Don't We Have Enough Financial Crime Already?

Via Mark Thoma, I see Benjamin Friedman has a nice piece in the New York Review riffing on George Akerlof and Robert Shiller's Animal Spirits. But I thought Friedman had an odd parenthetical here:

By now everyone realizes that excessive risk-taking, systematic mispricing of assets, and, often, plain reckless behavior (not to mention some instances of criminality, although to date surprisingly few of these have come to light) helped cause the current mess.

Wait, does anyone think criminality helped caused the current crisis? To paraphrase Warren Buffett: When the tide goes down you realize who isn't wearing swimming trunks. But it's not like the tide goes down because someone's swimming nude.



I also thought it was odd that Friedman thinks there are "surprisingly few" cases of criminality that have come to light. I have a feeling this has more to do with the quality of the light -- a lack publicity -- than the number of crimes that have been discovered and pursued. There is plenty of financial crime!

The FBI hasn't released white collar crime data for 2008, but the Bureau says it "recently observed a spike in the number of corporate fraud cases involving subprime mortgage lending companies." And the number of mortgage fraud cases was increasing before that:


FBI mortgage fraud.png
(The peak of the housing market was in 2006, so the big jumps in mortgage fraud started after the bubble's peak.)

More generally, why would any particular level of post-crisis criminality be surprising or unsurprising? I would expect an asset bubble to be correlated with an increase in asset scams, and a sudden decline in asset prices would pull the plug on a good number of them. And it looks like that's happening.

Presented by

Conor Clarke is the editor, with Michael Kinsley, of Creative Capitalism. He was previously a fellow at The Atlantic and an editor at The Guardian. More

Conor Clarke is the editor, with Michael Kinsley, of Creative Capitalism, an economics blog that was recently published in book form by Simon and Schuster. He was previously a fellow at The Atlantic and an editor at The Guardian. He is also on Twitter.

How to Cook Spaghetti Squash (and Why)

Cooking for yourself is one of the surest ways to eat well. Bestselling author Mark Bittman teaches James Hamblin the recipe that everyone is Googling.

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register.

blog comments powered by Disqus

Video

How to Cook Spaghetti Squash (and Why)

Cooking for yourself is one of the surest ways to eat well.

Video

Before Tinder, a Tree

Looking for your soulmate? Write a letter to the "Bridegroom's Oak" in Germany.

Video

The Health Benefits of Going Outside

People spend too much time indoors. One solution: ecotherapy.

Video

Where High Tech Meets the 1950s

Why did Green Bank, West Virginia, ban wireless signals? For science.

Video

Yes, Quidditch Is Real

How J.K. Rowling's magical sport spread from Hogwarts to college campuses

Video

Would You Live in a Treehouse?

A treehouse can be an ideal office space, vacation rental, and way of reconnecting with your youth.

More in Politics

Just In