Document Type
Article
Comments
This article predates Prof. Reiss's affiliation with Cornell Law School. It appeared in published form in: BNA Criminal Law Reporter (Mar. 20, 2013).
Abstract
When finance professionals play fast and loose, big problems result. Indeed, the 2008 Financial Crisis resulted from people in the real estate finance industry ignoring underwriting criteria for mortgages and structural finance products. That malfeasance filled the financial markets with mortgage-backed securities (MBS) that were worth a small fraction of the amount issuers represented to investors. It also loaded borrowers with liabilities that they never had a chance to satisfy.
Despite all the wrongdoing that caused the financial crisis, prosecutors have been slow to bring charges against individuals who originated bad loans, pooled bad mortgages, and sold bad MBS. Unfortunately, the lack of individual prosecutions signals to participants of the financial industry that wrongdoing not only will go unpunished but will likely even be rewarded financially. Without criminal liability, we risk a repeat of the type of conduct that brought us to the edge of financial ruin.
Date of Authorship for this Version
2013
Keywords
Global Financial Crisis, 2008-2009, Financial fraud, Mortgage-backed securities. REMIC, Prosecutorial discretion
Recommended Citation
Borden, Bradley T. and Reiss, David J., "Cleaning Up the Financial Crisis of 2008: Prosecutorial Discretion or Prosecutorial Abdication?" (2013). Cornell Law Faculty Working Papers. 166.
https://scholarship.law.cornell.edu/clsops_papers/166