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43 Crime L. & Soc. Change 1 (2005)

handle is hein.journals/crmlsc43 and id is 1 raw text is: Crime, Law & Social Change (2005) 43: 1-29 DOI: 10.1007/s10611-005-2488-y © Springer 2005 Control fraud as an explanation for white-collar crime waves: The case of the savings and loan debacle W. BLACK Lyndon B. Johnson School of Public Affairs, University of Texas, Austin, PO. Box 78713, Austin, USA (e-mail: b. black@ mail. utexas.edu) Introduction: Control frauds and the S&L debacle Economists and white-collar criminologists tend to come from opposite ends of the political spectrum, so it should not be a surprise that their views on the relative importance of white-collar crime in general and the role of white- collar crime in the savings and loan debacle of the 1980s should be polar. Economists tend to view fraud as being of marginal importance in general, and distracts policy makers trying to prevent future crises.1 One scholar who specializes in law and economics, Professor Daniel Fischel of the University of Chicago's School of Law, has written articles and books that reflect the conventional wisdom of many economists about these subjects. The title of his 1995 book, Payback: The Conspiracy to Destroy Michael Milken and His Financial Revolution, conveys both the thesis and the polemical style of the argument. While Payback deals primarily with Milken and the investment banking firm he became synonymous with, Drexel, Burnham & Lambert, it also discusses the S&L debacle at some length and argues that, as with Milken, the government sought to grossly exaggerate the role of fraud in the debacle. In the course of Payback, Fischel asks the question that this article is intended to answer: Why was there a sudden simultaneous explosion of fraud and criminality at savings and loans across the country? Did a new generation of morally depraved thrift operators just coincidentally appear at the same time.2 Professor Fischel intended these questions to be rhetorical and sarcastic, he believed they exposed the fact that: The government's simple fraud and insider-abuse explanation for the thrift crisis defied common sense (Id). This article answers Professor Fischel's questions. There was a sudden explosion of criminality because a series of factors came together to create a

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