CrimProf Blog

Editor: Kevin Cole
Univ. of San Diego School of Law

Thursday, February 13, 2020

Rex on Criminal Prosecutions and the 2008 Financial Crisis

Justin Rex (Bowling Green State University - Department of Politcal Science) has posted two manuscripts on SSRN on the topic. The first is Criminal Prosecutions and the 2008 Financial Crisis in the US and Iceland: What Can A Small Town Icelandic Police Chief Teach the US About Prosecuting Wall Street? (Concordia Law Review: Vol. 4 : No. 1 , Article 5). Here is the abstract:
Politicians, journalists, and academics alike highlight the paucity of criminal prosecutions for senior financial executives in the United States in the wake of the 2008 financial crisis. One common argument for the lack of prosecutions is that, though industry players behaved recklessly, they did not behave criminally. This Article evaluates this claim by detailing the civil and small number of criminal actions actually taken, and by reviewing leading arguments about whether behavior before the crisis was criminal. Rejecting the “reckless innocence” explanation, this Article provides examples of criminal behavior that could have been prosecuted and reviews the literature on why there were few cases made, despite potential criminal activity. Though scholars identify numerous explanations, this Article argues a combination of inadequate investigatory resources and regulatory capture offers the best explanation. This Article then explains Iceland’s different approach and why it successfully criminally prosecuted senior executives from its three largest banks, among others. Though the size of the two economies and the impact of the crisis for each explain a large part of the different roads taken, the independence and outsider status of Iceland’s prosecutor also contributed to, and is instructive for, how the U.S. could structure its regulatory apparatus, should it want to prioritize prosecutions in the future.
The second is Restorative Justice, White-Collar Crime, and the 2008 Financial Crisis (Forthcoming, Appalachian Journal of Law). Here is the abstract:
Despite potential criminal behavior, no senior executives from major U.S. financial institutions were incarcerated for actions related to the 2008 financial crisis, an outcome decried by a variety of academics, journalists, and judges, as well as the broader public. This critique is premised on a retributive theory of justice and the belief that incarceration is an effective deterrent against future crime. But are calls for more criminal sanctions warranted? Restorative justice offers an alternative lens to critically evaluate the retributive paradigm that supports calls to put more bankers in jail, and underlays the broader approach to criminal justice in the U.S. Though restorative justice has been increasingly used around the world for blue-collar street crimes and state crimes, its theory and application to white collar crime is less well developed. This research fills that gap by evaluating the governmental response to financial wrongdoing related to the 2008 financial crisis through the lens of restorative justice. I argue that a restorative justice approach to financial regulation is theoretically desirable and outline a variety of financial regulatory reforms to more closely align the Department of Justice’s approach to white-collar financial crime and federal financial regulators’ approach to banking regulation with restorative justice principles.

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