Tuned in for the first time to The Martin Bashir Show today on MSNBC. Mr. Bashir had a couple guests on laying arguments for prosecuting Wall Street investment banks for causing the 2007 recession.
My eyes rolled and I exhaled as three obviously intelligent men made their “burn Wall Street at the stake” arguments. Problem with these arguments is their lack of legal precedence. Two quick points.
First, let’s look at the term recession. Recessions are generally defined as two consecutive quarters of negative growth in gross domestic product. The nation sees a decline in economic activity. We are not producing goods and services at a positive rate.
A number of the classic components of gross domestic product, namely personal consumption, exports, government spending, and private investment are in decline during a recession.
Personal consumption in particular accounts for 70% of gross domestic product, and when Americans are faced with high levels of unemployment as we are facing now, gross domestic product is sure to fall.
Second quick point. Congress never intended for the courts to prosecute anyone because our gross domestic product contracted. They, along with the President, are responsible for managing the economy per the U.S. Constitution, and the Full Employment Act of 1946 as amended by the 1978 Humphrey-Hawkins Act. The Congress promotes the economy through the regulation of commerce, while the President targets growth and full employment primarily via fiscal and budgetary policy.
Business is not responsible for managing the economy. Business is subject to the economy’s flows and ebbs. Business is responsible for managing the day-to-day of commercial activity; marketing goods and services, entering and self-enforcing contracts, negotiating prices between buyers and sellers.
Before pointing fingers and seeking criminal indictments against the financial sector, Mr. Bashir and company need to remember that the economy always goes through cycles. If they are going ton stir up popular dissent using the courts as the stake upon which to burn a few private sector players, they should at least cite the legal authority to do so.