Why Do Financial Crimes Go Unpunished? Rich and Poor, Debt and Finance (2014)

 The U.S. subprime mortgage crisis was a set of events and conditions that led to a financial crisis and subsequent recession that began in 2008. It was characterized by a rise in subprime mortgage delinquencies and foreclosures, and the resulting decline of securities backed by said mortgages. Several major financial institutions collapsed in September 2008, with significant disruption in the flow of credit to businesses and consumers and the onset of a severe global recession.

Government housing policies, over-regulation, failed regulation and deregulation have all been claimed as causes of the crisis, along with many others. While the modern financial system evolved, regulation did not keep pace and became mismatched with the risks building in the economy. The Financial Crisis Inquiry Commission (FCIC) tasked with investigating the causes of the crisis reported in January 2011 that: "We had a 21st-century financial system with 19th-century safeguards."[1]

Increasing home ownership has been the goal of several presidents including Roosevelt, Reagan, Clinton and George W. Bush.[2] However, the FCIC wrote that Fannie Mae and Freddie Mac, government affordable housing policies, and the Community Reinvestment Act were not primary causes of the crisis.[1][3]

Failure to regulate the non-depository banking system (also called the shadow banking system) has also been blamed.[1][4] The non-depository system grew to exceed the size of the regulated depository banking system,[5] but the investment banks, insurers, hedge funds, and money market funds were not subject to the same regulations. Many of these institutions suffered the equivalent of a bank run,[6] with the notable collapses of Lehman Brothers and AIG during September 2008 precipitating a financial crisis and subsequent recession.[7]

The government also repealed or implemented several laws that limited the regulation of the banking industry, such as the repeal of the Glass-Steagall Act and implementation of the Commodity Futures Modernization Act of 2000. The former allowed depository and investment banks to merge while the latter limited the regulation of financial derivatives.

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Incarceration in the United States is one of the main forms of punishment, rehabilitation, or both for the commission of felony and other offenses. The United States has the largest prison population in the world,[3][4] and the second-highest per-capita incarceration rate, behind Seychelles (which has a total prison population of 786 out of a population of 90,024).[5][6] In 2012, it was 707 adults incarcerated per 100,000 population.

According to the U.S. Bureau of Justice Statistics (BJS), 2,266,800 adults were incarcerated in U.S. federal and state prisons, and county jails at year-end 2011 – about 0.94% of adults in the U.S. resident population.[8] Additionally, 4,814,200 adults at year-end 2011 were on probation or on parole.[12] In total, 6,977,700 adults were under correctional supervision (probation, parole, jail, or prison) in 2011 – about 2.9% of adults in the U.S. resident population.[12]

In addition, there were 70,792 juveniles in juvenile detention in 2010.[13]

Although debtor's prisons no longer exist in the United States, residents of some U.S. states can still be incarcerated for debt as of 2014.[14][15][16][17] The Vera Institute of Justice reported in 2015 that jails throughout the United States have become warehouses for the poor, the mentally ill and those suffering from addiction as such individuals lack the financial means or mental capacity to post bail.[18]

According to a 2014 report by Human Rights Watch, "tough-on-crime" laws adopted since the 1980s have filled U.S. prisons with mostly nonviolent offenders.[19] This policy failed to rehabilitate prisoners and many were worse on release than before incarceration. Rehabilitation programs for offenders can be more cost effective than prison.[20] According to the Brennan Center for Justice, falling crime rates cannot be ascribed to mass incarceration.




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