How Everyone Got Away With "Collective Embezzlement"

It’s worth taking a long, slow read of this morning’s Times story on lack of prosecution in general and particularly the lack of Justice Department civil or criminal cases regarding the “financial crisis.” For one thing, there are at least two instances of someone directly lying to the reporters in the story (although it is unknown to us which of the parties giving conflicting accounts is lying). Elsewhere, people put the blame on regulatory inaction: “In 1995, bank regulators referred 1,837 cases to the Justice Department. In 2006, that number had fallen to 75. In the four subsequent years, a period encompassing the worst of the crisis, an average of only 72 a year have been referred for criminal prosecution.” And here’s a nice way to look at a flaw in the system, from a UC Irvine criminology professor: “When regulators don’t believe in regulation and don’t get what is going on at the companies they oversee, there can be no major white-collar crime prosecutions. If they don’t understand what we call collective embezzlement, where people are literally looting their own firms, then it’s impossible to bring cases.”

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