In the world of finance, the law of unintended consequences is and always has been a driving force in shaping economic policy

The law of unintended consequences states that the actions of people, and especially of government, always have effects that are unintended. For example, in an effort to protect the threatened Northern Spotted Owl in the 90s, Judge William Dwyer issued a ruling that greatly reduced commercial logging activity in the national forests of the Pacific Northwest.

Dwyer saved the owl, but there were multiple unintended consequences as a result. Aberdeen, Washington (near the Pacific coastline) used to be a logger’s paradise, but after Dwyer’s decision, the logging industry moved elsewhere. As a community, Aberdeen was decimated and its residents, the former loggers, are now barely hovering above the poverty line. The Aberdeen consequence was not likely what Dwyer had intended with his decision.

In the world of finance, the law of unintended consequences is and always has been a driving force in shaping economic policy. Even the best intentioned pieces of legislation can have the worst consequences. One of those well-intentioned efforts, what’s known as, ‘the Yates memo,’ is just now starting to reveal its unintended consequences a year after its release.

What is the Yates Memo?

Deputy Attorney General Sally Yates issued a public memorandum entitled Individual Accountability for Corporate Wrongdoing, in which she laid out the Justice Department’s desire to spend more resources pursuing individuals for corporate misdeeds. You can read the entire thing here, but following are the memo’s main points as laid out by Yates:

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