International Journal on Criminology Volume 2, Number 1, Spring 2014 | Page 7

International Journal on Criminology - Volume 1 Issue 1 - Fall 2013
The Long Arm of Crime and Financial Crisis
Alain Bauer
Starting with the "Yakuza recession"
of the 1980s, then the U.S. Savings
and Loans Crisis of the same era, followed
by Mexico, Russia, and Thailand, a
series of financial crises with a more or less
marked criminal dimension has rocked
the world's leading countries over the last
30 years. Central regulators paid no attention
to this phenomenon despite International
Monetary Fund (IMF) estimates
of a quantity of dirty cash of between 1%
and 5% of world gross domestic product
(GDP). The world of crime has become
a financier of primary importance.
The Savings and Loans Hold Up
The Savings and Loans Crisis devastated
U.S. savings associations in the
1980s. Almost two thirds of these
institutions went out of business through
bankruptcies that were clearly fraudulent.
The crisis is estimated to have cost around
US$160 billion, US$124.6 billion of which
was doled out by the U.S. Treasury, a cost
equivalent to World War II. 1
Jean-François Gayraud reminds us
that, according to the U.S. General Accounting
Office (the federal accounts auditing
body) and to the numerous judicial, university,
and journalistic investigations conducted
since, these bankruptcies resulted from
massive and systematic misappropriations
carried out from inside the savings associations
themselves by senior executives (white
collar crime), sometimes in association with
members of traditional gangland groups.
Effective governance of these "thrift"
associations had become lax. The Garn-St
Germain Depository Institutions Act 1982
had deregulated the sector regardless of its
particular sensitivity to criminal ambitions.
Local Mafias leapt into the breach. Based
on falsified documents, an increasing number
of loans at very low interest rates were
granted to "friends" on very "flexible" terms
and conditions. At the same time, a systematic
use of "creative" accounting concealed
the colossal losses. In 1987, the U.S. Attorney
General acknowledged massive frauds.
The vast majority of the ill-gotten
gains raked in by the fraudsters were secreted
away into tax havens. It also led to the
collapse of the U.S. construction market,
which fell from 1.8 million new homes per
year to only 1 million between 1986 and
1991.
"Yakuza Recession" 2
The Japanese "Yakusa" are some of
the most powerful organized crime
organizations. In 2008, there were
nearly 90,000 members amalgamated into
1
On this crisis see (in French) Jean-François Gayraud, "Crises Financières: la Dimension Criminelle" (Financial
Crises, the Criminal Dimension), Défense Nationale et Sécurité Collective, December 2008; Jean-François
Gayraud, "La Dimension Criminelle de la Crise des Subprimes" (The Criminal Dimension in the Subprime
Crisis), Diplomatie, Special Edition No. 8, April–May 2009 and (in English) Kitty Calavita, Henry N. Pontell,
and Robert H. Tillman, "Big Money Crime, Fraud and Politics in the Savings and Loan Crisis", University of
California Press, 1997.
2
On this crisis see Jean-François Gayraud, "Le Monde des Mafias, Géopolitique du Crime Organisé" (The Mafia
World, Geopolitics of Organized Crime) (Odile Jacob, 2005 and 2008); Jean-François Gayraud, Crises Financières:
la Dimension Criminelle (Financial Crises, the Criminal Dimension), Défense Nationale et Sécurité
Collective, December 2008.
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