Capitalist banks as criminal enterprises

The case of Wall Street

Abstract

This article addresses the financial crisis of 2008 as a criminological phenomenon. Analysis of and commentary on the global economic crisis has poured forth from a wide range of sources, and in the academic realm, in particular, from historians, economists, political scientists, law professors and many others. Overall, to date, criminology and criminal justice have not had an especially high profile in the avalanche of analysis and commentary. The specific objectives of this article are as follows: First, to address the financial crisis as crime in conceptual terms. If crime - and, more specifically, white-collar crime - played a central role in this crisis, in what sense of the term “crime” was this the case, and what form of white-collar crime was involved? Second, to address the financial crisis as crime in contextual terms: How should the consequences of crime that occurs within the Wall Street context be understood in relation to the consequences of crime that occurs within the Main Street context? And third, to address the financial crisis as crime in critical terms: what kinds of transformative perspective and policy initiatives are needed if we are to minimize the chances of a future financial crisis on a catastrophic level? The article reviews different attributions of blame for the financial crisis, but then argues for viewing it as reflecting a form of white collar crime, namely finance crime. The term finance crime was adopted in the original edition of my text for “large-scale illegality that occurs in the world of finance and financial institutions”. More specifically, I noted that such crime stands apart from corporate and occupational crime insofar as “... vastly larger financial stakes are involved... [it is intertwined with] financial networks... [and it] threatens the integrity of the economic system itself.” Bank robbery from within banks is compared with conventional forms of bank robbery. The claim is made that the losses caused by these investment banking executives vastly exceeded the losses involved in conventional bank robberies. The crimes of Goldman Sachs, an especially prestigious investment bank, are addressed. The criminogenic conditions generating finance crime are identified. They include financial organizations that are either “too big to fail” or are too interconnected to challenge without harming financial structures. They also include exorbitant executive compensation and bonuses; excessive leveraging in relation to investments; “innovative”, complex and excessively risky financial products or instruments; pervasive conflicts of interest involving entities that supposedly provide some form of oversight of the activities of financial institutions, including boards of directors, auditing firms, and credit rating agencies; weak or ineffective regulatory system, an inherently corrupt political system where wealthy financial institutions and corporations have far too much influence and, more broadly, “free market” fundamentalism. The author concludes with a call for recognizing finance industry practices as crime, and for transformative policies to address them.