International Journal on Criminology Volume 1, Number 1, Fall 2013 | Page 29

International Journal on Criminology
From traditional fraud to innovative fraud
In order to understand some of the hidden roots of this crisis, we need to think
outside the box of the common patterns prescribed by the mediasphere. So what do we
find? Series of genuine (systematic) frauds have polluted every single real estate and
financial market (the system), helping to create speculative bubbles. Something out of the
ordinary emerges: “Crime scenes” on a macroeconomic scale which enable this to be
reclassified as a “subcrime” crisis. The long and opaque financial chain of subprime loans
evolved into a “food chain” attracting multiple predators, with almost no obstacles in
their way thanks to deregulation. There are two possible approaches to describing this
systemic criminal predation.
An initial analytical approach on both a macrocriminological and a macroeconomic
level demonstrates how the entire American financial system was reorganized following
the collapse of savings and loan associations to prompt a massive transfer of wealth from
the poorest to the richest in American society, at a time when a lack of desire to distribute
purchasing power to those on the lowest incomes (income and salary stagnation) meant
that they were sold an illusion of enrichment through an ill-considered and cynical
development of debt. Deregulation was a concomitant of greater inequality at a level not
seen since the nineteenth century, temporarily hidden by those in power by encouraging
debt, off-balance-sheet activities, and securitization. However, is it possible to handcuff
cynical public policies, or dreams (“a house for all”) which have transformed into
nightmares?
A second approach, this time on a microcriminological and microeconomic level,
seems even more relevant to our demonstration. The apparent complexity of the system
thus barely conceals two major frauds. First of all, we discover a more traditional and
unpolished fraud consisting of encouraging modest and vulnerable households (which are
in theory not solvent or barely solvent) to take out loans which will inevitably choke
them. The nicknames given to these loans perfectly sum up their true nature: they are
known as “liar” or “predatory” loans. They explicitly target the weakest members of
American society: ethnic minorities—in particular blacks and Hispanics—as well as the
poor, the handicapped, and senior citizens. These fungible categories, for example poor
and black senior citizens, are urged to take on more debt than they are able to repay,
intentionally deceived by cynical professionals. Even worse, these loans are described as
“neutron loans”, which (like the eponymous bomb) kill the people and leave the houses.
In fact, these subprime/liar/predatory loans are “ghost” loans—also known as NINJA
loans as they intentionally target households with no income, no job, and no assets. These
explicit qualifiers describing the true nature of these loans were not invented a posteriori
by sensationalist commentators, but instead were used right from the outset by financial
professionals themselves. The terms thus reveal their guilty intentions and consequently
make a mockery of any attempts to claim ignorance or incompetence. All of these loans
are concentrations of plainly criminal acts: breach of trust, fraud, abuse of weakness,
forgery, etc.9
A posteriori evaluation of these subprime loans is overwhelming. At least threequarters
of all cases involved an element of deceit! Mortgage lenders and their lobbyists,
the mortgage brokers, are in practice two professions with little regulation where
monitoring and controls are slack. Mortgage lenders are also a central element of what is
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9. For a more detailed description of the landscape, far from economic theory, and of the formation
of this fraudulent real-estate bubble: Richard Bitner. Confessions of a Subprime Lender: An
Insider’ Stale of Greed, Fraud, and Ignorance (John Wiley & Sons, 2008).
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