If investment banks threw fuel on the fire of the collapsing housing market, do they owe anything to the American people—and to people anywhere who are suffering from the worst recession since the Great Depression? This week, I’m offering a modest proposal: bank reparations.
If the allegations that certain investment banks took actions that willfully contributed to the collapse of the housing market, and directly or indirectly to the economic recession, should they be accountable for damages? I’ll develop the proposal day by day.
Today, I want to emphasize that I have nothing against investment banking. I believe that investment banks play a vital role in our economy. I have nothing against banks earning large profits. After all, I have spent my entire career teaching in major business schools, first at the University of Chicago, now at the University of Michigan. Many of my students work on Wall Street. But there is a line.
If actions were taken that willfully and knowingly helped to bring down the economy, then the line was crossed. The Securities and Exchange Commission (SEC) has leveled charges of fraud, the details of which we’ll discuss tomorrow. If proven, damages would be paid to the investors who were defrauded. But this might not go far enough. If banks and individuals facilitated the collapse of the housing market (and thereby contributed to the recession) in order to make profits, then they owe reparations—to the people who lost their homes, their jobs, their pensions. Join me this week as we discuss the idea of bank reparations.
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