Skip to content

How Freedom of Speech Relates to the Financial Crisis

April 1, 2011

After recently watching the documentary “Inside Job,” a movie explaining what actually caused the 2008 credit crisis, I began to think about what freedom of speech really means.

For those who have not seen the movie, I highly recommend it. But for the purposes of this blog, I want to focus on one of the causes of the crisis mentioned in the film. Large investment banks (Goldman Sachs, JPMorgan Chase, etc.) were purposely providing their investors with information and recommendations to put their money into investments that they knew were poor. After doing so, they would bet against the investment and make money off of their customers. Pretty crazy, right?

Well what’s even crazier is that they have not been punished at all for their actions. They got away from the financial meltdown with hardly any dents to their wallets while legal action has not been taken against these executives. Part of the reason why they haven’t been charged with any crimes is that in their congressional hearings, when they were accused of betting against their own recommendations, they played dumb and acted like it never happened. Here is one of my personal favorite videos from the hearing. Yes, I know 4 minutes seems like an eternity in youtube world but at least watch the first minute.

This brings me to my inquiry about freedom of speech and liberty. What truly defines a freedom to say anything you want? There was no contract between the investment bank and its customers saying that it is the bank’s job to always provide them with their best recommendations. Many of the executives that are under fire are now claiming that that isn’t even their job, and that their responsibility is to simply provide their customers with information.

This is without a doubt unethical but at what point does an unethical opinion go from simply expressing one’s right of freedom of speech to a crime that someone should be punished for after it harms families all over the world.

Where should the line be drawn? Is it even possible to draw this line?

  1. Paige Robinson-Frazier permalink
    April 1, 2011 1:20 PM

    Did the investment bankers use the first amendment to argue that they were not doing anything wrong? It seems to me like they were obviously giving their customers false information. It may not be written anywhere that they have to give them their best recommendations, but they should definitely be charged for giving false information. I’m not sure about how the first amendment would protect you when you perjure yourself.

  2. alexqhe permalink
    April 1, 2011 6:18 PM

    I think it’s pretty obvious that Daniel Sparks was playing the semantics game during the testimony he gave to the Senate Permanent Subcommittee on Investigations. And while it seems like Sen. Levin’s frustration results in a large part from Sparks’s wordplay of clueless innocence, I’m not so sure that they did anything legally wrong. Unethical and immoral, yes, but criminal?

    When you walk into any store where the sales staff makes a commission off of however much they sell you, it’s no different from what Goldman Sach’s did regarding the Timberland account, albeit on a much smaller scale. I purchased a Sony computer two years ago based off of the testimony of a sales representative at Fry’s that told me that it would be the best computer that I would ever buy. Three months later, it was in the garbage due to a problem with the processor, despite the sales representative’s original claims that the computer would last me for years. From that point on, I took it upon myself to do my own research in the future.

    Sure, I was upset at the salesperson’s tactics, but it’s just part of the game. Reminds me of a Hobbesian state of nature in a sense – every man looking out for himself.

  3. Jeremy Kucera permalink
    April 1, 2011 8:03 PM

    Boris, I thought this was a great post. It was to the point, and I think that freedom of speech and this credit crisis you outlined in the post are very relatable. You made a very good point. There is not contract between the banks and the investors saying that the bank has to be truthful. The first amendment does allow anyone, whether it is in businees or not, to say what they please with no restrictions, even if they are lies. I wonder what the Senate leaders would have said if the bank claimed the first amendment as a defense. I think it could be a legitimate one. There is nothing in the first amendment saying all speech is protected only if it’s true.

    Secondly, I have never watched any Senate hearings on C-Span until now. I didn’t know they were so informal. I just assumed that Senators would have tried to use more politically correct words instead of shitty, which Levin used countless time, but I actually like the informality and the use of colloquial language. It makes government seem more relatable to me.

    Great post Boris.

  4. alexqhe permalink
    April 1, 2011 10:22 PM

    In regards to Jeremy’s comment above about the informality of the Goldman Sachs Senate hearing, they usually are much more stringent than the clip above. Sen. Levin’s direct quote of “shitty deal” is pretty far out there, and the public use of expletives in a political setting usually draws a fair amount of attention (e.g. Cheney-Leahy). I was a bit surprised as well.

    • Jeremy Kucera permalink
      April 4, 2011 4:42 PM

      Thanks Alexqhe

  5. apnash permalink
    April 2, 2011 12:11 PM

    I think that this debate about truth in speech is best placed in terms of harm as we defined it in class on Thursday when discussing Mill. This speech in the form of advice was most definitely meant to harm because the providers of the advice stood to profit from the failure of the investments they advised their customers buy. Through their actions they not only directly harmed their customers but the nation as a whole. As for whether it is illegal or not, that only depends on what is on the law books, not what is right and wrong. A law could be written forbidding opening a door with your left hand. The act would then be illegal, but could it possibly be considered to be morally wrong?

    If we judge the actions of these individuals to be wrong and yet not illegal, that does not excuse the behavior but shows the inadequacy of our current laws around the issue. I don’t personally believe that this is an act that is simply a nuisance and should simply be rebuked. I believe that their actions caused actual and lasting harm and should be legally disallowed.

Comments are closed.

%d bloggers like this: