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This article talks about how the mob makes money off of economic downfalls. They take advantage of these downfalls, and exploit it to make their cash. This is how the mob has survived for so long. They look at these recessions, and uses it to take advantage of people and make money.

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The Mafia has always profited from economic crisis. Recessions fill up the mob's coffers and boost its social standing.

In fact crime is one of the few sectors of the economy that thrive in moments of financial decline. Just look at the past decade, when the United States suffered a collapse in its housing market, Italy risked default, and Greece, Spain, and Portugal came to the brink of bankruptcy. During all that time, drug trafficking reached unprecedented heights of prosperity.

It's always been this way. In the Great Depression, the Italian-American mob, which was already reaping the benefits of Prohibition, saw its business grow even more. The consumption of alcohol and drugs increased as uncertainty about the future caused people to seek refuge in them, the penniless and destitute turned more often to loan sharks, and general hopelessness about the future spurred the rise of Mafia-organized gambling, sports betting, and illegal lotteries.

And it doesn't end there. The Mafia exploits these moments of uncertainty to validate its organizations and to build consensus in society. After the stock market crashed in 1929, Al Capone decided to mobilize his restaurant and garment businesses to feed and clothe Chicago's poor. (In the 1980s, Pablo Escobar would reprise this demagoguery when he offered to pay Colombia's public debt out of his own pocket.)

While politicians and the press worried about how to end the Depression, the Italian-American bosses gloated in the situation, using it as an opportunity to reorganize and relaunch their illicit enterprises. It was during that period, for example, that the Chicago Outfit was consolidated. It was at the end of the 20s that Lucky Luciano came to understand the importance of the heroin trade. And it was in 1931 that gambling was legalized in Nevada and the bosses conquered Las Vegas.

Only in the early 1930s, when America had caught a glimpse of the way out of the crisis, did US institutions begin to truly concentrate on the fight against the Mafia. At that point the first arrests were made: Luciano and Al Capone ended up in jail, but they had established themselves so well during the recession that they successfully managed all of their ventures from prison. And the bosses of the Italian-American Mafia had such power that American intelligence asked their help with security during World War II in exchange for lessened sentences and impunity.

Though history teaches us that in times of crisis it's necessary to raise our guard against gangsters and racketeers, institutions tend to lower their defenses, handing a carte blanche to organized crime. So it continues today.

In December 2009 Antonio Maria Costa, then the executive director of the UN Office on Drugs, made a shocking declaration: He revealed that the earnings of criminal organizations made up the sole liquid assets at the disposal of some banks seeking to avoid collapse during the 2008 financial crisis.

But how did we get to this point? According to the International Monetary Fund, between 2007 and 2009, banks in the United States and Europe lost more than $1 trillion in toxic assets and bad loans. Many big credit institutions failed or were put under temporary receiverships, and by the second half of 2008, cash flow had become a major problem for the banking system. Due to the banks' reluctance to grant loans, the system was practically paralyzed, and criminal organizations seemed to have huge quantities of cash to invest-that is, to launder.

A recent investigation by two Colombian economists at the University of Bogotá, Alejandro Gaviria and Daniel Mejía, revealed that 97.4 percent of Colombia's drug-trafficking revenue is regularly laundered in American and European banking circuits through various financial operations. We're talking about hundreds of billions of dollars. The laundering takes place by way of a system of blocks of shares that work like Chinese boxes or Russian dolls: The cash is transformed into electronic titles, passed from one country to another, and when it arrives on another continent it is nearly untraceable. That's how interbank loans came to be systematically financed with money from drug trafficking and other illicit activities. Some banks relied on this money to save themselves. Consequently, a large part of the $352 billion originating from drug trafficking was absorbed into the legal economic system, perfectly cleaned.

On October 26, 2001, in the wake of 9/11, President George W. Bush signed the Patriot Act with the goal of preventing, identifying, and prosecuting international money laundering and financing of terrorism. This law established that the US Department of the Treasury can ask national financial institutions to undertake a series of special measures with regard to jurisdictions, institutes, or foreign bank accounts suspected of being involved in money laundering.

But despite the tough measures taken by the American government, the financial crisis that started in 2008 even caused American banks to turn a blind eye to illicit activity and to find a way around the law. In February 2012, before a congressional hearing on organized crime, Jennifer Shasky Calvery, chief of the Asset Forfeiture and Money Laundering Section of the Department of Justice at the time, declared: "Disguised in the trillions of dollars that is transferred between banks each day, banks in the US are used to funnel massive amounts of illicit funds," confirming, in a sense, that the Patriot Act was not enough to distance the flow of dirty money from the American economy and finances.

The tie between drug trafficking and banks is not new. As Costa declared to the Observer, "The connection between organized crime and financial institutions started in the late 1970s, early 1980s, when the Mafia became globalized." Until that connection was made, criminal organizations' money had circulated primarily in cash. With the globalization of the Mafia, it became easier and more convenient to transfer money electronically from one part of the world to the other through the use of electronic titles and virtual cash. But according to the Observer, at the end of the 80s the authorities increased their oversight of laundered money in banks, and criminal organizations began to operate in cash once again.

Yet the anti-money-laundering authorities hadn't accounted for the financial crises that spread across the globe in the early 2000s, causing a shortage of liquid assets from Russia to the United States. This shortage not only would bring the banks to their knees but also would open them up to the enormous assets of criminal organizations. And the cases in the news involving some of the biggest global banks in recent years demonstrate this fact.

According to some experts, the banking powerhouses of London and New York have become the two biggest laundries of dirty money in the world. This title no longer belongs to tax havens like the Cayman Islands and the Isle of Man but to Lombard Street and Wall Street.
Translated from the Italian by Kim Ziegler

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The Mafia has always profited from economic crisis. Recessions fill up the mob's coffers and boost its social standing. In fact crime is one of the few sectors of the economy that thrive in moments of financial decline.

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This article talks about gangsters during the depression. Most of them were immigrants, or children of immigrants. While the different groups certainly competed with each other, by the early 1930s, they started to collaborate because public opposition to gang violence made them very conspicuous. Reduction in gang violence was probably one of the only good things to come out of the era.

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William J. Helmer

Although the term "gangster" is used for any criminal from the 1920s or 30s that operated in a group, it refers to two different breeds.

Mobsters belonged to organized crime rings. They generally lived in large cities, and most were immigrants, or children of immigrants. Many of these criminal gangs were protected by urban politicians and police. While the Italian mafia was the largest and most powerful, other ethnic groups also had organized crime rings, most notably Jews and the Irish. While the different groups certainly competed with each other, by the early 1930s they are starting to collaborate more closely because public opposition to gang violence makes them so conspicuous.

Outlaws typically came from rural areas in the Midwest, Southwest, or the West. According to FBI Special Agent Melvin Purvis, "Most of the top-flight hoodlums of the Middle West were 100-per-cent American boys with no foreign background whatsoever." The term "outlaw" applied to robbers, kidnappers, or occasionally, murderers. They followed in the tradition of Western outlaws such as Jesse James, except that after a hold-up, they used cars instead of horses for their getaway. Hence they were also called "auto bandits" or desperadoes.

Mobsters earned their money by providing illegal goods and services. They were most famous for bootlegging, but also managed gambling, prostitution, and abortion. While outlaws operated independently of mobsters, they did rely on organized gangs for the tools of the trade -- firearms, bulletproof vests, and armored cars. They could use the organized rings to pay for hide-outs and police protection. They could also arrange for legal assistance or medical care. Whether outlaws were wounded in a gunfight or simply became ill, they risked capture by going to an ordinary doctor. For an exorbitant fee, an underworld doctor would treat them and not notify the authorities. The outlaws sometimes took on special jobs for the criminal rings, like murdering an enemy, that a particular organization wanted done but didn't want to take the blame for.

The outlaws were relatively democratic. Each gang member received a share of the loot in proportion to the level of participation. Mobsters, on the other hand, belonged to a hierarchical structure organized like a corporation - hence the name "syndicate." The Chicago Syndicate was the country's largest and most powerful organized crime operation. Its chief, Al Capone, controlled all underworld operations in the Chicago area. Capone lived so lavishly and openly that Chicago newspapers wrote about him in their gossip columns. He cultivated good public relations by donating money to charity, and opening soup kitchens during the Depression.

Throughout the 1920s mobsters engaged in street battles over issues of control. Gang warfare reached its climax in the St. Valentine's Day Massacre. On February 14, 1929, seven men were killed in a Chicago garage by five unknown men wearing police uniforms. Witnesses were unable to establish their identity, and the coroner's jury did not find sufficient evidence to prosecute anyone. Al Capone was blamed for the Massacre, even though he was in Florida at the time. To this day, the perpetrators' identity remains a mystery.

The St. Valentine's Day Massacre shocked the American public more than any previous street violence, because it resembled an execution. People blamed Prohibition for this violence, and began to favor its repeal.

Meanwhile, outlaws were successfully robbing banks throughout the Midwest. Besides the automobile, they were assisted by new hard-surfaced highways, and the Rand-McNally Road Atlas, which first came out in 1924. Robberies were easier in the Midwest than other parts of the country because small Midwestern towns usually lacked adequate police forces. The long distances between towns also made getaways feasible.

Due to the expansion of newspaper wire services and the radio, bank robberies could become national news instantaneously. Criminals became national celebrities, who symbolized the public's lack of faith in society's crumbling institutions. While the public found their notoriety exciting, the government did not. FBI Director J. Edgar Hoover targeted them for pursuit. By 1935, all the famous outlaws had been killed or captured by FBI special agents.

Fearing the end of Prohibition, mafia leaders held their first national conference from May 13-15, 1929, in Atlantic City, New Jersey. They solidified the networks formed through bootlegging to become national in scope. Mobsters expanded their markets to racketeering and legitimate enterprises. Violence became more discreet, as street battles became a thing of the past. Ironically, while the syndicates became less visible in American society, their power increased dramatically.

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Gangsters During the Depression | American Experience | PBS

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Although the term "gangster" is used for any criminal from the 1920s or 30s that operated in a group, it refers to two different breeds. Mobsters belonged to organized crime rings. They generally lived in large cities, and most were immigrants, or children of immigrants.

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This article talks about how mobsters like “Lucky” Luciano made tons of money during the depression. They became loan sharks, loaning their money to people since banks couldn’t, and charge them 20% rates. This was an extremely popular method of making money for mobsters during the depression.

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Wikimedia Commons
Many people are aware that the mob made a fortune in illegal alcohol due to Prohibition in the Roaring '20s.

But most aren't aware of how they made their greatest profits during the Great Depression: They became loan sharks.

One of the rising mob bosses was "Lucky" Luciano in New York. With the help of Meyer Lansky - the ultimate financial genius, also called the "Mob's Accountant" - and the infamous Bugsy Siegle, he implemented a strategy that helped the mob thrive during one of the worst downturns in history.

It was a simple matter of supply and demand. When the Depression hit, people and businesses couldn't get loans. So the mob took the money they got from bootlegging and started lending it out at shark rates of 20%-plus.

To put it in perspective, that's similar to what credit cards charge over-spenders with questionable credit today!

The mob was able to enforce these high rates for one simple reason - they were the frickin' mob!

It's not that people and businesses didn't have previously existing loans from the banks. Some even got money from relatives and other lenders. But they can't kick your ass and break your legs like Luigi can!

So who do you think got paid first? That advantage reduced their risk in a high risk period.

And even when borrowers couldn't cough up the cash after breaking their legs, the mob just took a chunk of their business to create future cash flow for when the economy ultimately turned around again.

So not only were these mobsters raking in high cash flow from high interest rates, they were taking over businesses in dynamic growth cities like New York when they were the cheapest they would ever be.

Lending high and buying low - it's the perfect winter season strategy.

Just think about how Joseph Kennedy made his family fortune during the same period. He made much (if not most) of his money bootlegging in the '20s, then sold his stocks in late 1929 when a shoe shine boy started giving him tips - a sign that speculation had really gone berserk!

Finally, when the stock market went down by as much as 89%, he reinvested that money. With that cash, he bought the bargains of a lifetime in financial assets when no one else did, and few could.

Think about it: He became so successful, he switched from an illegal business to a legal one and even had a kid become President. He went from near-mob to a royal family.

I'm not telling you to break people's legs or start an illegal business venture to make money! I'm telling you how powerful a depression can be if you have the cash and cash flow to take advantage of it.

But cash isn't the only strategy the mob used. They also practiced the delicate art of consolidation. And they did it during a winter season, when market share shifts long-term to the largest and most efficient businesses (legal or illegal) while most fail.

Coming out of the Roaring '20s, the top crime boss in New York was Joe Masseria. For awhile, Lucky Luciano worked under him. But there was a new ruthless up-and-coming mob boss that came to America when Mussolini started locking up anyone even suspected of being in the mob in Italy.

In New York, Luciano "took care of" Masseria to get closer to the new rising boss - Salvatore Maranzano, from Sicily. And when Maranzano got greedy and refused to share the top spot as promised, Luciano killed him too. That's what I call consolidation!

With Meyer Lansky and his new mob family, Luciano became the "Godfather," or "boss-of-bosses" in New York... like Michael Corleone in the infamous Godfather movie (which, mind you, has facts mixed with some fiction, but it's characteristic over the same time period).

Luciano was driven by greed and power. But in practical terms, he consolidated his illegal industry during the most economically trying period of the 20th century.

That's not all - he created a new long-term mob empire and growth path for decades to follow, by being stronger when everyone else was getting weaker.

So what can you learn from this as we get closer and closer to the next great depression?

Sell financial assets, speculative real estate, and parts of your business you don't dominate now. Do it ahead of the next crash which could start as soon as this summer and accelerate in 2016.

In your business, focus on your strongest sectors. Now's the time to get lean and mean. Doing this should darn-near guarantee you'll survive and out-live your competitors. And you'll make money doing it, too - in the short term, but even more so over the long term.

There's an old joke: "If a bear is chasing you, you don't have to outrun the bear, just your friend." That's what the bear market and winter season is about - narrowing the economy down to the strongest and most efficient competitors.

Finally, do what you can now to protect your income and financial assets from rising taxes. They're sure to come, especially in the next two administrations.

One way to do that, is sell highly appreciated financial assets before the government raises capital gains taxes to ordinary rates. Those rates will only rise in the years ahead for the more affluent.

Our country is about to face some hard economic choices. Seeing them coming before they happen will help you protect your income, your retirement, and your cash. Rodney goes in depth into this in July's Boom & Bust, which we release Monday.

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How the mafia crushed it during the Great Depression

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Many people are aware that the mob made a fortune in illegal alcohol due to Prohibition in the Roaring '20s. But most aren't aware of how they made their greatest profits during the Great Depression: They became loan sharks. One of the rising mob bosses was "Lucky" Luciano in New York.

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This political cartoon is supposed to depict what taking a loan from a loan shark is like. The people who usually take these kinds of loans are people in financial emergencies or having issues. This is significant information because everyone who lived in America during the depression were in a financial emergency. This meant people were taking loans from loan sharks left and right.

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This infographic talks about the effects the depression had on money, debt, assets on interest rates. Assets/stocks go down, lose value, while cash is king and debt increases. Interest rates also increase, like the loan sharks loaning money to poor people during the depression. This was how things started to operate during the depression.

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This poem I wrote talks about how desperate the times were, how scarce money was, the mindset people had at the time. Anything they did was for just some extra cash for food, water, anything really. They were a glimmer of hope for them, or so they thought. They instead just gave you money, and then just took it back and then some when you couldn't pay it back.

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The darkest of times; No financial aid; Voiceless as mimes; Nothing for them to say; They question their choices; Why is this the path they find; Money is power; the mob has plenty; they control the time in a hour; Loans taken from them; too much to pay back; 20% rates giving them a heart attack; But it’s for their family; So maybe it’ll be helpful; Instead, it’s dreadful; Making them even more doubtful; Paying debts they can’t pay; They take your businesses; But you have no say; The darkest of times.

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This painting depicts what life was like during the depression. Is full of despair, darkness. People were in very rough times, making them more vulnerable. It was dirty, poor, and no one could do anything about it. The mob saw this, and used it to take advantage of people, and make even more money. They kept rich while making everyone else even more poor.

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This is a picture of “Lucky” Luciano, the largest mob boss in New York during the depression. He made lots of money by becoming a loan shark. He would loan people the money he got from bootlegging, since the banks couldn’t give loans, and then charge rates of 20% or so. These rates were basically unpayable, so he instead would go in and take money from these people's businesses instead.

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The videos I found are restricted, but this video in particular was very good. It basically was an older video in a documentary like fashion talking about crime during the great depression. It was very interesting to watch, and I learned a lot from it.

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Time To Remember -  The Tough Guys  1930s  - Reel 1 (1930-1939)