What explains the lack of criminal prosecutions related to the financial meltdown?
January 30, 2014
Mark D. White
Many people, including in the media and academia, have wondered about the lack of criminal prosecutions stemming from the 2007-08 financial meltdown, especially related to fraud in the banking sector. In the new issue of Crime, Law and Social Change (61/1, February 2014), Henry N. Pontell, William K. Black, and Gilbert Geis probe this question in a paper titled "Too big to fail, too powerful to jail? On the absence of criminal prosecutions after the 2008 financial meltdown":
Various explanations have been offered regarding the causes of the current global economic crisis that was spawned by the collapse of mortgage-based securities in the U.S. that were sold world-wide and that contained "toxic assets" comprised of subprime loans. There is ample evidence that such loans were originated through fraud. Firms recorded huge profits, and executives were awarded large bonuses even though some had led their companies into bankruptcy and plunged both the U.S. and global economies into the greatest recession since the Great Depression. This paper assesses the reasons why there have been no major prosecutions to date, and compares the U.S. government's response to that in the savings and loan crisis. It analyzes the influence of large financial institutions on lawmaking, regulation, and the allocation of enforcement resources, the continued general lack of understanding of financial fraud including control fraud, and problems related to the higher status and power of potential defendants.
This paper promises to contribute a much-needed criminological insight to this question (which seems to bring out a retributivist sentiment in people who would normally disavow such ideas!).
Who are these people who disavow retribution for anyone except bankers? It's not clear if you've got someone in mind, or if that comment was reflexive.
Surely, you don't mean to equate accountability with retribution? Because we can't really even begin to talk about retribution, and whether it is wise or fair, until there is some accountability.
This is what Chris Hayes was getting at here:
"Along with all of the other rising inequalities we've become so familiar with -- in income, in wealth, in access to politicians -- we confront now a fundamental inequality of accountability.
"We can have a just society whose guiding ethos is accountability and punishment, where both black kids dealing weed in Harlem and investment bankers peddling fraudulent securities on Wall Street are forced to pay for their crimes, or we can have a just society whose guiding ethos is forgiveness and second chances, one in which both Wall Street banks and foreclosed households are bailed out, in which both inside traders and street felons are allowed to rejoin polite society with the full privileges of citizenship intact.
"But we cannot have a just society that applies the principle of accountability to the powerless and the principle of forgiveness to the powerful. This is the America in which we currently reside."
Posted by: Jonas Feit | January 31, 2014 at 07:14 AM
Good point, Jonas, thanks. I have two thoughts in response:
1. Honestly, I was thinking of the "hang 'em high" sentiment I pick up so often in connection to the role of financial actors in the downturn, regardless of whether there is any evidence of criminal wrongdoing in any particular case. It's not retributivism proper, but a more base form of vengeance rooted in frustration and anger.
2. I love the Hayes passage, thanks -- right on target. And I agree accountability is prior to retributivism, since the latter assumes proper conviction. In a way, though, accountability is retributivist in the sense that it is backward-looking in directly addressing past wrongs for their own sake (and holding deterrence mainly as a beneficial side-effect). But rather than implicate those who call for accountability as being secretly retributivist, this points out that the backward-looking nature of retributivism that brings forth so much ridicule has merit that often goes unrecognized.
Posted by: Mark D. White | January 31, 2014 at 07:51 AM
why do the authors (pontrell et al) publish in pay walled journals ? are they not contributing thereby to the status quo, where the wealthy rule ?
Posted by: D | November 2, 2014 at 09:58 AM