While everyone from Tony Blair to Nouriel Roubini is debating whether or not bankers should be hung, the Wall Street Journal and Bloomberg provide some fascinating historical context.
The journal's Jason Zweig reports:
"Financial criminals throughout history have been beaten, tortured and even put to death, with little evidence that severe punishments have consistently deterred people from misconduct that could make them rich.
"The history of drastic punishment for financial crimes may be nearly as old as wealth itself.
"The Code of Hammurabi, more than 3,700 years ago, stipulated that any Mesopotamian who violated the terms of a financial contract -- including the futures contracts that were commonly used in commodities trading in Babylon -- "shall be put to death as a thief." The severe penalty doesn't seem to have eradicated such cheating, however.
"In medieval Catalonia, a banker who went bust wasn't merely humiliated by town criers who declaimed his failure in public squares throughout the land; he had to live on nothing but bread and water until he paid off his depositors in full. If, after a year, he was unable to repay, he would be executed -- as in the case of banker Francesch Castello, who was beheaded in 1360. Bankers who lied about their books could also be subject to the death penalty.
"In Florence during the Renaissance, the Arte del Cambio -- the guild of mercantile money-changers who facilitated the city's international trade -- made the cheating of clients punishable by torture. Rule 70 of the guild's statutes stipulated that any member caught in unethical conduct could be disciplined on the rack 'or other corrective instruments' at the headquarters of the guild.
"But financial crimes weren't merely punished; they were stigmatized. Dante's Inferno is populated largely with financial sinners, each category with its own distinctive punishment: misers who roll giant weights pointlessly back and forth with their chests, thieves festooned with snakes and lizards, usurers draped with purses they can't reach, even forecasters whose heads are wrenched around backward to symbolize their inability to see what is in front of them.
"Counterfeiting and forgery, as the historian Marvin Becker noted in 1976, 'were much less prevalent in Florence during the second half of the fourteenth century than in Tuscany during the twentieth century' and 'the bankruptcy rate stood at approximately one-half [the modern rate].'
"In England, counterfeiting was punishable by death starting in the 14th century, and altering the coinage was declared a form of high treason by 1562.
"In the 17th century, the British state cracked down ferociously on counterfeiters and 'coin-clippers' (who snipped shards of metal off coins, yielding scraps they could later melt down or resell). The offenders were thrown into London's notorious Newgate prison. The lucky ones, after being dragged on planks through sewage-filled streets, were hanged. Others were smeared with tar from head to toe, tied or shackled to a stake, and then burned to death.
"The British government was so determined to stamp out these financial crimes that it put Sir Isaac Newton on the case. Appointed as warden of the Royal Mint in 1696, Newton promptly began uncovering those who violated the financial laws of the nation with the same passion he brought to discovering the physical laws of the universe.
"The great scientist was tireless and merciless. Newton went undercover, donning disguises to prowl through prisons, taverns and other dens of iniquity in search of financial fraud. He had suspects brought to the Mint, often by force, and interrogated them himself. In a year and a half, says historian Carl Wennerlind, Newton grilled 200 suspects, 'employing means that sometimes bordered on torture.'
"When one counterfeiter begged Newton to save him from the gallows -- 'O dear Sr no body can save me but you O God my God I shall be murderd unless you save me O I hope God will move your heart with mercy and pitty to do this thing for me' -- Newton coldly refused.
"The counterfeiter was hanged two weeks later.