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A Different Legal System for the Rich: Imagine Getting Off Easy for Hit-and-Run Because You Run a Hedge Fund

It's not just the recession that's killing the middle class -- it's how the legal system is being used to establish a two-tiered society.

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In war, there’s always “collateral damage,” and an economic assault based on such a depraved and antisocial moral framework is bound to spill over into other areas of society -- into the broader culture. The Erzinger affair was but one of a series of recent events that suggests, if only anecdotally, that Rand’s vision of society may indeed be infecting our judicial system (which never exactly treated everyone alike regardless of their station).

Not Just a Local Tale of Injustice

The scandal was just a local Colorado story, but it’s emblematic of broader trends in America's criminal justice system. Compare, for example, the zeal with which we punish nonviolent drug offenders with the attention -- and resources -- we devote to locking up corporate criminals who are no more violent but create many more victims.

According to Human Rights Watch, the number of Americans behind bars quadrupled between 1980 and 2002, while violent crime rates were “relatively constant or declining.” In 2003, three-quarters of new admissions to state prisons went in for nonviolent offenses. “Perhaps the single greatest force behind the growth of the prison population,” the human rights watchdog reported, “has been the national ‘war on drugs.’" The number of drug offenders increased twelvefold in the two decades following Ronald Reagan’s election in 1980.

The enforcement trend has looked very different when it comes to white-collar crime. As I noted last week, during the savings and loan scandal of the Reagan era, 1,100 bankers went to jail for fraud, but so far the current financial crisis -- rooted in a mortgage-based securities scam that may prove to be the greatest Ponzi scheme in history -- has yielded no high-level prosecutions to date (only a few low-level loan officers have faced criminal sanctions). There are a number of reasons for that, but one of the biggest is a simple matter of resources. While the financial sector has grown significantly since the 1980s, and the securities Wall Street peddles have gotten far more complex, David Heath reported that the FBI had just 240 agents working on mortgage fraud cases last year, compared to 1,000 white-collar investigators it employed at the height of the S&L crisis.

Civil Injustice

The disparities get even more egregious in the civil courts. Consider the difference in how we approach two sides of a debt obligation.

The Minneapolis-Saint Paul Star-Tribune reported that the debtors’ prisons of the 19th century  -- or their modern equivalents -- are returning for human persons who fall into a spiral of debt. The original prisons were abolished in the United States over a century ago, but according to the report, “people are routinely being thrown in jail for failing to pay debts” in states like Minnesota, “which has some of the most creditor-friendly laws in the country.”

Technically, they’re not being imprisoned for owing money, but for missing court-ordered payments. But the effect is the same. Fueled by “a growing industry that buys bad debts and employs every means available to collect,” the Star-Tribune noted that in some “extreme cases, people stay in jail until they raise a minimum payment.” One Illinois judge sentenced a debtor "to indefinite incarceration" until he came up with the $300 he owed a local lumberyard.

It’s a case of using public resources to secure private profits:

Taxpayers foot the bill for arresting and jailing debtors. In many cases, Minnesota judges set bail at the amount owed.

In Minnesota, judges have issued arrest warrants for people who owe as little as $85 -- less than half the cost of housing an inmate overnight.

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