Image credit: P.B. Abery, photograph, 1909, National Library of Wales via Wikimedia Commons
The news that a rogue trader in China has been sentenced to death reminded us that harsh punishments aren’t unprecedented in the markets.
In 1762, a stockbroker in London named John Rice misappropriated at least £19,900 pounds sterling from a client (the rough equivalent today of £2.3 million). He fled to Cambrai, in northeastern France. The British ambassador issued an order for his extradition; Rice was apprehended and brought back to England, where he was summarily hanged.
A much earlier punishment — Section 7 of the Code of Hammurabi (circa 1792-1750 B.C.) — stipulates:
If a man purchase silver or gold, manservant or maid servant, or sheep or ass, or anything else from a man’s son, or from a man’s servant without witnesses or contracts, or if he receive (the same) in trust, that man shall be put to death as a thief.
This passage has been interpreted by legal historian Edward J. Swan to mean that anyone who traded in futures without properly documented contracts would face the death penalty. (Ancient Mesopotamia had an active futures market, especially in grains like barley and wheat.)
Finally, according to the great French essayist Michel de Montaigne, false prophecies were punishable by death among the reputed cannibals of South America in the 16th century:
He prophesies to [the people] things to come and the results they are to expect from their undertakings…but this is on the condition that when he fails to prophesy correctly, and if things turn out otherwise than he has predicted, he is cut into a thousand pieces if they catch him, and condemned as a false prophet. For this reason, the prophet who has once been mistaken is never seen again. [Translation: Donald M. Frame, 1965]
Montaigne’s anecdote could usefully be adapted for modern purposes. What punishment could be more painful for market strategists than to display their complete record of market calls every time they make an appearance on CNBC?
Members of Congress could be required not only to prepare their own tax returns but to do so without any software, calculators or reference material other than the roughly 3 million-word Internal Revenue Code that they have helped perpetrate.
The CEOs of Wall Street banks that took bailouts from taxpayers could be required to wear custom-made electronic collars whenever they appear in public. If any of these CEOs are about to boast of their firms’ current profitability or to claim their banks would have survived sans bailout, any taxpayer would be able to press a button, immediately muzzling the fat cats.
Are there any financial punishments you would like to see?
￼Source: WSJ.com, Total Return blog