Review of Banking and Financial Law
We may finally be emerging from a "Great Recession." But the economy remains quite fragile. What bankers did was an important cause of the recession. They structured, sold and bought "toxic" securities, taking excessive risks with other people's money. Sometimes they did so recklessly, because they did not sufficiently understand the securities. Other times, they did understand the securities, and sold them to those who didn't, sometimes omitting much relevant information. Some evidence suggests that bankers knew the quality of mortgages being securitized was plummeting; indeed, given the dramatically increasing volume of mortgages being securitized, they had to at least suspect significant declines in quality. They also knew, or should have known, that the huge volume of mortgages being made could be having broader effects, including enormous and probably unsustainable housing price inflation. And they engaged in other problematic behavior, including the use, for themselves and for their clients, of techniques designed to conceal debt and otherwise improve financial appearance.
Claire Hill, Bankers Behaving Badly? The Limits of Regulatory Reform, 31 Rev. Banking & Fin. L. 675 (2012), available at http://scholarship.law.umn.edu/faculty_articles/111.