Discretionary justice. A comparison and discussion of criminal prosecutions in the history of major financial crimes

Author:James F. Gilsinan, Muhammed Islam, Neil Seitz, James Fisher
Position:Department of Sociology, Saint Louis University, St. Louis, MO, USA; Department of Economics, Saint Louis University, St. Louis, MO, USA; Department of Finance, Saint Louis University, St. Louis, MO, USA; Department of Marketing, Saint Louis University, St. Louis, MO, USA
Pages:5-15
SUMMARY

Purpose - The purpose of this paper is to understand the reasons why some financial crises do not result in extensive criminal prosecutions. Design/methodology/approach - The authors examine three major events: the crash of 1929 leading to the Great Depression, the collapse of the US Savings and Loan industry circa 1990 and the sub-prime mortgage meltdown. The authors explain how circumstances ... (see full summary)

 
FREE EXCERPT
Discretionary justice
A comparison and discussion of criminal
prosecutions in the history of major
nancial crimes
James F. Gilsinan
Department of Sociology, Saint Louis University, St. Louis, Missouri, USA
Muhammed Islam
Department of Economics, Saint Louis University, St. Louis, Missouri, USA
Neil Seitz
Department of Finance, Saint Louis University, St. Louis, Missouri, USA, and
James Fisher
Department of Marketing, Saint Louis University, St. Louis, Missouri, USA
Abstract
Purpose – The purpose of this paper is to understand the reasons why some nancial crises do not
result in extensive criminal prosecutions.
Design/methodology/approach The authors examine three major events: the crash of 1929
leading to the Great Depression, the collapse of the US Savings and Loan industry circa 1990 and the
sub-prime mortgage meltdown. The authors explain how circumstances surrounding these nancial
collapses led to stark differences in criminal prosecutions.
Findings This review of prosecutions during three nancial crises underscores the contingent
nature of seeking criminal penalties for nancial wrongdoing. The decision is inuenced by a number
of factors, including a prosecutor’s level of risk tolerance (probable win test); the potential economic
impact of a successful conviction; the number of laws and regulations available in the prosecutorial tool
kit; and the desired outcome which can range from new regulatory structures, to prosecutions that x
blame and satisfy the desire for scapegoats, to seeking nancial penalties that shore up the
government’s bottom line.
Research limitations/implications This study covers three crises and focuses on the US
responses. A broader study could look across countries.
Practical implications Regulators and lawmakers are interested in avoiding future crises.
Because crises are not anticipated, responses are determined by conditions of the moment. A frequent
result is that laws and regulations are not in place. Decisions about likely preferred responses would
allow anticipatory legislation and regulations.
Social implications – Financial crises obviously have major implications for ordinary citizens far
removed from the centers of nance. Improved responses to mitigate or avoid disasters would have
profound impacts on people’s quality of life.
Originality/value – The three crises have been studied individually. This work is different in that it
examines the impact of a common set of factors over three crises covering a span of 80 years.
Keywords Finance, Crises, Meltdown
Paper type Conceptual paper
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1359-0790.htm
Discretionary
justice
5
Journalof Financial Crime
Vol.22 No. 1, 2015
pp.5-15
©Emerald Group Publishing Limited
1359-0790
DOI 10.1108/JFC-02-2014-0009

To continue reading

REQUEST YOUR TRIAL