The key problem with using the law against bankers has been the difficulty of getting a conviction, economist Paul Collier said.
"We need a crime of managing a bank irresponsibly: In other words, bank-slaughter," Collier wrote in the UK Guardian.
Fear of jail would discourage bankers from taking excessive risks, Collier thinks. And judging failed banks on the leaders intentions misses the point, he wrote.
“Faced with a corpse and a killer, police do not need to prove ill intent. Manslaughter sets the hurdle lower than murder,” Collier wrote. “It is enough to show the killer was irresponsible. That is the standard we need.”
A bankslaughter law, Collier argued, would make bonuses less dangerous because managers would have to weigh the balance between risk and return and take defensible decisions.
“I doubt hyper-caution would be a problem,” he said. “The overly cautious would not get bonuses. Surely we can rely on our bankers to exhibit the necessary degree of greed.”
A bankslaughter law should target the “wild fringe” where trouble often starts, Collier said, discouraging reckless behavior before it spreads from the fringe to the mainstream.
A major problem with criminalizing bank failure is that bank shareholders don't want to be protected, according to Clusterstock’s John Carney.
“Indeed, they want bank managers to take on enormous risks,” Carney wrote.
“If anything, the problem is that they want bank managers to take on too much risk, betting that they'll be bailed out if things go badly.”
© 2013 Newsmax. All rights reserved.