Criminal Prosecutions and the 2008 Financial Crisis in the US and Iceland : What Can A Small Town Icelandic Police Chief Teach the US About Prosecuting Wall Street?

Politicians, journalists, and academics alike highlight the paucity of criminal prosecutions for senior financial executives in the United States in the wake of the 2008 financial crisis. One common argument for the lack of prosecutions is that, though industry players behaved recklessly, they did not behave criminally. This Article evaluates this claim by detailing the civil and small number of criminal actions actually taken, and by reviewing leading arguments about whether behavior before the crisis was criminal. Rejecting the “reckless innocence” explanation, this Article provides examples of criminal behavior that could have been prosecuted and reviews the literature on why there were few cases made, despite potential criminal activity. Though scholars identify numerous explanations, this Article argues a combination of inadequate investigatory resources and regulatory capture offers the best explanation. This Article then explains Iceland's different approach and why it successfully criminally prosecuted senior executives from its three largest banks, among others. Though the size of the two economies and the impact of the crisis for each explain a large part of the different roads taken, the independence and outsider status of Iceland's prosecutor also contributed to, and is instructive for, how the U.S. could structure its regulatory apparatus, should it want to prioritize prosecutions in the future