Democracy Now!, 10/19/2011

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regulation: a principle, rule, or law designed to control or govern conductderegulation implies a loosening of social

control

Durkheim applied the concepts to the domain of moralityanomie is a social condition characterized by

the lack of moral regulation, when standards of right and wrong are unstable and unclear

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1940s-1970s: Regulatory Expansion

1980s-present: Deregulation

Deregulation – in the economy – is the removal or simplification of government rules and regulations that constrain the operation of market forces

Regulatory capture occurs when a state regulatory agency created to act in the public interest instead advances the commercial or special interests that dominate the industry or sector it is charged with regulating

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1940s-1970s - Regulatory expansion: highly regulated financial institutions, high capital requirements, capital controls, etc., took us out of historical boom-bust cycles Glass-Steagall Act (1933) mandated a separation between commercial banking

(handling deposits and lending) and investment banking (buying/selling securities, underwriting, etc.)

1980s-present - Deregulation: placing faith in free markets, regulation was loosened, and regulatory agencies downsized; began as part of “Reagan revolution” but continued under Democratic and Republican administrations alike Financial Services Modernization Act (1999): tore down Glass-Steagall's

wall separating commercial and investment banking Commodity Futures Modernization Act (2000): banned regulation of

derivatives Derivative: a financial contract with a value linked to the expected future price

movements of the asset it is linked to - such as a share, currency, commodity or even the weather. Derivatives allow risk about the price of the underlying asset to be transferred from one party to another.

Banks became increasingly leveraged, use of derivatives & high-frequency trading expanded, resulting in high volatility

2010: Dodd-Frank Wall Street Reform & Consumer Protection Act Critics charge law is weak, many provisions won’t take effect for years and details of

implementation still unclear Does not fundamentally address incentive structures that promote risk taking -- i.e.,

the criminogenic (financial) regulatory structure Systemic risk created by Too Big To Fail (TBTF) banks remains – as TBTF banks are

now bigger

Fraud: intentional deception for personal gain or to damage another individualFraud is a crime and civil law violation

“[T]he essence of fraud is, I get you to trust me, and then I betray that trust for gain”

Fraud, particularly at the elite levels, destroys trust“And when you destroy trust, you destroy

economies, families, democracies.”

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In the savings & loan (S&L) crisis, there were over 10,000 criminal referrals to the FBI In this crisis, there were zero criminal referrals

“If you don’t get people pointing the way and pointing to the top of the organization, you don’t get effective prosecutions”

In peak of S&L crisis, 1,000 FBI agents were assignedThis crisis has losses 70 times larger than S&L crisisAs recently as 2007, we had 120 FBI agents—1/8 as

many FBI “And they looked not at the big folks, but almost exclusively at

the little folks.”

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“Liars’ loans caused this crisis—and it’s overwhelmingly lenders that put the lie in liars’ loans.” Liar’s loan: a stated income loan is a mortgage where the

lender does not verify the borrower's income by looking at pay stubs, W-2 forms, income tax returns, or other records. Instead, borrowers are simply asked to state their income, and taken at their word.

FBI warned, in open congressional testimony in Sept 2004, there was an “epidemic of mortgage fraud” and predicted it would cause a “financial crisis” “And the regulators did nothing, because you had the Alan

Greenspans of the world who were selected because they were leading opponents of effective regulation in the US”

“You create a self-fulfilling prophecy of regulatory failure, and then turn around and say, ‘Well, you can’t trust the government. It fails’."

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Ch. 30, Gray Cavender and Aogan Mulcahy (1998)

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A: It’s the influence of the crime news frame

News frames are tacit theories “about what exists , what happens, and what matters” (Gitlin 1980: 6)

Crime news frames are used to analyze two cases of media coverage of corporate crime: (1) a regulatory investigation and trial involving GM pickup trucks (2) An NBC program about the trucks

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Attribution of responsibilityIndividualization of responsibility

Reaffirmation of moral boundaries

Promotion of resolution

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The crime news frame, echoing crime fiction, may increase the news-worthiness of corporate wrongdoing

The frame also may limit the salience of corporate deviance and the ability of the media to control it

News frames favor simple explanations for organizational and structural-level problems

They also make it easier to wipe slate clean, through denials, scapegoats, and resignations

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Ch. 40, Andrew Szasz (1986)

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Federal regulation to guarantee the safe disposal of hazardous wasteEstablished standards to classify substances as

hazardousAuthorized states to register corporate

generators of hazardous waste and license hauling and disposal firms

Mandated the creation of a manifest system to document the movement from the generator, through, through the transporter, to the licensed disposal site

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Organized crime elements in garbage hauling & landfilling quickly entered hazardous waste disposal market

Corporate generators of hazardous waste discharged their RCRA obligations by entering into relationships with firms dominated by organized crime

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Criminogenesis is the production of crime or criminality

The most common explanations for organized crime involvement in hazardous waste disposal - lax implementation and enforcement – are incomplete

Analysis of the formation of RCRA shows corporate generators helped create a criminogenic regulatory structure

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1) lack of agreement on what substances were hazardous

2) firms generating less than 1 metric ton of hazardous waste per month were exempt from RCRA regulation

3) some firms the generated hazardous waste have either failed to cooperate w/EPA requests for data or failed to identify themselves to the EPA as regulable generators

4) firms that appear to be in compliance may not be reporting accurately the types and amounts of hazardous waste they generate

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Organized crime was ideally suited to develop illegal hazardous waste practices to the fullestWhere garbage hauling and landfilling was

historically controlled by organized crime, movement into new hazardous waste market was an extension of current activityIn NJ, organized crime had control through ownership

of garbage hauling firms, through ownership or control of landfills, and through labor racketeering

Threats and violence were used to persuade others to join the infrastructure or get out

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Lax implementation, incompetent and/or corrupt enforcement in both interim licensing and manifest oversight were critical

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Generators, led by petrochemical firms, fought for and achieved a regulatory form that would minimize responsibilities and liabilities for potential violations

Firms lobbied hard against regulationopposed intervention in production decisions denied legal responsibility for the ultimate

disposal of hazardous waste, relying on subcontracting

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