Law Commons^™

The Emperor's New Loans: A Cautionary Tale From The Subprime Era, David J. Reiss

David J Reiss

A body of folk tales from the subprime mortgage era is now being written. Some are in PowerPoint. Some are in video format. Some appear in the guise of a non-fiction account. After all, isn’t The Big Short just Jack the Giant Slayer —with the little guys not only ending up with the gold, but also with the big guys dead on the ground? And some stories are just plain old fairy tales like the one contained herein. You might ask why a complex financial crisis needs such folk tales. And I would tell you that they are necessary because …

Consumer Protection Out Of The Shadows Of Shadow Banking: The Role Of The Consumer Financial Protection Bureau, David J. Reiss

David J Reiss

Consumer protection remains the stepchild of financial regulation. Notwithstanding the fact that the economic doldrums we find ourselves in originated in the under-regulated subprime mortgage sector, relatively few academic commentators focus on the role that consumer protection can play in reducing such risks as well as in restoring the balance between consumer and producer in the financial markets. This essay suggests that consumer protection regulation has an important role to play in the regulatory structure of the shadow banking sector.

This essay does four things. First, it describes the role of shadow banking in the residential mortgage market—the shadow mortgage …

Learning From Financial History: An Academic Never Forgets, David J. Reiss

David J Reiss

Those with short-term memories have been dominating our debate over the future of the Consumer Financial Protection Bureau. They argue that the financial industry has learned its lesson and they point to a more rational marketplace today. But the Bureau was designed to regulate the subprime mortgage market and other consumer credit markets through the credit cycle. A strong Bureau should be built today to deal with the inevitable irrational exuberance of lenders and consumers once the cycle rises from its current depths to the heights of tomorrow.

Book Review: The Subprime Virus: Reckless Credit, Regulatory Failure, And Next Steps, David J. Reiss

David J Reiss

John Godfrey Saxe’s 19th century poem, “The Blind Men and the Elephant,” opens with six learned men

Who went to see the Elephant

(Though all of them were blind),

That each by observation

Might satisfy his mind.

The financial crisis is the Elephant of our time. Over the last couple of years, more than six wise men and women have written books purporting to explain the financial crisis and many more such books are surely in the works. Most of these wise ones suffer from the same limitations as the poem’s learned men. As each reaches out, he or she …

Book Review: Dan Immergluck, Foreclosed: High-Risk Lending, Deregulation, And The Undermining Of America’S Mortgage Market, David J. Reiss

David J Reiss

This is a book review of Dan Immergluck, FORECLOSED: HIGH-RISK LENDING, DEREGULATION, AND THE UNDERMINING OF AMERICA’S MORTGAGE MARKET (Cornell University Press 2009).

The Federal Government’S Implied Guarantee Of Fannie Mae And Freddie Mac’S Obligations: Uncle Sam Will Pick Up The Tab, David J. Reiss

David J Reiss

This article provides the most comprehensive statutory analysis to date of the federal government’s implied guarantee of Fannie Mae and Freddie Mac’s financial obligations. Fannie and Freddie together have $4.45 trillion in mortgage-related obligations. The magnitude of their obligations can only be understood in comparison to the amount of outstanding U.S. government debt -- $5.04 trillion. Given the ongoing meltdown of the residential mortgage market, it is important that the implied guarantee be understood for what it is, a contingent liability of the federal government. After explaining the nature of the implied guarantee and the risks that it poses, the …