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Why weren't banks punished the way Bernie Madoff was?

Banks went bankrupt. Most of the money Bernie Madoff owed investors has been returned. The same can't be said about Washington Mutual and other banks. Why weren't banks that were more fiscally irresponsible than Madoff punished?

  • Best Answer

    We always believed capitalism depends on 'free market competition'.  But the problem with competition is that there are winners, and once there are clear winners, there's no longer competition.

    We allowed banks, insurance companies, etc. to grow and merge, which had the effect of eliminating competition.  Eventually we got companies that were 'too big to fail', because if they did it would damage the whole economy.  So when they DID fail, the taxpayers had to bail them out.

    Too Big To Fail is anathema to capitalism.  It's the sign of 'state socialism' when the managers of a company are protected from their own mismanagement.  They then have an incentive to take big chances.  If they win, they're heroes.  If they lose, then the taxpayers bail them out and they still get their 7-figure 'bonuses'.

    Perhaps GW Bush and Obama were right to bail them out, less trouble for the economy in the long run.  But then they should have broken them up into smaller units that COULD fail without destroying the country.  They didn't do that, pretty much ensuring that this kind of thing will happen again!

    Mr. Smartypants
    Lv 7 8 months ago 3 0
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