Unfortunately, there’s yet more tortured logic here:

The bailout of Lehman’s rivals compounds the lottery aspect. Many of the survivors arguably were not spared Lehman’s fate because they better managed the crisis. They survived because they outlasted the government’s patience with the liquidation of financial firms in 2008. So we’re not only punishing Lehman’s executives for failing—we’re punishing them for not being bailed out. What kind of justice is that?

The justice is the kind where we know of specific possible crimes by Lehman executives. Carney’s argument here is sort of like the burglar who tripped the alarm complaining about the cat burglar who didn’t get busted. Where’s the justice? Some people get caught. Most don’t. But if you really want to make it a level playing field, here’s betting most folks would be happy to beef up the Angelides Commission (or make it the Angelides/Valukas Commission) to sniff out specific possible crimes by Merrill, Citi, or Goldman executives. Even then, Carney would like them fined rather than jailed:

In short, one generation of Enrons should have been enough for us. Lehman shouldn’t be Enronized. Instead, it should be normalized, treated as an ordinary case of business failure, perhaps with civil liability for any malfeasance or deception by executives.

To add a little context, and in a programming decision we’d like to think was designed to make The Audit’s head explode, CNBC had Carney on with Larry “Goldilocks” Kudlow to talk about the Lehman failure and how it proves that market discipline beats the pants off regulation any ol’ day.












The Great Unspoken thing here is that the regulators had been hog-tied and gutted because of the likes of Kudlow and Carney over the course of three decades—through both Democratic and Republican administrations. Still, Kudlow calls the SEC “another bunch of regulatory dopes that completely missed this.”

This would be the same bunch of regulatory dopes headed by Christopher Cox, a man Kudlow lauded as a “forward-looking, Internet-minded visionary” in a 2005 column in the National Review, calling the move “a brilliant stroke and an inspired decision” by President Bush, who put forth a regulator “likely to reinterpret some SEC rules in a much more investor- and business-friendly manner.”

Cox, of course, was thereafter almost universally derided—even by the Wall Street executives in Too Big to Fail—as a frozen-grinned empty suit, who didn’t do or know how to do his job. Which was the whole point.

Now, Kudlow and Carney, nodding in agreement, believe that the failure of the SEC to sniff out the Lehman Brothers affair means that any new regulation is automatically suspect.

The message from Carney then is you can’t regulate them to try to prevent them from cheating, and you can’t jail them if you actually happen, somehow, to catch them cheating.

Non-white-collar criminals, presumably are a different story entirely.

UPDATEresponse here.


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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.