International Journal on Criminology Volume 1, Number 1, Fall 2013 | Page 31

International Journal on Criminology
a fact which does not encourage critical thinking and foresight, particularly with the
ratings market becoming increasingly lucrative: who would bite the hand that feeds them
so well? Secondly, agencies are involved in the upstream structuring of innovative
financial products, in theory in different departments (the Chinese wall principle): Is it
conceivable that a restaurant guide could offer impartial evaluations of restaurants it
owned?
As for the large Wall Street investment banks, their fraudulent record is equally
substantial. They tried to present themselves as the victims once the crisis emerged,
forgetting that they were in fact working at the upstream end of the financial chain. These
merchant banks were the financers and sometimes even the owners of dishonest mortgage
lenders. Right from the outset, therefore, they were the financers and dealers of the highly
addictive drug that subprime loans and “innovative financial products” became.
Furthermore, the Wall Street merchant banks also directly indulged in multiple forms of
malpractice. Massaging their accounts to hide losses linked to subprime loans, failing to
advise investors on the level of risk associated with securitized products, betting that the
securities offered to their clients would fall, manipulating the interbank lending rates
(Libor, Eurobor), etc. Ultimately, bankers and rating agencies colluded to deceive
purchasers/investors regarding the actual quality of “innovative financial products”.
Despite such a high level of malpractice which became so glaring after 2007/2008,
fraudulent activities continued after the outbreak of the crisis, this time as part of “loan
renegotiation/alteration” operations and foreclosures (foreclosure-gate).
White-collar organized crime
Let there be no doubt regarding the criminological species in question here. While
“traditional gangsters” (organized crime) were able to benefit from the windfall, the
architects and main beneficiaries of these frauds were primarily members of the
respectable elite installed in high and select society. Moreover, was it not an American
sociologist, Edwin H. Sutherland, who invented the concept of “white-collar crime” in
the 1930s?13 However, this concept seems to have been rather surpassed in the present
day. In effect, on close examination the white-collar fraudsters of globalized finance
reveal planning and association. We also ask ourselves why the organizational and
managerial powers retained a monopoly of the traditional gangsters (organized crime)?
What has been (newly) unveiled by the subprime crisis is the emergence of an unfamiliar
“white-collar organized crime/criminality”.14
However, the record of criminal convictions is disappointing, to the point of being
pathetic. In the face of so much fraud, the American courts proved unable to react in
credible fashion. They punished only the dishonest borrowers (speculating households,
opportunistic gangsters) but no financial professionals—with the sole exception of one
low-level banker. However, 80% of fraud is attributable to them. Why this impunity?
First of all, the production of evidence is always a delicate operation for crimes which are
invisible, complex, and committed by intelligent individuals embedded deep in a system
which they helped to create. Secondly, in accordance with a stubborn tradition, the justice
system and federal regulation agencies often prefer to “wipe the slate clean” with
agreements negotiated on a penal or civil level (plea bargaining, settlement). The rating
agencies escaped the long arm of the law by taking refuge behind the First Amendment to
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
13. Edwin H. Sutherland. White Collar Crime: The Uncut Version (Yale University Press, 1983).
Also, an earlier book on the criminality of the elite written in 1907 by an American sociologist:
Edward Alsworth Ross. Sin and Society: An Analysis of Latter-day Iniquity (Bibliolife, 1907).
14. We suggested this new approach in Gayraud, La grande fraude.
30!