International Journal on Criminology Volume 2, Number 1, Spring 2014 - Page 10

International Journal on Criminology “The Subprime Tsunami” 4 As highlighted by the expert, Noël Pons 5 , the mechanics of the crisis that broke out in 2009 were almost identical to that of the 1980s. Only the parties involved were different. In this new format, the banks were fed with applications for loans by mortgage brokers who made lavish promises. A number of applications were discreetly categorized as "non-documented". They were in fact faked, involving acts of fraud, scamming, abuse of trust, and forgery. Operating with the backing of mortgage lenders, the brokers dispensed questionable loans, using predatory lending techniques, consisting of lending to people from vulnerable demographic groups (poor people, ethnic minorities, etc.). Credit frequently exceeded 125% of the value of the home purchased with the loan. Home values were also significantly inflated. Loans were frequently made to borrowers unable to meet capital repayments on an interest only basis, a system thriving only in conditions of speculation. The illusion persists as long as the market is still rising. The entire economy, steeped in debt, became a "pyramid economy", a gigantic Ponzi scheme. In an attempt to conceal what was really happening, the banks tried amalgamating loans into common pools by "securitizing" them and then, in the second stage, mixing the "junk" securities with others in global structures, themselves overvalued, to produce a cocktail of fund derivatives based on nothing, but still highly speculative. Naturally, accounts were also falsified or externalized. In the third stage, the "globalized" structures were insured and then reinsured and finally sold to "investors", many of whom were domiciled in tax havens. These on-sold "receivables" were then used as leverage to raise loans from the major commercial banks that placed these "virtual securities" with other, notably foreign, banks, local authorities, associations, etc. From the bottom of the ladder upwards, these dealings may not always have been blatantly fraudulent but were at least often very shady. A few months before the outbreak of the subprime crisis, although nothing could be done to prevent it, Michael Mukasey, Attorney General in the George W. Bush administration, curiously denounced the criminalization of the economic and financial markets on April 23, 2008, at a conference on organized crime at the Center for Strategic and International Studies (CSIS). More recently in Europe, there was the case of the carbon VAT scam which involved buying rights to pollute, exclusive of VAT, in one European country through a dummy or shell company, with almost immediate resale on the French, English, or Italian markets, inclusive of VAT. The fraudsters pocket the VAT rate differential and disperse it between offshore accounts. These transactions involve the fraudsters themselves, their protectors, and financiers, especially the "launderers" of the monies earned from trafficking, including in narcotics. A judge was reported in the newspaper "Le Parisian" as saying that "there is a veritable Mafia behind the carbon emissions tax and a Mafia does not hesitate to kill." In January 2009, Serge Lepage, son of a well-known underground figure, was shot down in front of his home. It was suspected that he had been called upon as a provider of funding for carbon emission tax fraudsters. Amar Azzoug was executed on April 30, 2010, in a brasserie in Saint-Mandé. A known former bank robber, this 35-yearold man had been implicated in carbon tax fraud and its embezzled millions. He had known that he was a marked man and 8