Financial Crime Registry: Will it Deter Fraud and Improve Restitutions?

Every state in the United States has a sex offender registry that is publicly available for everyone to see in order to identify people who have been convicted of a sex crime in the past. Could such an approach also prove effective at lowering financial crime rates? A recent article in The Wall Street Journal discusses the creation of a White Collar Crime Offender Registry in Utah. Utah is the first state to implement such a registry, making them, according to the article, the “most aggressive jurisdiction in the country when it comes to publicly shaming financial criminals.” The registry will list first time offenders of financial crime for five years, second time offenders for ten years, and third time offenders will never have the option of being removed. In addition, convicts who fully comply with court orders and pay their restitutions in full will not be added to the list.

The Next Financial Crisis

Harvard economist Jeremy Stein predicts that the next financial crisis will come from a bubble in green energy industry.  Sound familiar?

Surprise: people are finding more ways to steal from the U.S. government

Two whistle blowers have accused the private security company and government contractor Blackwater Worldwide (now called Xe) of defrauding the U.S. government.  Perhaps unsurprisingly, most of the accusations seem to hint at a general lack of oversight by the government.  Basically it looks like the government didn't do much to verify expense reimbursements submitted by Blackwater.  This isn't the first time the government has had issues like those alleged by these whistle blowers, and it probably won't be the last.  Weak internal controls and inadequate oversight by the government do not in any way justify fraud, but how many taxpayer dollars need to be stolen before we make a greater effort to eliminate these opportunities?

Bride scams in China

While we are recovering from a real estate bubble that was at least partially fueled by government policies, China has a bubble of their own: an oversupply of unwed males leading to exorbitant prices for available brides. This WSJ article describes some of the scams that are resulting from this situation. I guess it shows that government intervention in life or markets can lead to all sorts of problems...

Another bubble candidate

In addition to the green energy industry, I believe that the health care industry has potential to develop into our next bubble. The attitude toward the health care industry is similar in many ways to the pre-bubble attitude toward the housing industry. Similar to housing (and green energy), health care is being subjected to a great deal of government tinkering, with the objective of making health care affordable for all (note: I will save my political views on health care reform for another post--in this post I simply wish to point out the similarities between the pre-bubble housing industry and the current health care industry). In addition, many individuals believe that the demand for health care will continue to either increase or remain constant, similar to the "house prices will always increase" belief. Although differences between the two industries (e.g. a lower degree of leverage in health care) may limit the severity of a health care bubble in comparison to the housing bubble, I still believe that health care is a viable candidate for our next bubble.

The next bubble...

After two major bubbles popping in our economy in the last decade (the internet and real estate bubbles), I've wondered where the next bubble will form and if the pop will be as dramatic as the first two. Each bubble grows as investors jump on board in the boom times but, eventually, the market has a reality check and the bubble pops. In the boom times, fraud perpetrators have abundant opportunities to create a facade that investors are happy to finance. Then, when the reality check comes, the facade is revealed and rampant fraud is revealed.

I was reading about the proposed legislation for green energy and I'm going to be watching for a bubble in this area of the economy. Along with the bubble, I'm curious to see how much fraud forms among the companies that are jumping on board to make their millions while the government is blowing hot air into that part of the economy. Don't get me wrong, I would love to see us get away from foreign oil and put the middle east out of business but I'm also pretty sure that whenever the government is blowing hot air that a bubble will form and fraud perpetrators will come running to get their share.