There are plenty of people to blame in the current mortgage meltdown -- executives who took huge salaries while building a feeble house of financial cards, buyers who bit off more than they could chew, betting that home prices would only continue to rise, etc. In the talk of how to solve the problem, one question that hasn't been answered is how to punish the guilty.

I'll agree with those who advocate not punishing the guilty that the most important thing is to avoid a total lockup of our financial systems. That would hurt everyone. A lot. But I don't agree that we should just let those who've profited from their greed and mistakes get away with it.

One of the arguments against punishing them is that what they did isn't technically illegal, so how could you punish them? The US Constitution prohibits creation of ex post facto laws, so we can't create a law to retroactively punish someone who did something before the law was created.

Some have advocated requiring acceptance of what amounts to punitive measures in order for companies to participate in the "bail out" (eg. limits on executive salaries). That would get around the ex post facto prohibition, but we'd risk having companies not participate, or having them lose their best executives since their decision makers wouldn't want to accept the "punishments".

So how do you get around the ex post facto law prohibition without giving the guilty the option of continuing to get paid to destroy the economy? How about passing laws making it easier for the victims of the crisis to file class action lawsuits against those who got grossly overpaid for failing in their fiduciary responsibilities (bank shareholders and customers...)?

The net result of such class action lawsuits may be that slimy class action lawyers get grossly overpaid while the victims only get token reparations, but if it means taking back the absurd salaries and bonuses that were paid to the people who built the house of cards we've been watching crash down recently, maybe that's okay. At least it sends a message.

Reader Comment:
Offshore Banking said:
No government can act in the most liberal way possible. I mean just seat back and wait until economy stabilizes itself. Government is ELECTED and if it does not show (or at least pretend) doing something with the crisis, it won't be reelected that in...
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