Maybe time has mellowed Eliot Spitzer.
Spitzer, who built his political career as New York Attorney General more than a decade ago by crusading against Wall Street corruption, has a surprisingly philosophical take on the topic of sending bankers to jail for their misdeeds ahead of the financial crisis.
"It is not simply a matter of sending 10 people to jail," Spitzer said at a panel on Tuesday at the Harvard Club of New York City. "You can stop a few individuals from acting improperly, but if the business model isn't changed ... that doesn't really change behavior."
Don't get Spitzer wrong or anything: Sending bankers to jail is pretty useful, he said on Tuesday.
"Does that work in terms of specific deterrence? Yes," he said. "Does that work in terms of general deterrence to scare people? Absolutely.
"Let me tell you, there's nothing like seeing your neighbor in handcuffs," Spitzer continued. "I hate to be crass about it, but it works. The criminal justice system is predicated on the notion that if you do bad stuff, there's a penalty.
"The problem we have is that you can't jail an institution," he said.
The Harvard Club panel, sponsored by the Aspen Institute Initiative on Financial Security, was dedicated to trying to figure out how to get people to trust banks again after the financial crisis. One reason that people perhaps don't trust banks is because they believe that bankers have so far been largely able to get away with financial murder with few real consequences. No one has gone to jail over the crisis, and it looks unlikely that anyone probably ever will.
While you can't physically send a large bank to prison, you can prosecute it for crimes -- assuming the bank is not all that important. U.S. Attorney General Eric Holder has admitted that some banks are just too big even to prosecute, for fear of upsetting the global economy.
Spitzer sent a number of people to jail during his tenure as New York's Attorney General, earning himself the enmity of Wall Street, along with a trip to the Governor's Mansion, before a prostitution scandal ended his political career. But he suggested that, beyond just prosecuting banks, a possibly more effective way to restore trust in them would be to make them simpler and easier to understand.
"The problem from the consumer perspective is the conflicts that are in the business models of the larger institutions," Spitzer said.
Exhibit A of these conflicts were the toxic mortgage-backed securities packaged and sold to unsuspecting customers just before the meltdown. Spitzer noted that, at the Senate hearings about the "Abacus" mortgage-backed securities, for which Goldman Sachs paid a $550 million fine (without admitting or denying wrongdoing, and with nobody going to jail), Goldman executives had a hard time identifying their clients in that deal.
"Deal with that conflict at a structural level -- that is where the more interesting conversation should be," Spitzer said. "It's not viscerally as satisfying, but in the long-term has a greater impact."