Law Commons^™

Predatory Structured Finance, Christopher L. Peterson

ExpressO

Predatory lending is a real, pervasive, and destructive problem as demonstrated by record settlements, jury awards, media exposes, and a large body of empirical scholarship. Currently the national debate over predatory mortgage lending is shifting to the controversial question of who should bear liability for predatory lending practices. In today’s subprime mortgage market, originators and brokers quickly assign home loans through a complex and opaque series of transactions involving as many as a dozen different strategically organized companies. Loans are typically transferred into large pools, and then income from those loans is “structured” to appeal to different types of investors. …

Finding Nemo: Rediscovering The Virtues Of Negotiability In The Wake Of Enron, Adam J. Levitin

ExpressO

Creditors have long understood that any claims they submit for repayment in a bankruptcy might be valid, but subject to subordination in the order of payment of the bankruptcy estate’s limited funds if the creditor behaved inequitably as the debtor failed. A groundbreaking opinion in Enron’s on-going bankruptcy has expanded the practice of equitable subordination far beyond its traditional reach. According to the court, buyers of bankruptcy claims are now subject to subordination, not just for their own conduct, but also for conduct of previous owners of the claims, regardless of whether the conduct related to the claims.

In a …

U.S. Corporate And Bank Insolvency Regimes: A Comparison And Evaluation, Robert R. Bliss, George G. Kaufman

ExpressO

In the U.S., the insolvency resolution of most corporations is governed by the federal bankruptcy code and is administered by special bankruptcy courts. Most large corporate bankruptcies are resolved under Chapter 11 reorganization proceedings. However, commercial bank insolvencies are governed by the Federal Deposit Insurance Act and are administered by the FDIC. These two resolution processes—corporate bankruptcy and bank receiverships—differ in a number of significant ways, including the type of proceeding (judicial versus administrative); the rights of managers, stockholders and creditors in the proceedings; the explicit and implicit goals of the resolution; the prioritization of creditors’ claims; the costs of …

Corporate Form And Substantive Consolidation, William H. Widen

ExpressO

This Article reformulates substantive consolidation doctrine in light of modern financing techniques. Building upon the author's research showing the prevalence of substantive consolidation in large public bankruptcies, it offers an economic account (based on Coase's theory of firm size) to explain why we should expect that the circumstances giving rise to substantive consolidation should be common (rather than rare as suggested by the rhetoric of case law). Extending the asset partitioning theory developed by Professors Hannsmann and Kraakman, it offers a model for looking at the corporate form within corporate groups, particularly in the insolvency context. The recent Third Circuit …