What has happened in the years since the financial meltdown? Are we out of the woods? Has the debt crisis that long plagued the Third World now become one of the most significant problems facing the First World? What have we learned? Nelen and Ritzen, in this volume, claim that financial crises create both problems and opportunities. Have we taken advantage of the opportunities to restructure the regulatory environment to prevent a recurrence, or can they still get away with it?
The financial landscape has been shifting rapidly ever since the U.S. subprime mortgage crisis and the collapse of Iceland’s three major banks made headlines in 2008. It is changing so fast that what is written one day has to be modified the next. Still, general trends and consequences can be identified. Several economies still have unsustainable levels of debt. Many banks, businesses, and individuals are unable to get loans. Unemployment rates, particularly for youth between 16 and 24, have remained high in many industrialized and post-industrialized countries since the crisis began (reaching over 50 percent in Spain, 48 percent in Greece, approximately 30 percent in Ireland, Italy and Portugal, and is 22.3 percent is Great Britain [Thomas 2012]), and wages are stagnant or falling for those who have jobs.
As a result, the standard of living for the vast majority of citizens has decreased. The World Bank calculated that the financial crisis caused the world GDP to fall 1.5 percent in 2009, a drop worse than what occurred during the economic downturns of the 1970s and 1980s (Norris 2011).
During the summer of 2011, as many nations showed signs of returning to fiscal health, economic problems continued to dominate the news in the European Union and the United States. In fact, the economic crises in the euro zone and the United Kingdom appear to be getting worse. Credit ratings agencies downgraded Greek, Portuguese, and Irish debt ratings to junk status, gave Iceland its lowest investment grade rating,1 and dropped the ratings of Italy and Spain, making it more difficult for those countries to raise capital, stimulate growth, and pull themselves out of an ever-deepening hole. Impatient with Congressional debates over raising the debt ceiling, Standard & Poor’s lowered the United States’ AAA bond rating to AA+ in August 2011 and the other two rating agencies have threatened to follow suit. The debate over raising the U.S. debt ceiling, at its core, is an ideological debate over the direction the country should take. While some may believe that it makes good economic sense to cut deficits and spending, Nobel economist Joseph Stiglitz warned in 2010 that “‘mindless deficit reduction’ would lead to greater and longer-lasting national debt” (Phillips 2010). The real problem with economies on both sides of the Atlantic is the lack of jobs, the lack of spending by individuals and cash-rich corporations, and forced cutbacks in government spending (Krugman 2011a).
Europe
Massive debt brought to light by the 2008 financial crisis has hurt the economic standing of Greece, Ireland, Italy, Portugal, and Spain. The bailouts of Greece (initially ₠110 billion or $156 billion; in February 2012 an additional bailout valued at ₠130 billion or $172 billion was planned), Ireland (₠85 billion or $120.7 billion), and Portugal (₠78 billion or $110.8 billion)2 by the IMF, the European Commission, and the European Central Bank have produced neither political nor economic stability, which in turn raises concerns about the future of the euro zone. In fact, by May 2011, it was determined that Greece needed a second bailout and that Cyprus might be the next weak link.
The European Commission expects Greece’s debt-to-GDP ratio to increase from 142 percent in 2010 to 166 percent in 2012. Its fiscal deficit is expected to decline from 10.5 percent to 9.3 percent. Ireland’s debt-to-GDP ratio is expected to increase from 96 percent in 2010 to 118 percent in 2012. Its 2010 fiscal deficit of 30.3 percent is expected to decline to 8.5 percent in 2012.
Portugal’s debt-to-GDP ratio is expected to increase from 93 percent in 2010 to 107 percent in 2012. On the basis of projected austerity measures, Portugal is expected to reduce its fiscal deficit from 9.1 percent to 4.5 percent in 2012. According to the Bank for International Settlement data, at the end of 2010, the exposure of foreign banks—primarily German and French—to Spanish, Greek, Portuguese, and Irish debt totaled around $2.3 trillion (Marcus 2011, 2).
Greece, Ireland, Portugal, and Italy have adopted severe austerity programs, much to the displeasure of their citizens. Citizens of Iceland, Greece, Italy, United Kingdom. and Portugal have taken to the streets to demonstrate their anger over being asked to shoulder the burden of belt-tightening measures, such as pension reform, tax increases, cuts to public education, and health and reductions in public sector wages, while financial institutions and holders of bank or government debt are not forced to take losses. Neither has anyone from the financial community been sentenced to prison. It is not surprising that the Occupy Wall Street movement resonated with Europeans.
Greece, Iceland, Ireland, Italy, Portugal, Spain, and the United States took different routes into their economic quagmire. Iceland’s 2008 financial collapse was caused by “extreme negligence” according to the findings of the Special Investigation Commission (Penfold 2010). Iceland’s three main banks collapsed in 2008 following difficulties in refinancing their short-term debt and a run on deposits in the United Kingdom. Since deregulation in 2001, all three banks grew rapidly by borrowing “more than 10 times the country’s gross domestic product—$75 billion—from the international wholesale money markets” and quickly expanded their domestic lending (Jackson 2008). They used weak underwriting standards, particularly for loans to large holding companies. They enticed foreign depositors with high interest rates based on stock market performance and issued 100 percent mortgages and car loans, often in foreign currencies. The value of their assets rose from 100 percent of Iceland’s gross GDP in 2004 to 923 percent by the end of 2007 (Jackson 2008), a sure sign that something was amiss.
Iceland’s response to the economic meltdown, however, was different than the response taken by most countries. Icelandic voters in 2010 rejected a $5.3 billion plan to repay the United Kingdom and the Netherlands for loans incurred during the financial crisis in 2008, and they turned down a similar plan the following year despite warnings that without the debt repayment agreement, Iceland would be unable to obtain loans from the IMF or succeed in a bid for membership in the European Union (Editorial, April 18, 2011; Quinn 2010). Many Icelanders believed that the plan, which would have required each citizen to pay around $135 a month for 8 years—the equivalent of a quarter of an average income for a four-member family—was unfair when the government failed to curtail the reckless behavior of bank executives. Adding to the skepticism, a Special Investigations Commission established by Iceland’s state prosecutor in December 2008 to “investigate suspicions of criminal actions in the period preceding the collapse of the Icelandic banks” has already led to charges of gross negligence against seven senior officials, including former Prime Minister Geir H. Haarde. The commission’s report claims that Haarde and David Oddsson, former head of the Central Bank of Iceland (Seðlabanki Íslands) “knew that banks were assuming overseas debt but took no action to prevent or mitigate the effects of the accumulation” (Zeldin 2011).
Icelanders’ refusal to take on bank debts, forcing creditors to take losses and share in the pain, appears to be very much an effort to ensure that “they” don’t get away with it—not to mention a smart long-range move: Iceland’s economy is beginning to recover (Organisation for Economic Cooperation and Development 2011).
Greece’s debt of $1.2 trillion, amounting roughly to a quarter-million dollars for each working adult, is the result of a variety of factors: a bloated public sector that is paid much better than the private sector, generous pensions, waste, corruption, wholesale tax evasion, cooked books, and creative accounting encouraged by Goldman Sachs (Faiola 2010; Lewis 2010).
Greek bankers, however, “did not buy U.S. subprime-backed bonds, or leverage themselves to the hilt, or pay themselves huge sums of money” (Lewis 2010). Instead, Greek banks lent money to the Greek government, which was their downfall. According to Lewis, who chronicled the Greek crisis in a Vanity Fair article, the level of Greek debt has been high since the 1980s. The entry fee for becoming a euro zone country in 2000 was lowering debt levels. To accomplish this, Greece manipulated statistics and its accounting ledgers to make inflation and debt magically disappear. Once its debt was backed by the euro, Greece went on a borrowing spree (Faiola 2010). In 2001, Goldman Sachs taught government officials how to securitize future receipts and aided them in hiding the country’s true indebtedness, which in 2009 was 15 percent instead of the required (and reported) 3 percent.
A major contribution to the Greek crisis, as Vidali indicates in Chapter 14, was widespread tax evasion, bribery, illegal debt financing, and other forms of state-corporate criminality. Greeks learned to ignore the law not only because of the absence of law enforcement but also because everyone believed that everyone else was engaged in these activities (Lewis 2010). Clearly, this criminal behavior is socially learned and became the norm. In Greece, in effect, everyone got away with it for years.
Everyone was also a victim, as the case of Ireland illustrates. When the financial markets opened the floodgates to almost limitless credit at the beginning of the century, Irish citizens rushed to take advantage. “Lending by banks to Irish residents rose 450% in the decade prior to 2008, compared to a 30% increase in Germany and an increase of 100% in the Netherlands” (Lyons 2010). A housing bubble grew to such an extent that nearly a fifth of the workforce was employed constructing houses. The industry contributed nearly a quarter of the country’s GDP, in contrast to what most economists consider a normal proportion of less than 10 percent (Lewis 2011). Loans of the three largest banks—Anglo Irish, Bank of Ireland, and Allied Irish Banks—were tied up in real estate. When the inevitable crash occurred, it had severe consequences. Unemployment, which was 4 percent in 2006, rose to 14 percent in 2012. Ireland recorded a budget surplus in 2007. Today its deficit is 9.9 percent of its GDP, down from a deficit of 32 percent GDP in 2010.
The crisis in Europe is still far from over. Real concern exists over the ability of Italy and Spain (the EU’s third and fourth largest economies) to handle their debt. The Spanish economy is larger than that of Greece, Ireland, and Portugal combined, and it has higher levels of bank debt than Portugal. Furthermore, thirty of Spain’s banks were derated by Moody’s in 2010 (Thomas 2011), and five failed a stress test in July 2011. The sixteen European banks that narrowly passed were concentrated in Spain, Greece, and Portugal (Werdigier and Ewing 2011). The good news is that Spain has taken several steps to stay out of danger—including a pension overhaul and a cleanup of its banking sector (Minder and Castle 2011). Nevertheless, the European banking system’s exposure to these countries’ debt could result in a systemic crisis in the event of even a partial default. Austerity programs have been offered as the principal solution. But they are certain to worsen standards of living for many Europeans who are used to—and rely upon—a functioning welfare state. Many budget cuts have been achieved by eliminating jobs. In Greece, the unemployment rate was over 21 percent in February 2012. Across Europe unemployment also continued to rise. By December 2011, the unemployment rates were as follows: Spain, 22.9 percent; Portugal, 13.6 percent; Ireland, 14.5 percent (and that is after many of its foreign workers left the country); and Italy, 9.0 percent (Bureau of Labor Statistics 2011). Government austerity programs seem to comport with Canadian journalist Naomi Klein’s (2008) “shock doctrine” concept. She argues that governments desiring to replace the existing economic order with a version of a free market economy use opportunities presented by disasters and crises to gain citizen support for slashing social spending and engaging in privatization.3
This volume only scratches the surface of how the financial crisis has impacted countries around the globe. While many have identified the financial meltdown as a global crisis, Australian criminologist John Braithwaite (2010) argues that although the financial meltdown has devastated the economies of the United States, Iceland, and many euro zone countries, it is not a true global crisis. True, the recession impacted most countries in the world. However, as he and others note, in countries with better regulatory practices, such as Australia, the recession was not as severe.4 In those countries, regulators did not allow banks to engage in behavior the regulators did not understand. Avoiding the kind of misbehavior that occurred in the United States, banks and lending agencies in those countries checked records instead of relying on sophisticated quantitative risk models. They also refrained from buying into bad American housing loans. In essence, countries that did not drink the Kool-Aid by jumping on the deregulatory and self-regulation bandwagon tended to escape the worst effects of the financial crisis.
The United States
In the United States, where the crisis began, the picture is just as bleak. The housing market is still depressed in most regions. A large proportion of homes are underwater; that is, homeowners now hold mortgages amounting to more than their homes are worth. Foreclosures are continuing. U.S. Census Bureau data show that 18 percent or 1.6 million of Florida’s homes are vacant—an increase of more than 63 percent over the past 10 years (Christie 2011). Housing prices in the state have dropped by more than 50 percent from their peak and are expected to continue to fall through mid-2012. Nevada, the state with the nation’s highest foreclosure rate, has a vacancy rate of approximately 14 percent, and Arizona’s rate is about 16 percent (Christie 2011).
The U.S. stock market has rebounded, but wages are stagnant. Although the reported national unemployment for January 2012 dropped to 8.8 percent, one questions how many individuals out of work are no longer counted. Cash-starved state governments are cutting jobs, social services, benefits, and demanding labor concessions from their employees. Former U.S. Secretary of Labor Robert Reich warned in his March 30, 2011, blog that the United States was heading toward a double-dip recession. The evidence, according to Reich, is that real hourly wages and housing prices continue to fall in many regions of the country.
The $5.6 trillion in mortgage debt that U.S. households took on during the bubble years is believed to be holding back the economy (Krugman 2011b). Banks are still reluctant to make loans even to good customers. One individual seeking a $120,000 mortgage on a home he built was turned down by the bank with whom he had been a client for over 30 years. He told one of the editors of this volume that he had never missed a payment on a previous mortgage or on the boat loans he had with them. He had $40,000 in savings. But he apparently ran afoul of a new Fannie Mae requirement that borrowers on newly constructed houses must live in the house for 6 months. The fact that he had already owned the property for 2 years and the house was appraised at $280,000 did not help. Although Fannie Mae’s new requirement was adopted to prevent the kinds of abuses that led to the crisis, the one-size-fits-all application is problematic. Fallout from the crisis is even affecting customers with good credit.
New scandals involving mortgage-granting financial institutions have appeared. In the fall of 2010, several mortgage lenders engaged in illegal foreclosures using “robo-signers,” which mechanically attested that banks had the required documentation to seize homes without verifying whether they actually did (Krugman 2011b). A study commissioned by the San Francisco assessor/recorder found that between January 2009 and November 2011 “84 percent of the files contained what appeared to be clear violations of the law” and a full “two-thirds had at least four violations or irregularities” (Morgenson 2012). These crimes occurred after the government had supposedly increased its scrutiny of the industry. In most cases, the victims were individuals similar to those described by Barnett in Chapter 6.
Politicians reacted to the public’s outrage over the shenanigans that led to the financial meltdown by taking steps to plug loopholes and to reregulate the financial industry by passing the Dodd-Frank Wall Street Reform and Consumer Protection Act. The act, aimed at rectifying the problems that caused the financial crisis, is still controversial today and under attack by Republicans on the campaign trail. Another law, the 2009 Mortgage Reform and Anti-Predatory Lending Act, prohibited lenders from engaging in the types of activities Barnett describes in Chapter 6: underwriting loans that consumers do not have a reasonable ability to repay and discouraging exotic, nontraditional mortgages, which were a major factor in the current housing and foreclosure crisis.
Problems with Regulation
Unfortunately, the Dodd-Frank Act has become little more than a hollow promise after it was signed into law in July 2010. As Snider noted in Chapter 8, the financial industry lobbied to delay or dilute several key provisions of the act. Congressional Republicans have done their best to aid the industry in achieving deregulation or a de facto repeal of Dodd-Frank by not adequately funding key provisions of the legislation and not approving the appointments of personnel to several positions the act created to implement and oversee the reform,5 raising the question of whether the act is merely symbolic legislation. One provision, however, that probably will be adhered to prevents the United States from adopting the newly agreed-upon Basel III capital requirements for banks (Taylor 2010).
The act greatly expanded the already underfunded SEC’s responsibilities. But the Republican-controlled House appropriations committee, claiming it wanted to reduce the cost and size of government, actually cut the agency’s 2012 budget request by $222.5 million. The total approved this year was $1.19 billion (Stewart 2011). Another agency, the Commodity Futures Trading Commission (CFTC), estimated that it needed $261 million to cover the additional responsibilities assigned it by the Dodd-Frank Act. Congress approved only $202 million (Protess 2011).
Uncertain and insufficient funding creates delays in hiring, training, establishing offices mandated by law, creating and enforcing new laws, and investigating cases. It hardly makes sense that the federal government has spent hundreds of millions bailing out banks that produced the crisis, while it cut spending for enforcement, which could prevent another crisis (Protess 2011). Rather than saving taxpayers money, cutting the budgets of agencies charged with regulating the financial industry may end up costing the treasury and taxpayers dearly.
In addition, financial institutions easily outspend federal agencies in several areas. For example: “In 2009 Citigroup and JPMorgan Chase … spent $4.6 billion each—four times the S.E.C.’s entire annual budget—on information technology alone” (Stewart 2011, B7). Under the House proposed budget, the SEC’s resources for technology would be cut by $10 million and a $50 million reserve fund earmarked for technology would be eliminated.
Even if the resources were in place, law has difficulty keeping up with innovation and new economic structures, particularly when the political class has little appetite to bite the hand that feeds it (see Chapter 2). As Snider aptly discussed in Chapter 8, innovation in the financial markets, in particular high-speed electronic trading, has presented problems for regulators. High-frequency trading firms (which now account for 60 percent of the shares traded daily on U.S. stock markets) that can turn quick profits producing billions, making the market less stable and hurting ordinary traders, are outside the regulatory purview. Since the May 6, 2010, “flash crash,” when the stock market plunged 700 points in minutes before recovering, the SEC and the CFTC increased their scrutiny and proposed curbs on high-frequency trading. Not surprisingly, the industry has mounted a $2 million lobbying effort to limit the proposed regulation (Bowley 2011). On the bright side, Snider reminds us that the same technological tools used by businesses could be effective weapons against corporate criminality.
Prosecutions
An often-repeated refrain among white collar crime scholars is that, with the exception of Bernie Madoff and a few other individual Ponzi operators, no one has gone to prison in connection with this latest financial scandal. Scholars have wondered why there has been a lack of prosecutions against major players in the financial crisis. If Angelo Mozilo (the former chief executive of Countrywide), Joe Cassano (the former head of AIG’s Financial Products division), and Richard Fuld (the former chief executive of Lehman Brothers, who approved a bookkeeping scheme that allowed Lehman to hide debt from investors) were not criminally prosecuted for their roles in the financial crisis, who would be? Edwin Sutherland (1940), who introduced the concept of white collar criminality over 70 years ago, claimed that white collar offenders are relatively immune to harsh treatment because of the class bias of the courts and noted that they have the power to influence how law is administered.
The crimes of the wealthy either result in no official action at all, or they result in suits for damage in civil court. Or they are handled by inspectors and by administrative boards or commissions with penal sanctions in the form of warnings, orders to cease and desist, occasionally loss of a license, and only in extreme cases by fines and prison sentences. Thus, white collar criminals are segregated administratively from other criminals and, largely as a consequence of this, are not regarded as real criminals by themselves, the general public, or the criminologist (Sutherland 1940, 8).
In January 2008, the FBI investigated fourteen corporations as part of its Subprime Mortgage Industry Fraud Initiative. Six months later, it reported that more than 400 individuals were charged in a nationwide investigation that included the arrest of two Bear Stearns fund managers, Ralph R. Cioffi and Matthew M. Tannin (Kouwe and Slater 2009). When prosecutors lost the first major criminal case they mounted, against the two former Bear Stearns hedge fund managers, they seemed to lose their appetite to litigate.
As both O’Brien and Geis noted in this anthology, federal prosecutors officially adopted guidelines in 2008 (followed by the SEC in 2010) that encouraged the deferral of prosecutions, rather than charging corporations with crimes. Under the guidelines, companies that investigate and report their own wrongdoing will not be prosecuted as long as they promise to change their behavior. Generally, the agreements require corporations to pay penalties and restitution (Morgenson and Story 2011). Corporate executives are greatly advantaged by deferred prosecutions as they are rarely named as defendants.
Another example of the corporate-friendly environment that continues to have deleterious effects on rational political-economic policy and decision making is that government lawyers often go to companies early in an inquiry to have the corporation itself determine whether it or its officers engaged in improper activities. The companies are then asked to hire law firms to investigate and report back to the government. In an era of limited resources, these initiatives decrease regulators’ enforcement loads. But prosecutors who are increasingly dependent on their targets to do the investigative work are less knowledgeable about the evidence (Morgenson and Story 2011). This practice raises questions about how certain regulators and the public can be sure that financial institutions would spot and report all wrongdoing, including evidence related to misbehavior by senior executives or connections to a criminal enterprise. It also raises questions about co-optation and regulatory capture. Not surprisingly, Goldman Sachs, Morgan Stanley, JPMorgan Chase, and others who have cooperated with the government regularly compare notes about government evidence likely to be used against them in what are known as joint-defense calls. Such calls have led to the development of industry-wide strategies to respond to investigations (Morgenson and Story 2011).
Critics complain that the “outsourcing” of investigations and deferred prosecutions let companies off too easily with no real consequences for their actions. For its part, the government argues that harsh treatment would hurt the housing industry and the economy. Noble Prize–winning economists Amartya Sen (2009), Joseph Stiglitz (2010), and Paul Krugman (2011b), along with many white collar–crime criminologists, do not accept this rationale. In an era of diminishing resources, Braithwaite (2010) suggests a focus on preventing a recurrence of the crisis by convincing brokers, bankers, and ratings agencies that the regulator will escalate intervention into their businesses until they fix the problems. This can be accomplished by having financial regulators act as “benign big guns” as they have in countries that were little touched by the crisis. That means regulators would have the power to take over banks, increase banks’ required reserves, limit derivatives trading, and impose other conditions. “Big gun” regulators rarely have to use their power; usually they only need to express concern to gain compliance.
We must be mindful of Galbraith’s contention, as described by Young, that “it was not only a lack of regulation but the behavior of the major players in the process and their involvement in gross fraud and deception that led to the crisis” (see Chapter 4). In Chapter 11 Tombs and Whyte warn, and the Dodd-Frank Act demonstrates, that regulation is problematic because of the structural relationship between the state and capital. As long as the state believes its interests are intertwined with that of business and it forgets or ignores the need to serve and protect its citizens, it will serve business interests. “Once-and-for-all regulatory solutions” fail as solutions and fall prey to capital’s enablers—primarily accountants, lawyers, and lobbyists (see Chapter 8).
Rather than suffer any real consequences for their actions, the major players in the financial crisis in the United States received perverse incentives to take further risks and to skirt and even violate the law. American financial institutions learned that they did not have to be prudent. They could count on federal government to bail them out. Their employees were rewarded, not for careful reviews, but for producing numbers. Convinced that Wall Street would reward the bank for taking on greater risk, Washington Mutual’s chief executive, Kerry K. Killinger, amassed bad mortgage loans and did not take action against locations where fraud appeared to be widespread (Norris 2011).
What happened leading up to and during the crisis, and even after the bailout, amounted to a perversion of the capitalist belief that good business would drive out the bad. The Gresham dynamic played out when banks, mortgage companies, and subprime lenders that reduced lending standards appeared profitable, but those that did not lost business (Black 2005).
Even an apparently hefty fine is unlikely to persuade a globally powerful company to change its behavior, For example, $1 billion in fines were assessed by the government in a civil complaint against MortgageIT, a division of Deutsche Bank purchased in 2007, for defrauding the Federal Housing Administration. This fine was little more than a slap on the wrist to a company that had revenues of $42 billion in 2010 (Nocera 2011). The fine amounted to less than 3 percent of the bank’s revenue for the year.
The road to financial meltdown has taken many forms around the globe. In Greece, it was triggered by endemic state and private sector corruption. In other countries, it was assisted by factors ranging from the greed of private individuals and companies and an all-encompassing search for profit extraction, as Sassen discussed (in Chapter 2), to the encouragement of a culture that regarded the accumulation of wealth as a means of attaining status, no matter how it is achieved, and to governments’ belief that its interests are best served by assisting the business community and the wealthy, as Will and Young suggest (in Chapters 3 and 4, respectively).
The financial crisis has caused great harm to the economy and to millions of people. It has also, however, focused the attention of responsible government authorities and regulators on the criminality and serious defects in oversight that, depending on one’s point of view, either caused the crisis or aggravated it. This volume, offering the rich insights and analysis that scholarship can provide, points toward a framework that can guide change.
The question is whether governments (and voters) will embrace the opportunities produced by this crisis to take steps toward supporting real reforms of our regulatory and business structures. Will we, in other words, let them continue to get away with it?
The answer so far has not been encouraging. In the United States, the Dodd-Frank reforms are languishing. Other efforts to strengthen government oversight and protection have hit stiff political opposition. Meanwhile the growing U.S. movement to tackle debt and balance the budget by cutting government entitlement programs and reining in the public sector has found adherents elsewhere in the world. Many experts accept the argument that the economy will recover only if business is allowed to recover—and that excessive regulation will prevent that recovery.
The lack of political will, combined with a culture that seems to accept a degree of financial criminality as the price of prosperity, suggests that we will face endless cycles of regulation and deregulation. The Occupy Wall Street movement has at least awakened the public’s consciousness and stimulated discussion about disparities in how individuals and corporation are treated in the United States. While it is hoped that in the time prior to the 2012 national elections candidates will be forced to address basic concerns raised by Occupy Wall Street, politicians and the media seem to have forgotten their message since the encampments have been demolished. Even if politicians listened, there are no guarantees that every loophole will be closed or that shrewd operators will not find new loopholes or technological tools to evade whatever laws or regulations future authorities can develop. And there is certainly no guarantee that we will not experience within the next decade (or next three decades) yet another massive financial meltdown.
What the crisis of 2008 has made painfully clear is that in a globalized economy, the acceptance of criminal, unethical, or amoral behavior practiced by companies and individuals whose reach extends across borders can have devastating effects. There will always be a bill to pay—and most often it is paid by the ordinary consumers and homeowners who were bit players in the Ponzi schemes that nurture casino economies. Such behavior is now as deep a potential threat to the world economy as the new viruses that raise concerns about global epidemics. As the essays here suggest, there is no single answer to the question: “How did they get away with it?” But the authors and editors hope that this volume will contribute to and stimulate additional research and the larger discussion among scholars and policy-makers that can help ensure it never happens again.
Notes
References
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