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.

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