by Geoff Larcom, Published August 30, 2012
Our huge banking institutions profoundly failed us, taking huge risks with customers' money in order to line their own pockets. But our regulatory system and government were also at fault in the unprecedented collapse of the United States' financial markets during the crash of 2006 and beyond.
So says Gregg Barak, a professor of criminal justice and criminology at Eastern Michigan University who has written a powerful examination of Wall Street's recent financial meltdown and its impact on the rest of the country.
In Barak's provocative book "Theft of a Nation," he asks why, if the actions of key players on Wall Street and in the government resulted in an economic downturn that harmed millions of Americans and destroyed capital worldwide, no one was held criminally liable for these actions?
"Theft of a Nation" is about finance capital and institutionalized crime. Barak explains how the federal government, despite its rhetoric to the contrary, came to dismiss the crimes of Wall Street and to rebuff the victims of Main Street. It examines how a combination of governmental actions and omissions absolved Wall Street bankers, mortgage lenders, and associated fraudsters from any accountability for their criminally fraudulent behavior.
The book is the first comprehensive criminological investigation of the role of Wall Street and the government in the recent financial crisis. It's not only about financial fraud and its control but, more fundamentally, it's about the interactions of law, power and wealth.
"Given the scores of books written by economists, former Wall Street traders, consumer advocates, and investigative journalists, I figured it was time to hear from the criminologists," Barak says. "Especially because an account was called for to explain how and why the vast majority of Congress, the White House, the Federal Reserve, and the Department of Justice had all agreed to treat the biggest financial crime in history non-criminally."
Donald Shelton, chief judge, Washtenaw County Circuit Court, said, "This is a book that applies traditional (and Barak's new) criminological models so that we can understand the underlying causes of systemic conduct that would, in any other context, be viewed as simple and blatant criminal conspiracies."
What happened, exactly? Barak recalls how mortgage obligations were recklessly invested en masse throughout the United States and elsewhere as alternative debt-financing instruments, including millions of fraudulent subprime and adjustable-rate mortgages.
These mortgage loans were, in turn, bundled and sliced into different risk pools, and fraudulently pushed and resold all around the globe not as the "junk" or even worse, the toxic derivatives that they were, but as triple-A-rated securities, the best that money can buy. An economic deception of epic proportions.
Barak quotes the U.S. Senate's report, "Anatomy of a Financial Collapse," which notes that, "Unacceptable lending and securitization practices were present at a host of financial institutions that originated, sold, and securitized billions of dollars in high-risk, poor quality home loans . . . . These lenders were not the victims of the financial crisis; the high-risk loans they issued were the fuel that ignited the financial crisis."
In the end, quotes Barak, "The failure to restrict unsafe lending practices resulted in a record number of defaulted loans, and financial institutions around the globe suffered hundreds of billions in losses, triggering an economic disaster."
So, Barak asks, what could have been done differently?
• How many investors might have been saved from crushing losses if Lehman Brothers had been forced to reveal its shady accounting way back in 2002?
• Might the need for taxpayer bailouts have been lessened had fraud cases against Citigroup and Bank of America been pursued in 2005 and 2007?
• And would the U.S. government have doubled down on its bailouts of AIG if it had known that some of the firm's executives were suspected of insider trading in September 2008?"
"Theft of a Nation" pursues these and related questions as it examines the 2010 Dodd-Frank law and as it suggests alternative reforms to avoid similar financial disasters in the future.
The book was published this month by Rowman and Littlefield, and is available in hardcover, paper and eBook. For more information, or to order the book, see https://rowman.com/ISBN/9781442207783
Barak is the author or coauthor of several books, including "Class, Race, Gender, and Crime: The Social Realities of Justice in America," now in its third edition.