Saturday, March 2, 2013

Why are there no famous financial whistleblowers in this crisis? - New Economic Perspectives

Why are there no famous financial whistleblowers in this crisis? - New Economic Perspectives

The fact that the business community fought ferociously against doing anything to encourage whistle-blowers is an example of what we call “revealed preferences” in economics.  Honest CEOs should encourage whistle-blowers.   CEOs often say that they encourage whistle-blowers.  Their SEC filings reveal their true beliefs.

When the I-O police have a right win bias then the crime waves can boom and bust, more Iv self policing is allowed so the contagion can grow. Random audits from the Bi side of I are done less. In this environment Iv whistle blowers make less commissions from exposing this contagion as well as having less leverage to plea bargain their own crimes. Police are supposed to use Iv-Oy whistle blowers to moderate crimes by Y-V because Iv-Oy agents are supposed to use secrecy and deception on behalf of Y-V teams. When I-O has been weak then Y-V becomes strong, this takes time to rebalance because even when I-O police become strong they still have few Iv-Oy whistle blowers to help them find the Y-V crimes.
We have far too few whistle-blowers and because of the worst epidemic of accounting control fraud in history and the death of criminal referrals by the banking regulatory agencies our need for whistle-blowers has never been greater.  Indeed, our federal prosecutors are the people who most desperately need to encourage whistle-blowers to come forward who worked at the financial control frauds.
Given that desperate need how would a rational administration respond?  The President and the Attorney General would hold a press conference with a group of whistle-blowers.  He would praise their performance, give a few specifics of how valuable the information they provided was to the nation, urge the tens of thousands of Americans who have information about other frauds to come forward, provide a web site for future whistle-blowers to use, and help arrange a publicity tour in which the select group of whistle-blowers appeared on a series of major television and radio programs where their efforts could be extolled and they could ask others to follow their lead.
The DOJ web site would extoll whistle-blowing and give examples of how their actions helped the nation.  It would showcase video interviews with whistle-blowers that could be picked up by You Tube.
The DOJ would hold rallies outside buildings that had (or do) house the worst frauds featuring the whistle-blowers who had come forward and asking others to follow their lead.  The President would host a White House dinner for the whistle-blowers and bestow a medal on some of the most praiseworthy.  That is what an administration devoted to holding the elite frauds accountable would do.

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