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Who Were the Villains in the Subprime Crisis, and Why it Matters

Ohio Entrepreneurial Business Law Journal, Vol. 4, p. 323, 2010

Minnesota Legal Studies Research Serioes 10-21

29 Pages Posted: 2 Apr 2010 Last revised: 15 Apr 2010

Claire A. Hill

University of Minnesota Law School

Date Written: February 1, 2010

Abstract

This essay argues for the necessity of dealing with the market actors involved in the financial crisis - actors who committed no crimes, and cannot appropriately be demonized or viewed simply as bad agents making decisions in their short term interest but against their principals’ interests. Without these actors the crisis would not have occurred. It is therefore critical to try to understand why they acted as they did in this case, and how their behavior might be influenced to minimize the chance of future crises. To that end, this essay provides an account of the mindset of market actors other than “villainous” ones, and considers in broad brush what sorts of mechanisms might be employed to affect such actors’ behaviors in ways that might make crises less likely.

Keywords: financial crisis, subprime mortgage securities

JEL Classification: D83, K22

Suggested Citation

Hill, Claire A., Who Were the Villains in the Subprime Crisis, and Why it Matters (February 1, 2010). Ohio Entrepreneurial Business Law Journal, Vol. 4, p. 323, 2010; Minnesota Legal Studies Research Serioes 10-21. Available at SSRN: https://ssrn.com/abstract=1582641

Claire Ariane Hill (Contact Author)

University of Minnesota Law School ( email )

229 19th Avenue South
Minneapolis, MN 55455
United States
612-624-6521 (Phone)

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