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Have US Regulators Been Soft on Banks Over Structured Products? Yes

International Finance Law Review, Vol. 13, July 2006

7 Pages Posted: 18 Dec 2009  

George M. Cohen

University of Virginia School of Law

David A. Dana

Northwestern University - Pritzker School of Law

Susan P. Koniak

Boston University School of Law

Thomas Ross

University of Pittsburgh

Date Written: June 2, 2006

Abstract

This article was originally written as a comment on the proposed Interagency Statement on Sound Practices Concerning Elevated Risk Complex Structured Finance Activities, 71 Fed. Reg. 28329 (May 16, 2006). The statement is Interagency Statement is a joint effort of all the federal agencies having a role in the regulation of financial institutions, including the SEC, FDIC, Federal Reserve, OTS, and the Comptroller of the Currency. The comment argues that the proposed Interagency Statement is a mistake and should be withdrawn because in its current form, it can be (and we think will be) read to encourage and condone illegal conduct. The proposed Interagency Statement gives financial institutions too much discretion to determine which “complex structured finance transactions” (CSFT) pose the problem of “elevated risk.” More troubling, the Statement provides a list of transaction characteristics that “may . . . warrant additional scrutiny” without recognizing or emphasizing that all of the characteristics are strongly indicative of potential fraud which in our view invites reckless participation in illegal conduct, either as a primary wrongdoer or as an aider and abetter.

Keywords: structured finance, banks, financial regulation, aiding and abetting, corporate fraud, Enron, Central Bank

Suggested Citation

Cohen, George M. and Dana, David A. and Koniak, Susan P. and Ross, Thomas, Have US Regulators Been Soft on Banks Over Structured Products? Yes (June 2, 2006). International Finance Law Review, Vol. 13, July 2006. Available at SSRN: https://ssrn.com/abstract=1523712

George M. Cohen (Contact Author)

University of Virginia School of Law ( email )

580 Massie Road
Charlottesville, VA 22903
United States
(804) 924-3814 (Phone)
(804) 982-2079 (Fax)

David A. Dana

Northwestern University - Pritzker School of Law ( email )

375 E. Chicago Ave
Chicago, IL 60611
United States
312-503-0240 (Phone)
312-503-2035 (Fax)

Susan P. Koniak

Boston University School of Law ( email )

765 Commonwealth Avenue
Boston, MA 02215
United States
617-353-3136 (Phone)
617-353-3077 (Fax)

Thomas Ross

University of Pittsburgh ( email )

Pittsburgh, PA 15260
United States

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