Financial Fraud Prosecutions Collapse

February 1st, 2012
in econ_news

Econintersect:  Not only is the Federal prosecution of financial institutions for criminal activities down dramatically but citizens Robberhave to pay to find out the latest data.  The data can be determined by going through the official records of the Justice Department which is what is done by a service provided by Syracuse University (a private institution).  Understandably, as a private enterprise, S.U. tries to cover some of its costs by charging a small fee for its TRACFED service which compiles data on the classification of federal prosecution activity.  Expenses not covered by fees received are supported by the John S. and James L. Knight Foundation.  This appears to be necessary because of lack of summary reporting of activities by the Justice Department itself.  It might be concluded that not only is the DoJ not doing its job but it is failing to report the summary data on that failure.

Follow up:

A recent public report from the Syracuse TRACFED program summarized data through the end of August, 2011.  As shown in the following graphic, criminal prosecutions for financial fraud have declined twelve years in a row.


The last year of the Clinton administration saw a decline of approximately 5%.  The first term of G. W. Bush had an average annual decline of about 6%, the second term about the same and the first three years of the Obama administration the average annual decline has been about 7%.  About half of the decline for Obama occurred in the first year, so 2010 and 2011 have had an average decline closer to 5% and 2011 has declined less than 2%.

Does the recent slowing of the decline in the number of prosecutions indicate that a rapid decline in criminal fraud in the financial industry is ending?  That might be an incorrect interpretation as the following picture representing DoJ officials indicates.



In 2011 there were approximately 1330 criminal prosecutions of financial institutions.  Through the 1990s there were more than 3,000 every year, approximately 2.3 times as many.  Why has the number declined so dramatically?  Has criminal activity declined by that much?  Or is the reason possibly explained by the photo above?

Is it possible that some of what was criminal until 1999 was legalized by the repeal of Glass-Steagall in 1999?  If so, could we solve the entire organized crime problem by similar action?

Update: William K. Black has posted a length commentary, analysis and discussion of the shortcomings of the Bush (II) and Obama administrations with regard to financial crimes and mortgage fraud.  This was posted after this article was first posted and is now been listed as the fourth source reference below.


Hat tip to Roger Erickson.

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