Let’s Encourage the Others

By Patrick F. Cannon

In 1757, the British Royal Navy court martialled Vice Admiral John Byng for dereliction of duty, deciding he failed to give vigorous enough battle with the French in their successful attempt to take Minorca. The British government of the time was in trouble for a variety of reasons, and decided that making an example of poor Byng would show how determined they were in prosecuting the war against their ancient enemy. Byng was found guilty and executed on the quarter deck of HMS Monarch by firing squad, which apparently was less humiliating than being hanged, although the result was roughly the same.

When he heard of this, Voltaire included a similar incident in Candide, where the hero witnesses a similar  execution in Portsmouth and is told that it is good to kill an admiral from time to time “pour encourager les autres” (to encourage the others).

(A small digression. After fighting the French for a thousand years, the British victory at Waterloo ended the military phase of their competition. But old animosities die hard. I remember a television interview with an elderly Church of England Vicar when the Channel Tunnel was being dug. He was asked what he thought of soon being able to get to France in minutes instead of a long ride on the ferry. His response: “why would anyone want to go to France?”)

Anyway, it appears that our own government preferred to levy huge fines on corporations found guilty of financial shenanigans during the late troubles, rather than sending the corporate leaders to prison as a way of “encouraging the others.” Alas, the firing squad is no longer considered an option. It may be that their own sense of guilt in fostering the housing bubble by essentially forcing mortgage companies to lend money to unqualified borrowers had something to do with it. A series of highly publicized trials could well have rubbed both ways. Better apparently to just fine the corporations (thus sticking it to the stockholders) than send the guilty executives to jail.

An investment banking firm with a trillion dollars or so of assets hardly misses 4 or 5 billion, and probably gets to write it off its tax bill anyway! How much more satisfying it would have been – both to most Democrats and Republicans – if a few of the worst offenders had been sent away to join the legendary Bernie Madoff in the Federal pen “pour encourager les autres.”

No wonder that other famous Bernie, the venerable Sanders, has gained so much traction with young people and left wing Democrats (who yearn wistfully for the final triumph of Marxism).  They see the fat cats getting a slap on the wrist, while the poor shmoe who gets caught dealing a bit of weed gets years of hard time. Some of them, of course, did lose their jobs, but how many of them actually lost their ill gotten gains?

I’m for the absolute minimum of financial market regulation, but when the laws that are on the books are broken, the culprits should be dragged to the quarter deck just like the unfortunate Admiral Byng and made to understand that the rule of law applies to everyone. I’m OK with fining their employers too, because they almost certainly looked the other way as long as the profits kept rolling in.

Finally, I should make it clear that the financial markets generally work just fine, Bernie Sanders to the contrary. The tendency to demonize whole groups for the misdeeds of the few is a regrettable feature of our recent public discourse.

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Copyright 2016, Patrick F. Cannon