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Thursday, March 30, 2023

What Really Broke the Banks

 What Really Broke the Banks The Atlantic – “The Fed, among others, is blameworthy. But the ultimate culprit is COVID-19…After COVID-19 hit the U.S., bank deposits soared. The pandemic-relief measures—including stimulus payments, expanded unemployment insurance, and Paycheck Protection Program funds—put more money in people’s hands, even as consumer spending fell. At the same time, businesses cut back sharply on spending and investment. The result was a flood of money into the banking system. In 2020 alone, according to the Federal Deposit Insurance Corporation, bank deposits rose by 21.7 percent, the largest increase since the 1940s. The following year, deposits rose by another 10.7 percent. 

At the end of 2021, total bank deposits were an astonishing $4.4 trillion greater than they’d been just two years earlier…Banks, you might say, had been lulled into a false sense of security by years of low inflation and near-zero interest rates: They were operating on the assumption that, for many years to come, inflation would remain quiescent, and interest rates would stay low. 



Accordingly, banks made what now seems like an obviously foolish decision: taking hundreds of billions of dollars in deposits and putting them into long-term bonds yielding only a couple of percentage points. Now that inflation has returned and the Fed has jacked up interest rates, banks find themselves sitting on piles of bonds that are worth far less than they once were. As a result, their balance sheets are much weaker than they had previously appeared to be…”


Top Stories
San Diego: Six members of Romanian organized crime gang arrested; laundered jewelry stolen from elderly people in the area, also for theft of unemployment benefits; much money went back to Romania; losses at least $1.4 million
 
UK’s Which? reports survey on mass marketing fraud there

  • Nearly nine in 10 adult internet users have encountered content online which they believed to be a scam or fraud.
  • Nearly half of adult internet users have personally been drawn into engaging in an online scam or fraud, while four in 10 knew someone who had fallen victim.
  • A quarter of those who said they’d encountered online scams lost money as a result, with a fifth being scammed out of £1,000 or more.
  • Three in 10 experienced a potential scam or fraud via email, just under a quarter via social media and just under a fifth through websites and apps.

Brooklyn: New Jersey man pleads guilty to mass mail campaign claiming victims had won a prize or part of a legal settlement (they had not), took in $1.6 million; he did that while awaiting sentencing for another mass mail campaign claiming people had won and needed to pay $20 to claim winnings (no one won) that took in $50 million
 
Issue of the week, Recidivism by Fraudsters:  A fraud expert and regular reader noted the story above, and suggested that convicted confidence crime criminals (for example, people who do mass marketing fraud and who work in boiler rooms, commit mail fraud, or engage in on-line frauds such as romance scams) have a high rate of re-arrest and continue to be involved in fraud crimes.  
One study (by Weisburd & Waring, 2001) found that many criminals in street gangs tend to “age out” of criminal life, but that  “white collar” criminals have long careers and possibly learn more tricks and stay in the scam game. This study also found that 62% of those who commit the crimes of mail, credit, or false claims are re-arrested for another crime -- a high rate of recidivism. 
I’ve surely seen convicted scammers return to their ways after being convicted, and romance scammers often point to the absence of prior arrests in seeking lighter sentences. So:

  • Are scammers less likely to be caught and prosecuted?
  • Do they tend to get shorter sentences because they don’t have prior arrests?
  • And are they more likely to continue to engage in fraud after their jail time?
  • What other data bears on the recidivism rates for con criminals?

Let’s open this discussion up, and let me know what your experience is.

Fraud Studies: Here are links to the studies I’ve written for the Better Business Bureau: puppy fraud, romance fraud; BEC fraud, sweepstakes/lottery fraud,  tech support fraud, romance fraud money mules, crooked movers, government imposters, online vehicle sale scams, rental fraud, gift cards,  free trial offer frauds,  job scams,  online shopping fraud, and crypto scams
 
Fraud News Around the world

Humor                                                                              

FTC and CFPB  

Virus Benefit Theft 

IRS and tax fraud

Ransomware

Data Breaches 

Bitcoin and cryptocurrency

ATM Skimming

Romance Fraud and Sextortion


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