Do Intentions Matter?

This story is interesting. State enforcers pursued criminal charges against some former Bear Stearns executives. With much fanfare, they were acquitted.

The acquittal of the two former Bear Stearns hedge fund managers suggests that blame is not easy to apportion – and that cock-ups, not conspiracies, offer the more likely explanation.

This is a common mistake of pro-State troll justice. "Intentions matter, and not outcomes."

The fact that investors lost billions of dollars is irrelevant. According to pro-State troll justice, the key distinction is "Did they intentionally commit fraud, or were they merely stupid?"

"The subprime market looks pretty damn ugly," Tannin wrote to Cioffi in April 2007. If Bear's internal reports were accurate, Tannin suggested, "I think we should close the funds now," and "the entire subprime market is toast."

The situation became so dire that Cioffi pulled $2 million of his own cash from the fund, but the pair still told investors that they should stay in and that the outlook was good, prosecutors said. He also was accused of hiding news that one worried investor had decided to pull out $57 million from the funds.

They took their own money out of the fund, while telling investors that everything is all right.

This is exactly wrong.

It makes no difference whether billions of dollars were lost through your own gross negligence, or if you intentionally and deliberately stole it. Either way, the victims are injured.

The investment manager was presenting himself as an expert. He is guilty of fraud.

The executives get to keep their huge salaries and bonuses paid during the inflationary boom. During the bust, insiders get a bailout while investors lose their savings.

The executives can claim "We thought the housing market would recover and everything would be alright!" Maybe they really believed that. They have an incentive to believe that, because their careers depend on selling mortgage bonds.

It isn't an explicit Ponzi scheme, but in many ways the hedge fund industry is like a Ponzi scam. If you buy X, and then convince other people to buy X, you can sell to the greater fools for a profit. If you're managing a large fund, buying a lot of X pushes up the price of X, creating the illusion that it's an attractive investment.

A lot of money was invested in subprime mortgage bonds. This led to an inflationary boom. This led to even more money invested in subprime mortgage bonds. Due to the inflationary boom, they seemed really lucrative. The inevitable bust occurred. Insiders profit during the boom by printing new money. During a bust, "too big to fail" insiders get a bailout. Another boom/bust is guaranteed, but it's hard to predict exactly where in advance.

Limited liability incorporation provides an incentive for fraud. Management can always declare bankruptcy and cheat their creditors. Limited liability incorporation gives management a free put option. In a really free market, if you promise "Investment X is safe!" and then investors lose money, you can be personally responsible for the loss.

Also, this is a criminal trial. The issue is "State vs. criminal" and not "victims vs. criminal". The investors who lost criminal charges might file a separate civil lawsuit. In that case, JP Morgan Chase, who bought out Bear Stearns, would pay the loss. The individual executives would suffer no negative personal consequences.

Consider another example. Psychiatry is murder. Are mental health industry insiders intentionally committing mass murder? Or, are they so stupid that they can't tell the difference between medicine and murder? Either way, it's irrelevant. It's a crime. It makes no difference if it's done on purpose, or if it's gross incompetence.

Suppose someone files an "Anonymous" tip with the police that I have marijuana in my house. (I don't.) The police conduct a no-knock raid of my home. I am unarmed, but the police are confused and shoot me. The police claim "I thought he had a gun. I didn't kill him on purpose." According to pro-State troll justice, the policeman did not commit a crime.

Conversely, suppose I did own a gun. I thought that the policeman conducting a no-knock raid were criminals. Suppose I shot and killed one of them. I would be pursued for criminal murder charges. "I thought they were criminals!" would not be accepted as a defense. If police conduct no-knock raids, then non-State-licensed criminals can claim "We're the police!" and then victims won't resist. The "intentions matter" excuse is used to acquit State insiders. "Intentions are irrelevant" is used to convict non-insiders for non-crimes.

If "I didn't do it on purpose!" is a valid excuse, then why would anyone ever bother to take appropriate precautions? Why not just loot and pillage? When you get caught, claim "I didn't do it on purpose!", and that's an acceptable excuse.

There's another evil fnord in this trial. A jury acquitted the executives. Therefore, no crime occurred. That's false. A corrupt State court is biased. Typically, a prosecutor will stack the jury with pro-State trolls, filtering out people who are sympathetic to the defendant. If you have an expensive lawyer, he can stack the jury with people sympathetic to the defendant. In this case, there's a political incentive for there to be an acquittal. That provides the pro-State troll message "No crime occurred." Perhaps State prosecutors arranged for a sham trial, but then didn't try too hard. After all, the State prosecutor doesn't get fired just because the trial was an acquittal.

An evil person can't be logically convinced that they're doing something wrong. The State provides no incentive for parasites to do an honest job. The incentive is for the parasite to delude himself that he's a brilliant leader. Then, he can later plausibly claim "I had good intentions." From the parasite's point of view, he isn't lying, because he doesn't know that the State is a scam.

You can logically convince an intelligent person. However, really intelligent people usually aren't in a position where they're profiting from State violence. State-backed leaders tend to be parasites.

This is an important point of pro-State troll justice. A corrupt State court judges intentions, and not outcomes. That is wrong. You should only evaluate outcomes and not intentions. Intentions are irrelevant. It's impossible to fairly determine someone's intent. By evaluating intentions and not outcomes, a criminal can always say "I didn't do it on purpose!", and that's acceptable.

The State justice system is designed to protect parasites. In this trial, the acquittal provides the illusion that no crime occurred. Even if there were a conviction, the fnord would be "These individuals are evil!" rather than "The system is corrupt!"