Let’s talk about double standards – car companies and their bosses versus financial companies and theirs.
Lawmakers in the United States grilled General Motors CEO Mary Barra last week, wondering aloud and often why The General took years to recall 2.6 million cars for faulty ignition switches. Good question and we all await the full and final answer, including, it appears, Barra herself.
And apparently to further grab Barra’s attention, some of those lawmakers and others hinted at the possibility of criminal penalties, rather than mere fines, for violating the laws regarding recalls governed by the National Highway Traffic Safety Administration (NHTSA).
"There needs to be a change in the NHTSA statute so the failure to do a recall on a knowing and willful basis is a criminal violation," Joan Claybrook, former agency administrator and now consumer safety advocate, told Bloomberg News. "If you’re responsible for that, you go to jail."
Senator Clair McCaskill questioned whether financial penalties are enough to deter “companies like General Motors or Toyota or Chrysler, or any of the companies?" Senators Edward Markey of Massachusetts and Richard Blumenthal of Connecticut suggested GM could face "criminal liability," for failing to disclose what it knew and when.
All this came on the heels of a $1.2-billion (U.S.) fine to Toyota after a four-year criminal investigation concluded that Toyota failed to fully inform the public about safety defects related to uncontrolled acceleration.
So lawmakers in the U.S. are taking direct aim at car companies, and not just GM. That’s clear. And this is not unfair. Toyota and GM have plenty to answer for given the great tragedies that have resulted from faulty vehicle components.
But as I watched Barra testify, and as I dug into Toyota’s misdeeds, I could not help but ask: Where was the outrage from these same lawmakers over the devastation caused by Wall Street in the last financial crisis? As Neil Irwin points out in The Washington Post, not a single Wall Street CEO is serving time for their role in the crisis.
An excellent Frontline documentary points out that not a single Wall Street executive has been prosecuted for fraud related to a “financial meltdown that left 8.8 million Americans jobless and led to a $700-billion government bailout.” Talk about tragedy.
As Irwin adds, “It's not that federal government tried to prosecute a bunch of them (Wall Street CEOs) but lost the cases. There were no serious efforts at criminal prosecutions at all.”
Yes, there have been civil penalties and a number of low-level players have been prosecuted. But not a single “big fish” has gone to jail for the financial meltdown.
On the other hand, it’s clear that car companies are held to quite a different standard than financial institutions. U.S. Attorney General Eric Holder, who was front and centre in announcing the Toyota criminal investigation and settlement, has said that bringing criminal charges against financial institutions might have a “negative impact on the national economy.”
That suggests that bankers are too important to go to jail, though as the Post notes, Holder later clarified that he was not suggesting any such thing.
Irwin points out that “America doesn’t criminalize bad business decisions, even when they lead to business failure; if we did, Silicon Valley would be a penal colony.” If you buy that argument, then Barra and her colleagues at GM should not face any sort of criminal indictment.
Because on the surface, based on the evidence we’ve seen so far, the decisions within GM regarding the ignition switch were, indeed, business decisions. Yet senators McCaskill, Markey and others are talking about "criminal liability."
From this corner, it looks as though car companies and financial institutions are held to different standards.
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