It used to be that financial crime was punished by gruesome
punishment or even death. A response of that sort to the
fraudsters who brought us the crisis, starting in the 1970s
requires that these rules be re-instated.
checkitout: Washington's
blog
Will
We Have to Wait for a 21st Century Peasants’ Revolt Before Seeing Any Real
Change?
Posted
on August 4, 2012 by WashingtonsBlog
Will
the Peasants Go Medieval On Bankers?
... Financial criminals throughout history have been beaten,
tortured and even put to death, with little evidence that severe punishments
have consistently deterred people from misconduct that could make them
rich.
The history of drastic punishment for
financial crimes may be nearly as old as wealth itself.
The Code
of Hammurabi, more than 3,700 years ago, stipulated that any Mesopotamian
who violated the terms of a financial
contract – including the futures contracts that were commonly used in
commodities trading in Babylon – “shall be put to death as a thief.” The
severe penalty doesn’t seem to have eradicated such cheating, however.
In medieval Catalonia, a banker who went bust wasn’t merely humiliated by town criers who declaimed his failure in
public squares throughout the land; he had to live on nothing but bread and
water until he paid off his depositors in full. If, after a year, he was unable to repay, he would be
executed – as in the case of banker Francesch Castello, who was beheaded in
1360. Bankers who lied about their books could also be subject to the death
penalty.
In Florence
during the Renaissance, the Arte del Cambio – the guild of mercantile
money-changers who facilitated the city’s international trade – made the cheating of clients punishable by torture.
Rule 70 of the guild’s statutes stipulated that any member caught in unethical
conduct could be disciplined on the rack
“or other corrective instruments” at the headquarters of the guild.
But financial crimes weren’t merely
punished; they were stigmatized. Dante’s Inferno is populated largely with financial sinners,
each category with its own distinctive punishment: misers who roll giant
weights pointlessly back and forth with their chests, thieves festooned with
snakes and lizards, usurers draped with purses they can’t reach, even
forecasters whose heads are wrenched around backward to symbolize their
inability to see what is in front of them.
Counterfeiting
and forgery, as the historian Marvin Becker noted in 1976, “were much less prevalent in Florence during the second
half of the fourteenth century than in Tuscany during the twentieth century” and “the bankruptcy
rate stood at approximately one-half [the modern rate].”
In England,
counterfeiting was punishable by death starting in the 14th century, and
altering the coinage was declared a form of high treason by 1562.
In the 17th century, the British state
cracked down ferociously on counterfeiters and “coin-clippers” (who snipped
shards of metal off coins, yielding scraps they could later melt down or
resell). The offenders were thrown into London’s
notorious Newgate prison. The lucky ones, after being dragged on planks through
sewage-filled streets, were hanged. Others were smeared with tar from head to toe, tied or shackled to a stake, and
then burned to death.
The British government was so determined to
stamp out these financial crimes that it put
Sir Isaac Newton on the case. Appointed as warden of the Royal Mint in
1696, Newton
promptly began uncovering those who
violated the financial laws of the nation with the same passion he brought
to discovering the physical laws of the universe.
The great scientist was tireless and
merciless. Newton
went undercover, donning disguises to
prowl through prisons, taverns and other dens of iniquity in search of
financial fraud. He had suspects brought to the Mint, often by force, and
interrogated them himself. In a year and a half, says historian Carl
Wennerlind, Newton
grilled 200 suspects, “employing means that sometimes bordered on torture.”
When one counterfeiter begged Newton to
save him from the gallows – “O dear Sr no body can save me but you O God my God
I shall be murderd unless you save me O I hope God will move your heart with
mercy and pitty to do this thing for me” – Newton coldly refused.
The counterfeiter was hanged two weeks
later.
Until at least the early 19th century, it
remained commonplace for counterfeiters and forgers to be put to death; between
1792 and 1829, for example, notes Wennerlind, 618 people were convicted of counterfeiting British paper currency,
and most of them were hanged. Many were women.
Bloomberg
provides details of one “peasant revolt” stemming from a Libor-like currency
manipulation scheme:
During the “Good Parliament” of 1376, public
discontent over [manipulation of currency exchange rates similar to the current
Libor scandal] came to a head. The Commons, represented by the speaker, Peter
de la Mare,
accused leading members of the royal court of abusing their position to profit
from public funds.
A particular target was the London
financier Richard Lyons ….
Initially the government bowed to public
pressure. Lyons was imprisoned in the Tower of London and his properties and wealth
were confiscated. Other leading courtiers implicated in these abuses, such as
Latimer and the king’s mistress, Alice Perrers, were banished from court.
Once parliament had dissolved and the
public outcry had died down, however, the king’s eldest son, John of Gaunt,
acted to reverse the verdicts of the Good Parliament. Latimer and Perrers soon
reappeared at the king’s side and Lyons
was released from the Tower and recovered his wealth, while the “whistleblower”
de la Mare was
thrown in jail. The government also sought to appease the wealthy knights and
merchants that dominated parliament by imposing a new, regressive form of
taxation, a poll tax paid by everyone rather than a tax levied on goods. This
effectively passed the burden of royal finance down to the peasantry.
It seemed as though everything had returned
to business as normal and Lyons appeared to have gotten away with it. In 1381,
however, simmering discontent over continuing suspicions of government corruption and the poll tax contributed to
a massive popular uprising, the Peasants’ Revolt, during which leading government ministers,
including Simon of Sudbury
(the chancellor and archbishop of Canterbury) and Robert Hales (the treasurer)
were executed by the rebels. This time, Lyons did not escape; he was singled out,
dragged from his house and beheaded in the street.
If
the King had followed the
rule of law – and kept Lyons and the boys in jail – everything would have
calmed down. The monarchy – just like the present-day government – chose to
ignore the rule of law, and protect the thieves and punish the
whistleblowers.
