THE REGULATION OF STRUCTURED DEBTS: WHY? WHAT? AND HOW?
In: Southern California Interdisciplinary Law Journal, Jg. 19 (2010-04-01), S. 443
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Zugriff:
I. INTRODUCTION It is quite well known that the world in 2008, and the first half of 2009, experienced the onset of the worst economic recession since the 1930s. This recession was brought about by a financial tsunami, the center of which was somewhere on Wall Street, wherein several large investment banks faced a serious financial crisis in the latter half of 2008. Moreover, most people know that the crisis of these investment banks was related to the collapse of widespread structured debt financing. Because structured debt financing has been identified as the number one culprit of the current recession, there have been many suggestions and much discussion concerning the future regulation of structured debt financing. This Article contributes to the legal theoretical foundation of such regulations. We shall first anatomize the most typical kind of structured debt, the collateralized debt obligation ("CDO"). We analyze the similarity between a CDO and a constructed pledged mortgage, point out the embedded fuzzy information behind this structured mortgage, and then identify the implicit externality of this mortgage construction. We argue that the feature of prioritization associated with the structured debt makes the disclosure of CDO information intrinsically difficult - if not impossible, and the externality of it suggests room for government intervention. Most existing literature has emphasized the moral hazard problem of investment banks which packaged and sold these structured products. The implications are naturally to increase the capital adequacy ratio, and to impose partial liability on the banks in the ...
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THE REGULATION OF STRUCTURED DEBTS: WHY? WHAT? AND HOW?
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Autor/in / Beteiligte Person: | Chu, C. Y. Cyrus |
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Zeitschrift: | Southern California Interdisciplinary Law Journal, Jg. 19 (2010-04-01), S. 443 |
Veröffentlichung: | 2010 |
Medientyp: | academicJournal |
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