Dan Ariely on Wall Street Fraud and the Psychology of a Cheater!
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Welcome to Capital Account. More than two dozen companies over the past five years neglected to tell investors they were preparing for Chapter 11 bankruptcy, according to a Wall Street Journal analysis. Companies, including Kodak and American Airlines, did not warn investors about bankruptcy preparations even though such information could be deemed as 'material' to investors. We talk to Dan Ariely, professor of behavioral economics, about the best way incentivize morality and deter corporate cheating.
Plus, JPMorgan Chase reached an agreement, in principle, with SEC regulators to settle claims related to mortgage backed bonds handled by JP Morgan and Bear Stearns. How well do lawsuits deter financial crimes? We talk to Dan Ariely about what actually curbs Wall Street wrongdoing.
And in 2011, at a White House press conference, Obama explained that the lack of prosecutions on Wall Street was due to the fact that "a lot of that stuff wasn't necessarily illegal, it was just immoral or inappropriate or reckless." He went on to say, "That's exactly why we needed to pass Dodd-Frank, to prohibit some of these practices." And recently, Greg Smith, the op-ed writing Goldman Sachs defector, said in an interview on Bloomberg, "the reason that no one has gone to jail for the financial crisis is that this stuff is all legal." We ask Dan Ariely, Professor of Behavioral Economics at Duke University and author of "The Honest Truth About Dishonesty,"what is needed to change the culture of Wall Street, and whether regulation, including Dodd-Frank, is the right approach.
Finally, in "Loose Change" Lauren and Demetri talk to Capital Account guest Steve Keen about his latest project: "Minsky," a computer program for building dynamic monetary economic models. Minsky is an economic platform to enable students and teachers to create monetarily realistic process models of the macro-economy, in which banks, money and debt play key roles. He recently started Kickstarter campaign to raise funds for the project, and you can check it out at http://www.kickstarter.com/projects/2123355930/369710714?token=96f39287