Copyright (c) 2009 All rights reserved. http://works.bepress.com/david_reiss Recent documents in David J Reiss en-us Wed, 21 Oct 2009 09:07:32 PDT 3600 http://works.bepress.com/david_reiss/34 http://works.bepress.com/david_reiss/34 Fri, 25 Sep 2009 13:06:44 PDT This is a book review of Dan Immergluck, FORECLOSED: HIGH-RISK LENDING, DEREGULATION, AND THE UNDERMINING OF AMERICA'S MORTGAGE MARKET (Cornell University Press 2009). David J. Reiss Banking and Finance Property-Personal and Real Housing Law Consumer Protection Law Securities Law Housing Finance http://works.bepress.com/david_reiss/33 http://works.bepress.com/david_reiss/33 Thu, 23 Jul 2009 06:59:45 PDT This book chapter explores how the three largest rating agencies, Standard & Poor's, Moody's Investor Service and Fitch Ratings, exploited their privileged regulatory status to profit from the booming subprime mortgage market at the expense of homeowners. These rating agencies boosted their own bottom lines and assisted predatory lenders by effectively vetoing state consumer protection initiatives. While regulators have identified enhanced investor protection regulation of credit rating agencies as a priority, future regulation must ensure that the systemic biases of the rating agency industry are no longer permitted to trump legitimate state consumer protection initiatives. David J. Reiss http://works.bepress.com/david_reiss/32 http://works.bepress.com/david_reiss/32 Thu, 23 Jul 2009 06:54:06 PDT This book chapter describes the role of Fannie Mae and Freddie Mac in the ongoing financial crisis. The chapter first explains the hybrid public-private nature of Fannie and Freddie, which are what is known as Government Sponsored Enterprises (GSEs). Fannie and Freddie were originally chartered by the federal government to create a national mortgage market. The chapter then explains how the two GSEs morphed into extraordinarily large companies that profited enormously from their special relationship with the federal government, while providing only modest benefits to American homeowners. In what turned out to be a disastrous trade-off for American taxpayers, Fannie and Freddie ended up needing a bailout measured in the hundreds of billions of dollars. Ultimately, Fannie and Freddie exhibited the common failings of poor GSE design--after fulfilling their original purpose, they took on monstrously large lives of their own that defied political oversight. The chapter concludes that Fannie and Freddie should be privatized, with their remaining public functions assumed by pure government actors. David J. Reiss http://works.bepress.com/david_reiss/31 http://works.bepress.com/david_reiss/31 Wed, 24 Jun 2009 09:00:21 PDT This brief article reviews the various policies that the Obama Administration can choose from as it considers how Fannie Mae and Freddie Mac should exit conservatorship. It first reviews the benefits and costs associated with the two companies. It then reviews four broad positions regarding the appropriate role of Fannie and Freddie in the housing finance market. It argues that the two companies should be privatized because Fannie and Freddie pose a systemic risk to the financial system, unfairly benefit from their regulatory privilege and do not create net benefits for the American people. Finally, it reviews four concrete plans to fundamentally change Fannie and Freddie's structure, each involving different degrees of government involvement. It concludes that the two companies should be converted into generic financial holding companies and their public functions be reassigned to various federal instrumentalities. David J. Reiss http://works.bepress.com/david_reiss/30 http://works.bepress.com/david_reiss/30 Tue, 16 Jun 2009 12:51:56 PDT David J. Reiss http://works.bepress.com/david_reiss/29 http://works.bepress.com/david_reiss/29 Thu, 16 Apr 2009 09:15:38 PDT David J. Reiss http://works.bepress.com/david_reiss/28 http://works.bepress.com/david_reiss/28 Wed, 01 Apr 2009 13:20:45 PDT David J. Reiss http://works.bepress.com/david_reiss/27 http://works.bepress.com/david_reiss/27 Tue, 17 Mar 2009 08:41:51 PDT This essay is a lightly-edited version of a talk given at the University of Maryland School of Law and the Journal of Business & Technology Law's Conference on the Subprime Meltdown in October 2008. It briefly reviews the reputational risk literature and applies it to the rating agency industry. In particular, it looks at three of the inputs into reputation - trust, transparency, and leadership - and evaluates how rating agencies fared in the period leading up to the subprime meltdown. It concludes that rating agencies did poorly when it came to all three of these reputational inputs. David J. Reiss http://works.bepress.com/david_reiss/25 http://works.bepress.com/david_reiss/25 Wed, 04 Mar 2009 09:16:10 PST The federal government recently placed Fannie Mae and Freddie Mac, the government-chartered, privately owned mortgage finance companies, in conservatorship. These two massive companies are profit-driven, but as government-sponsored enterprises they also have a government-mandated mission to provide liquidity and stability to the United States mortgage market and to achieve certain affordable housing goals. How the two companies should exit their conservatorship has implications that reach throughout the global financial markets and are of key importance to the future of American housing finance policy. While the American taxpayer will be required to fund a bailout of the two companies that will be measured in the hundreds of billions of dollars, the current state of affairs presents an opportunity to reform the two companies and the manner in which the residential mortgage market is structured. Few scholars, however, have provided a framework in which to conceptualize the possibilities for reform. This Article employs regulatory theory to construct such a framework. A critical insight of this body of literature is that regulatory privilege should be presumed to be inconsistent with a competitive market, unless proven otherwise. The federal government's special treatment of Fannie and Freddie is an extraordinary regulatory privilege in terms of its absolute value, its impact on its competitors and its cost to the federal government. Regulatory theory thereby clarifies how Fannie and Freddie have relied upon their hybrid public/private structure to obtain and protect economic rents at the expense of taxpayers as well as Fannie and Freddie's competitors.Once analyzed in the context of regulatory theory, Fannie and Freddie's future seems clear. They should be privatized so that they can compete on an even playing field with other financial institutions and their public functions should be assumed by pure government actors. While this is a radical solution and one that would have been considered politically naïve until the recent credit crisis, it is now a serious option that should garner additional attention once its rationale is set forth. David J. Reiss Banking and Finance Consumer Protection Law Housing Law Law and Economics Legislation Property-Personal and Real Secured Transactions http://works.bepress.com/david_reiss/24 http://works.bepress.com/david_reiss/24 Tue, 23 Dec 2008 08:53:17 PST David J. Reiss