Big Money Crime: Fraud and Politics in the Savings and Loan Crisis
University of California Press, Nov 1, 1997 - Social Science - 281 pages
At a cost of $500 billion to American taxpayers, the savings and loan debacle of the 1980s was the worst financial crisis of the twentieth century as well as a crime unparalleled in American history. Yet the vast majority of its perpetrators will never be prosecuted, and those who were have received minimal sentences. In the first in-depth scrutiny of the ways and means of this disaster, this groundbreaking book comes to disturbing conclusions about the deliberate nature of this financial fraud, the political collusion involved, and the leniency of the criminal justice system in dealing with these "Gucci-clad white-collar criminals."
Using material from over one hundred interviews with government officials and industry leaders and recently declassified documents, the authors show how—contrary to previous government and "expert" explanations that chalked the disaster up to business risks gone awry or adverse economic conditions—S&L leaders engaged in deliberate fraud, stealing from their own corporations to speculate on high-risk ventures. Tempted by the insurance net, perpetrators looted their own institutions in a new kind of white-collar crime the authors dub "collective embezzlement."
Big Money Crime also demonstrates how systematic political collusion—not just policy errors—was a critical ingredient in this unprecedented series of frauds. Bringing together statistics from a variety of government agencies, the authors provide a close reading of the track record of prosecutions and sentencing and find that "suite crime" receives much more lenient treatment than "street crime," despite its significantly higher price tag. The book concludes with a number of modest, but no less urgent, policy recommendations to counter the current deregulatory trend and to avert a replay of the S&L debacle in other financial sectors.
FROM THE BOOK:"We built thick walls; we have cameras; we have time clocks on the vaults . . . all these controls were to protect against somebody stealing the cash. Well, you can steal far more money, and take it out the back door. The best way to rob a bank is to own one."—House Committee on Government Operations, 1988
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ADC lending American appraiser assets bailout Bank Board Bank Robbery Banking Committee borrowers brokered California capital Charles Keating Collar Crime collective embezzlement Committee on Banking Cong convicted corporate crime cost criminal referrals Criminology Daisy Chain Dallas deposits deregulation Dixon Don Dixon economic Enforcement against Financial Failed Thrifts FHLBB Financial Crime financial fraud Financial Institution Fraud Fricker FSLIC funds Gray hot deals House Committee Ibid indicted individuals Inside Job insider abuse insured investigation investments involved junk bonds Justice Keating land flips Law Enforcement losses Lowy ment million Muolo NCFIRRE Office of Thrift organized crime percent Personal interview Pizzo political prosecution real estate regulators Resolution Trust Corporation S&L Debacle Savings and Loan Southwest Plan Subcommittee suspected Sutherland taxpayers Texas thrift crisis Thrift Failures thrift fraud thrift industry Thrift Supervision tion Tobit models U.S. Attorneys U.S. Congress Urban Affairs white-collar crime white-collar offenders Wright York
Page 9 - The Federal Home Loan Bank Act of 1932 established the Federal Home Loan Bank Board (FHLBB), whose purpose was to create a reserve credit system to ensure the availability of mortgage money for home financing and to oversee federally chartered savings and loans. The second principal building block of the modern savings and loan industry was put in place when the National Housing Act of 1934 created the Federal Savings and Loan Insurance Corporation (FSLIC) to insure S&L deposits.
Page 11 - ... for new money and invest in more lucrative ventures. But it was not until the deregulatory fervor of the early Reagan administration that this strategy gained political acceptance as a solution to the rapidly escalating thrift crisis. Throwing caution to the wind and armed with the brashness born of overconfidence, policy makers undid most of the regulatory infrastructure that had kept the thrift industry together for half a century. They believed that the free enterprise system works best if...