February 5, 2009
How We Were Ruined: On the Financial Industry Meltdown and How Lawyers Enabled It
In the New York Review of Books, Jeff Madrick provides an excellent analysis and commentary of the current financial crisis using Charles Morris' The Trillion Dollar Meltdown: Easy Money, High Rollers, and the Great Credit Crash, Mark Zandi's Financial Shock: A 360° Look at the Subprime Mortgage Implosion, and How to Avoid the Next Financial Crisis, and the New York Times series of articles titled The Reckoning as springboards for his thoughts. Very insightful.
Terry Carter covers the legal profession's contribution to the financial crisis in the ABA Journal article How Lawyers Enabled The Meltdown And How They Might Have Prevented It. Carter's article opens with the following:
In the game of blame that followed the deepest financial implosion since the Great Depression, bankers and money managers have borne their share of attention. But how much blame should lawyers bear? Plenty.
As legislators, they helped remove restrictions on commercial banks that allowed them to get involved with subprime mortgage-backed securities.
As regulators, they allowed leverage at investment banks to increase largely unchecked. As judges, they made it harder for shareholders to bring suits to stop the financial shenanigans.
As counsel, their legal opinions gave sanction to deals that, in the words of the analysts behind them, “could have been structured by cows.”
There were also lawyers who did their jobs, only to find their voices lost in torrents of money, rationalization or plainspoken hostility toward the rule of regulation.
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