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Perverse Incentives: Risk Taking And Reform, Aaron J. Unterman
Perverse Incentives: Risk Taking And Reform, Aaron J. Unterman
Aaron J. Unterman
The common theme that ties the financial crisis (and this article) together is one of misguided incentives that pervaded the finance industry and perverted the actions of individuals and institutions resulting in a global crisis with severely deleterious social effects. In the world of finance, the greatest way to achieve a dramatic increase in wealth is to take large risks, of course, this is also the easiest way to lose it. A great deal of the so-called financial innovation that we experienced preceding the crisis was devoted to finding ways to take on as much risk as possible. The rise …
Innovative Destruction: Structured Finance & Credit Market Reform In The Bubble Era, Aaron J. Unterman
Innovative Destruction: Structured Finance & Credit Market Reform In The Bubble Era, Aaron J. Unterman
Aaron J. Unterman
The combination of unregulated financial innovation and human greed has, and will continue to have, dire effects on the international economy. The financial crisis which began in the American sub-prime housing market, and spread across the globe, has devastated the structured finance industry and cast doubts on the new era of credit risk transfer, which had come to represent the achievements of financial innovation. This paper explores the role structured finance played in the credit crisis, dissecting the complex instruments which drove the industry and allowed the American sub-prime housing market to infect the international economy. This paper argues that …
Exporting Risk: Global Implications Of The Securitization Of Us Housing Debt, Aaron J. Unterman
Exporting Risk: Global Implications Of The Securitization Of Us Housing Debt, Aaron J. Unterman
Aaron J. Unterman
The process of securitization has revolutionized the global debt market creating vast investment opportunities while fundamentally altering the dynamics of lending risk. Asset securitization allows risks to be transferred from mortgage lenders to investors through the sale of mortgage-backed securities. This detachment of risk has led to a lack of accountability within the industry and the creation of the infamous US sub prime mortgage market. This piece examines the effect of securitization on the international capital market focusing on the legal and economic implications of the rise and fall of the US housing market. It argues that this failure is …