1. What is the difference between “illegal” and “irresponsible”?
Asked at a Thursday news conference about the lack of Wall St. prosecutions, President Obama said this:
[O]ne of the biggest problems about the collapse of Lehman and the subsequent financial crisis and the whole subprime lending fiasco is that a lot of that stuff wasn’t necessarily illegal, it was just immoral or inappropriate or reckless. That’s exactly why we needed to pass Dodd-Frank, to prohibit some of these practices….
I think part of people’s frustrations, part of my frustration, was a lot of practices that should not have been allowed weren’t necessarily against the law, but they had a huge destructive impact.
While the distinction between hubris/stupidity and illegality may not satisfy many, it’s a key component to the financial crisis. The Motley Fool put it thus:
Blowing up your company isn’t necessarily a crime. Leveraging 30-to-1 isn’t unlawful. Neither is buying securities backed by homeowners unable to repay. Nor is ignoring caution signs. Or disregarding history.