Banking and finance roundup

by Walter Olson on December 20, 2013

  • Presumed-reliance (“fraud on the market”) theories, which SCOTUS is likely to reconsider in Halliburton, aren’t just confined to securities litigation, but crop up in various other areas of litigation including third-party payer drug suits [Beck, Drug and Device Law; more background]
  • Why restrict alienability?, pt. CLXXI: Neil Sobol, “Protecting Consumers from Zombie-Debt Collectors” [NMLR/SSRN]
  • Will Congress step in to curtail fad for eminent domain municipal seizure of mortgages? [Kevin Funnell, earlier here and here]
  • More commentary on J.P. Morgan settlement [Daniel Fisher, Michael Greve, earlier here, here, and here]
  • Judge Jed Rakoff: Why have no high level execs been prosecuted over financial crisis? [Columbia Law School Blue Sky Blog]
  • Treasury Department’s Financial Stability Oversight Council (FSOC) turns its sights to investment advisers. The logic being…? [Louise Bennetts, Cato/PJ Media]
  • Property-casualty insurer association challenges new HUD disparate-impact rules [Cook County Record]

{ 3 comments }

1 William Nuesslein 12.20.13 at 11:11 am

Judge Jed Rakoff doesn’t know what he is talking about. The give away was his stating that Jeff Skilling did something wrong just because the man was convicted by community madness.

The testimony to the Financial Crises Inquiry Commission howed banks hiring the best in the business risk managers and high quality management to gain control of the out of control mortgage generators in California.

What went wrong? The mathematics behind most calculations of risks assume independence. Life Insurance policies work because my getting hit be a truck doesn’t affect the chance of you getting hit by a bus. Once doubt hits a market, the last one out of the door is a loser.

The core problem is that the capacity for saving is limited by investment opportunities. An aging world workforce was trying to save for retirement. Demand for ownership drove up asset values for a while until it became clear that the assets were overpriced. Why did all the PhDs in Economics fail us so badly?

2 Boblipton 12.20.13 at 11:51 pm

No high-ranking banking executive has been convicted? There are two obvious solutions:

1: No high-ranking banking executive committed a crime. I find this contrary to reason, since everyone commits crimes, even if they are misdemeanors like crossing the street against the light. However, having learned some remarkable facts in the course of the banking crisis, like the existence of predatory lenders and how an applicant for a loan lying on the application is a crime by the lender; and that the Royal Bank of Scotland was financially unsophisticated…. well, the idea that high-ranking banking executives are to a man paragons of legal virtue is no more remarkable. Otherwise you could get them on not paying their parking tickets or something.

2: That sufficiently skilled defense lawyers with enough money can thwart the prosecution. Again, an article of faith: the lawyers who work as public defenders are incompetent hacks who get beat up by the mediocre governmental lawyers (Jack McCoy excepted), who are beat up, in turn, by those wily white-shoe lawyers.

3: that they didn’t commit any acts that were crimes at the time. Again, as an article of faith, this is ridiculous. We hates them, precious, so they must all be crooks. Q.E.D.

Bob

3 William Nuesslein 12.21.13 at 9:57 am

I reply to Bob Lipton’s comment There were valid studies that showed FICO scores were the best predictors of payment risk. So wage information added little value in underwriting. And there was foreclosure to claw back the mortgage loan if neccessary, and house prices were rising. The situation was sound even with some decline in values of houses. The financial crisis was not due to fools and crooks. As Chairman Greenspan points out regulation did not require a prudent level of reserves. In fact AIG sold tons of an insurance type product with no reserves at all. Mr. Greenberg had nothing to do with that, as the sheriff of Wall Street, Eliot Spitzer, forced out Greenberg. The black hgat character most responsible for trhe crises was Eliot Spitzer. But even if Spitzer had never been born (Devotedly to be wished.), the fact that saving possibilities are limited would apply.

By the way, the reason why Social Security is essentially pay as you go is that the entire value of the United States would be in the Social Security fund if Social Security were funded as a typical corporate defined benefit plan.

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