By Alan Bean
According to this article in the New York Times, Kareem Serageldin, once a top executive with Credit Suisse, has been sentenced to two-and-a-half years for his role in the derivatives meltdown. Like so many others, Serageldin bundled toxic mortgages and sold them to unwitting investors.
But why did a federal judge sentence the defendant to half the term outlined in the non-binding federal sentencing guidelines? Fortunately, we don’t have to guess because Judge Alvin K. Hellerstein explained his actions. According to the Times:
“He was in a place where there was a climate for him to do what he did,” the judge said. “It was a small piece of an overall evil climate inside that bank and many other banks.”
No one who has studied the sad trajectory of the mortgage crisis and the economic collapse it spawned can quibble with the judge’s assessment–the accused was caught up in an evil corporate climate. I have no problem with a judge taking that into account. We are all accountable for our individual decisions, but we are all dancing with the culture and, most of the time, the culture leads.
But can you imagine a judge cutting a member of a drug gang some slack because he operated within an evil climate? I can’t.
In fact, we have artificially jacked up sentences for narcotics-related crimes on the theory that the tougher we get, the greater the deterrent effect. Other street punks will notice that Tony got thirty years for a second offense and mend their ways. It has never worked, but that’s the rationale.
There is no fundamental difference between a street gang involved in drug dealing and a financial firm on Wall Street peddling worthless mortgages to gullible investors. Well, there is one minor difference. People who do business with drug dealers generally get what they pay for; it’s simple supply-and-demand. The folks who bought the poison Credit Suisse was peddling thought they were getting triple-A stock because, in most cases, the worthless bundles of garbage carried that rating.
So, yes, you can’t blame one isolated guy for the sins of a corrupt corporate culture. A measure of mercy is fitting. On the other hand, if this defendant must serve 2.5 years in federal prison without the benefit of parole, why aren’t we rounding up his brothers and sisters in crime throughout the financial industry?
The answer is simple. If we did that, we would devastate hundreds of thousands of families indirectly associated with the financial sector. In other words, we would be doing to the upper-middle and upper classes what we have done to the poorest of the poor via our ill-considered war on drugs.