whole debacle.
Bernie Madoff was actually what put me back on my heels when it comes to investing and capitalism in general. I know it's a hot take on reddit, but genuinely - it appears that the only way to get punished is to scam people with loads of money.
Bernie Madoff was actually what put me back on my heels when it comes to investing and capitalism in general. I know it's a hot take on reddit, but genuinely - it appears that the only way to get punished is to scam people with loads of money.
Yup, scamming per se is rife and as with most borderline 'white' white collar crime, largely consequence-free - in sell-side analysis for example. But step on the wrong toes...
As a person with 21 year of experience in custom software development, i struggle to define what "scam" is, at all...
The law around scams looks a lot like the design of unit tests.
On the one hand, you have the full suite of hypothetical unethical mechanisms (realized and unrealized) human beings could scheme up to unfairly cheat each other out of hard-earned resources. Analogous to the full suite of behaviors a complex program could exhibit given arbitrary inputs over infinite time.
And on the other hand, you have a subset of those behaviors carved out and codified as illegal, where a violator will go to jail. Analogous to the behaviors a unit test suite can rule out.
But unit tests, as we know, are not mathematical proofs of soundness.
On the one hand, you have the full suite of hypothetical unethical mechanisms (realized and unrealized) human beings could scheme up to unfairly cheat each other out of hard-earned resources. Analogous to the full suite of behaviors a complex program could exhibit given arbitrary inputs over infinite time.
And on the other hand, you have a subset of those behaviors carved out and codified as illegal, where a violator will go to jail. Analogous to the behaviors a unit test suite can rule out.
But unit tests, as we know, are not mathematical proofs of soundness.
If he wasn’t, he was dead man walking
That's too bad. I wanted him to live out his term. Given the amount of damage he caused, he has hardly paid his debt to society.
You want a 71 year old man to live out his 150 year prison sentence?
Sure, why else give him a 150 year prison sentence? I am only 49% joking.
Doesn't that just cost society more? In actual dollars a 150 year sentence would cost taxpayers something like $10M (apparently prison costs like $81k/year in the US)
If his example deterred one person from committing the same crime, taxpayers may come out ahead anyways.
too little too late.
scrubs(1)
The debt that all men pay.
Guess that Awkwafina song now needs a partial re-write.
Isn't Bernie Madoff dead? He's dead, right?
Nah, that motherfucker not dead, he in jail getting booty-rammed by the feds, getting tossed by a dude named Big Ed, in a hotbed, eating ramen noodles and crying
Isn't Bernie Madoff dead? He's dead, right?
Nah, that motherfucker not dead, he in jail getting booty-rammed by the feds, getting tossed by a dude named Big Ed, in a hotbed, eating ramen noodles and crying
[deleted]
Fines are just the cost of doing business.
There are many other scandals: the whole subprime disaster, pollution from plants and the like where no one went to prison and people really should've.