Friday, January 9, 8:30-10:15 am.
A discussion of the causes, short-term solutions, and longer-term implications of the current financial crisis.
Moderator: Theodore P. Seto (Loyola Law School – LA)
Speaker 1: Lauren E. Willis (Loyola Law School – LA): The Role of Mortgages
Professor Willis has written extensively on problems in the subprime mortgage market and consumer financial transaction regulation more generally. In speaking engagements in the U.S., the E.U., and South Africa, she has discussed regulation of the U.S. home mortgage market, predatory lending, financial literacy education, behavioral decisionmaking, and other consumer law topics. She was one of a select group of law professors that conferred with members of the Federal Reserve Board in crafting new mortgage regulations that will take effect in 2009. Before joining the Loyola Law faculty, she practiced at the Civil Rights Division of the U.S. Department of Justice, litigating lending discrimination matters.
Professor Willis will discuss the crisis at the retail level – the evolution from credit rationing to risk-based pricing of mortgages, the effects of risk-based pricing on consumers’ mortgage decisions, the financial and psychological antecedents of borrower demand for mortgages posing a high risk of foreclosure, and the marketing and sales practices that respond to and create that demand. She will further explain why prior law governing mortgage transactions and even law enacted to address subprime lending problems were ineffective.
Speaker 2: William K. Black (University of Missouri-Kansas City School of Law): The Role of Securitization and Financial Instruments
Professor Black is an Associate Professor of Economics and Law at UMKC. In October 2009, he testified before the relevant Senate committee on the role of financial derivatives in the ongoing crisis. Before joining the academy, he served as litigation director of the Federal Home Loan Bank Board, deputy director of the Federal Savings and Loan Insurance Corporation, Senior Vice President and General Counsel of the Federal Home Loan Bank of San Francisco, Senior Deputy Chief Counsel, Office of Thrift Supervision, and deputy director of the National Commission on Financial Institution Reform, Recovery and Enforcement. He is author of The Best Way to Rob a Bank is to Own One: How Corporate Executives and Politicians Looted the S&L Industry (University of Texas at Austin Press 2005), has written extensively on financial sector issues, and recently helped the World Bank develop an anti-corruption initiative.
Professor Black will cover the securitization of home mortgages and the development of derivatives that contributed to the financial crisis. He will describe the legal and regulatory actions that allowed for these developments and will explain why the securitization of heterogeneous subprime mortgages and the existence of an over-the-counter credit default swap market are fundamentally inconsistent with a stable financial system.
Speaker 3: Arthur E. Wilmarth, Jr. (George Washington University Law School): The Role of Financial Regulation
Professor Wilmarth is chair of the AALS Section on Financial Institutions and Consumer Financial Services and a member of the editorial board of the Journal of Banking Regulation. He has authored numerous articles in the fields of banking law and American constitutional history and co-authored a book on corporate law. In 2005, the American College of Consumer Financial Services Lawyers awarded him its prize for the best law review article published in the field of consumer financial services law during the previous year. He has testified before committees of the U.S. Congress, the California legislature, and the D.C. Council on bank regulatory issues.
Professor Wilmarth will speak on the role of large financial conglomerates and the failure of the various regulators (especially the OCC, the OTS, the Fed and the SEC) to control the risk-taking of those conglomerates. He will cover the failure of capital regulation and the evident failure of on-site examination teams at major financial institutions.