Class, Crime and Legal Systems

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Class, Crime and Legal Systems

The premise from the documentary Meltdown that power and privilege had little to do in the 2008 global financial crisis is incorrect. The global crisis represents the most adverse economic problem that had hit American and the world in general since the 1930s’ Great Depression. Poor financial markets, macroeconomic problems, and ineffective policy implementations factored in the crisis. The financial sector had diversified into a complex system with its actors gaining too much power that resulted in difficulties of regulation and control. Moreover, the internal structure and control policies of financial institutions were failing because of their high levels of laxity. The levels of risk in the financial sector grew to unbelievable proportions that had never been experienced prior to the crisis. Power, social inequality, and class influenced the natures of the economic crimes together with their associative controls as experienced in the global crisis.

The depictions of the socioeconomic patterns in crime drawn from official judicial statistics are imperfect. It has long being argued by criminologists that case processing from the suspect to the judge results in various biases as seen in the Global crisis (Rosenfeld and Messner 4). The documentary Meltdown argues against the priviledged and the powerful as the parties behind the crisis because of the same biased nature of persecutions. This bias is supported by the casual relationship between status and crime as dictated by Rosenfeld and Messner. Class and Race divide residential cases in the United States, where the low class are associated with high levels of crime while the high class with low levels (Rosenfeld and Messner 4). Part of the global crisis that is the mortgage was developed by housing bubble. Reasons behind the bubble were rapid increments and reductions in housing prices resulting in mortgage debts that had higher values than the properties. Power in sense of the Federal Reserve is accountable for price regulation. In the global crisis, the regulatory body failed placing power as a reason behind the economic depression.

The financial and economic global crisis had adverse implications on the public as opposed to the private sector. This was a factor developed by the unprecedented downturn in the national economy. The national debt injects itself directly on the public capital. It is illogical to argue that the privileged did not have a role to play in the crisis given that they were least affected by its consequences. The theory of crime assumes that crime is a direct reflection of agreement rather than the dependent outcome of a judicial process that is subject to class bias (Barak et. al. 10). The global economic crisis negates the criminologist generalization on the casual relationship between power and crime as seen in the classical criminology. Modern positivist criminology employs the use of evidence-based science in its determination of the guilty subject (Barak et. al. 8). The global crisis through evidence-based research is caused by a ‘moral hazard’ where each link in the banking sector collected profits in the belief that they were transferring risk. Mortgage brokers and underwriters do not loan out their own funds, but collect incentives and high commissions from the complex sales of Adjustable Rate Mortgages (ARMs).

Mortgage Brokers and Underwriters, representing the privileged, were responsible for more than half of the loan rates that led to the global crisis. This is an example of how the global economic crisis in its social inequality did not follow the social order of modern market oriented practices that are characterized by mutual benefiting in transaction relationships (Rosenfeld and Messner 53). In a research done in 2004, mortgage brokers were identified to be the reason behind 68% of all the occupied residential houses taken up through loans in the United States (Bianco 8). In the subprime crisis, this loan percentage accounted for 42% in terms of the volume debt incurred by both banks and the Federal Reserve (Bianco 8). The Mortgage Bankers Association determined that the brokers were the main profiteers of the loan boom. In addition, the association related brokers with the least amount of efforts made to repay the loans. Underwriters generated 40% of the loans in the subprime crisis (Bianco 9). Automated underwriting applied in loan issuance meant little documentation and quick decision making the process susceptible to huge financial risks. The lax control and application of shortcuts by the two parties in the less automated systems played significant roles in the economic depression.

Individuals in power and the privileged played the major role in the 2008 global financial crisis. The government, regulatory bodies, and management in financial institutions were lax in policy implementation therefore allowing application of weak financial practices. Moreover, the government and the regulatory bodies were ineffective in exercising price control in the market making loans to have higher values than asset properties. Implications of the ineffectiveness were a debt balance that superseded the public and private reserve. Underwriters and Mortgage brokers are examples of the privileged that benefited from the crisis as opposed to the public. This makes the premise narrated in the documentary ‘Meltdown’ inaccurate because it follows the traditional classical model that is less evidence based associating class and power with low levels of crime.

Works Cited

Barak, Gregg, Paul Leighton, and Jeanne Flavin. Class, Race, Gender, and Crime: The Social Realities of Justice in America. Lanham, Md: Rowman & Littlefield, 2010. Print.

Bianco, Katalina M. The Subprime Lending Crisis: Causes and Effects of the Mortgage Meltdown. Chicago, IL: CCH, Wolters Kluwer Law & Business, 2008. Print.

Rosenfeld, Richard, and Steven F. Messner. Crime and the Economy. London: Sage, 2013. Print.