Pride and Prejudice in Securitization: A Reply to Professor Plank
23 Pages Posted: 4 Mar 2009 Last revised: 14 Jun 2015
Date Written: 2009
Kenneth C. Kettering, Securitization and Its Discontents: The Dynamics of Financial Product Development, 29 Cardozo L. Rev. 1553 (2008), explores the processes by which new financial products, having legal underpinnings that suffer from the uncertainties that attach to innovation, come to take root and shape the law to accommodate their existence. The product that is the main reference point for that exploration is securitization, and so a subsidiary theme of the article is analysis of the weaknesses of the legal foundations of that product, including its exposure to attack on theories of fraudulent transfer and substantive consolidation. Thomas E. Plank, Sense and Sensibility in Securitization: A Prudent Legal Structure and a Fanciful Critique, 30 Cardozo L. Rev. 617 (2008), takes issue with that analysis. This paper replies to Plank's critique.
Keywords: securitization, structured finance, fraudulent conveyance, fraudulent transfer, substantive consolidation, secured transaction, security interest, too big to fail, repurchase agreement, repo, derivatives, rating agency, credit rating agency, standby letter of credit, financial products
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