Payday Lenders: Luring the Elderly into the Debt Trap

by Yuri Kim February 27 2008, 02:49
I. Introduction



During the past few months, the credit crunch has spread to all areas of the credit market, including: commercial real estate mortgages, student loans, and even auction-rate securities that are considered as safe as cash.[1] In attempt to prevent further loss, many lending industries have tightened lending standards to the extend that some consumers have found obtaining a loan or even a credit card more difficult.[2] At a time where borrowing money has become harder, people with bad credit and low income are flocking to lenders that are willing to fill their wallets with no questions asked. The “payday” loan industry is growing rapidly and is known for its quick and easy lending.[3] Although the quick and easy money may seem attractive, the outrageously high interest rates are leading payday loan users into an inescapable debt trap.[4] Aside from high interest rates, another critical problem surrounding the payday loan industry is its practice of targeting the elderly and other recipients of government benefits.[5] The elderly falling victim to these predatory lenders has only grown over the years, and this exploitation calls the need for regulation and strict enforcement.

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USA PATRIOT Act, Title III: The Efficacy of Anti-Terrorism Financing Measures

by Daniel Lohse February 11 2008, 09:01
I. USA PATRIOT Act, Title III



On October 23, 2001 President George W. Bush signed into law the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 ("USA PATRIOT Act," or "Patriot Act"). [1] Since its enactment in 2001 and subsequent partial reauthorization in 2005, many financial institutions have struggled with the high cost of complying with Title III of the Patriot act and the stiff civil and criminal penalties for those who fail to comport to its requirements. [2] The Act's adoption of an expansive definition of the phrase "financial institution" has increased its range of regulation with portions of the Patriot Act affecting a profusion of entities ranging from commercial banks to travel agencies to casinos. [3]

Of primary concern for financial institutions is Title III of the Patriot Act, the International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001 ("Title III"). [4] Title III substantially amends the Bank Secrecy Act of 1970 ("BSA") by enhancing reporting obligations, toughening standards for transaction structuring, and requiring the implementation and oversight of customer identification and anti-money laundering programs. [5] While Title III has certainly increased law enforcement's ability to investigate the records of individuals and organizations suspected of financing terrorist organizations, its capacity to thwart an attack similar to the disaster of September 11, 2001 is debatable. [More]

Release the Hounds: NY Attorney General's Office Pursues Wall Street (Again)

by Scott B. Wilson February 7 2008, 23:24
   As common as it is to find thin greasy pizza in Brooklyn, it is just as common to hear that the New York Attorney General's office is launching a zealous high-profile prosecution of Wall Street. One need only whisper the name "Spitzer" in lower Manhattan to receive a response of colorful epithets and conjure up a regime that has been described as, "the most egregious and unacceptable form of intimidation we've seen in this country in modern times."[1] That is quite a statement considering some of the actions undertaken by the U.S. Justice Department in recent years. However, Mr. Spitzer is safely ensconced in the N.Y. Governor's office; are not the days of feasting on Wall Street over? Not so fast, this past week current Attorney General Andrew Cuomo's office indicated it will pursue firms suspected of "mortgage abuses" linked to the national subprime mortgage fiasco.[2] This article will explore the legal and substantive basis of the AG's interest in these Wall Street firms.     During the week of January 27, 2008, the New York Attorney General's Office issued subpoenas to at least a half-dozen Wall Street financial firms concerning their possible involvement in securities fraud.[3] Specifically, the subpoenas are issued under the Martin Act of 1921 in order to gather information into whether these firms intentionally disregarded warnings indicating that some of the home mortgage loans that the firms repackaged as securities were in fact bad.[4] The subpoenas are a culmination of an inquiry that began last summer[5] and was given a recent push after a participant agreed to cooperate with NY authorities.[6] The Connecticut-based home loan reviewer Clayton Holdings Inc. agreed to provide important documents and testimony of key officials pertinent to its involvement with the Wall Street firms.[7]     Clayton Holdings is a home mortgage vetting firm that reviewed thousands of loans for investment banks over the past few years. New York officials are specifically looking for key disclosures concerning certain "exception" loans that these Wall Street firms accepted and later collateralized.[8] "Exceptions" are loans that do not even meet minimum lending standards.[9] NY officials are concerned that Clayton's disclosures will reveal that such exceptions, "accounted for a 'significant' or 'substantial' portion of the loans contained in the securities" that the Wall Street firms created.[10] What made the exception loans attractive to Wall Street firms is that such low grade loans could often be purchased at discount rates, which potentially increased their margins once the loans were collateralized into high-rated securities.[11]     Consequently, since the Wall Street firms did not regard the exceptions when collateralizing the loans, Moody's and Fitch claim they were not privy to this crucial information when gave the securities triple-A ratings.[12] The subtle implicit allegation is that the Wall Street firms concealed from the credit-rating firms Clayton's due-diligence reports concerning the exceptions, "in a bid to bolster ratings of mortgage securities and make them more attractive to buyers...which often required AAA...ratings on potential investments in securities containing risky mortgages."[13]     To be sure, New York is not the only state curious about Wall Street's mortgage re-packaging deals; other states such as Florida, California, and Illinois have launched their own investigations through their particular attorneys general.[14] The F.B.I. has even opened a very broad inquiry into possible accounting fraud, insider trading, and other violations concerning subprime loans made to risky mortgagors.[15] However, what distinguishes these investigations from the NY AG's inquiry is that it was made pursuant to the Martin Act of 1921.[16]      The Martin Act was enacted in 1921 in order to punish securities fraud and is regarded as one of most "potent" legal tools in the nation.[17] The Act's potency is provided by its broad scope as well as providing the NY AG with muscular enforcement and investigative powers unparalleled at the federal level.[18] In fact, prior to 2001, the AG used the Martin Act to ferret out low-level "boiler-room frauds" involving small time individual defendants while, "It was generally acknowledged within the securities industry and the law enforcement community that the SEC, the NASD and the US Department of Justice had primary responsibility for securities regulation and enforcement."[19] That understanding drastically changed with the combination of an aggressive AG by the name of Elliot Spitzer and the high profile corporate financial frauds that began in late 2001 and early 2002.[20]     Mr. Spitzer used his enforcement powers under the Martin Act to take on big financial industry players, such as Merrill Lynch, to obtain eventual settlements because of their involvement with various securities frauds.[21] Some of the powers afforded to the AG under the Martin Act include authorizing the AG to commence an investigation on the basis of suspected "fraudulent practices" related to "the advertisement, investment advice, purchase or sale" of securities within New York state.[22] Moreover, the definition of "fraudulent practices" is much broader than the definition under federal securities laws[23]; the former definition encompasses, "devices, schemes, artifices, fictitious or pretended purchases or sales of securities or commodities, deceptions, misrepresentations, concealments, suppressions, frauds, false pretenses, false promises, practices, transactions and courses of business..."[24]     Additionally, a defendant does not need to purchase or sell actual securities to be found liable, which is also a much broader provision than under the federal securities laws.[25] Further, the Martin Act does not require "proof of intent to defraud, reliance, or damages" to establish misdemeanor liability; felony liability does require proof of intent but not customer reliance.[26] Unlike the SEC, which only possesses civil litigation powers, the Martin Act empowers the NY AG with both civil and criminal enforcement authority.[27] For instance, the NY AG can state a claim seeking full restitution on behalf of defrauded investors, which is a power federal prosecutors do not possess except upon a conviction or guilty plea.[28]     It is unclear whether the most recent subpoenas issued by the NY AG's office to several Wall Street firms relate to either criminal or civil matters.[29] Nevertheless, subpoenaed firms including Bear Stearns Cos., Deutsche Bank AG, Morgan Stanley, Merrill Lynch & Co., and Lehman Brothers[30], face an AG's office that is empowered under the Martin Act with strong investigative and evidentiary compulsion powers. For instance, in a procedure known as a "Martin Act hearing", the AG can "subpoena witnesses, examine them under oath, and compel the production of any relevant documents...[and] failure to comply with a Martin Act subpoena constitutes a misdemeanor."[31] Further, if for instance Merrill fails to comply with the subpoena, it "constitutes prima facie proof that the defendant has engaged in the suspected fraudulent activities and, standing alone, can provide the basis for a permanent injunction order."[32]     Wall Street doubtless knows the Martin Act practices and procedures all too well after seven years with Eliot Spitzer at the helm. More specifically, the Street firms are pointedly aware of the broad scope and investigative authority provided to the attorney general's office. However, with Spitzer now gone and a new high-profile controversy embroiling Wall Street (this time involving subprime debt collateralization), it will be interesting to see how NY Attorney General Cuomo uses his Martin Act powers to ferret out cases of securities fraud. [1] U.S. Group is Taking on Spitzer, INT'L HERALD TRIB., January 6, 2005, http://www.iht.com/articles/2005/01/05/business/spitzer.php. [2] Kate Kelly et al., State Subprime Probe Takes a New Tack, WALL ST. J., January 31, 2008, at A3, available at http://online.wsj.com/article/SB120173938230430417.html. [3] Id. [4] Id. [5] Vikas Bajaj & Jenny Anderson, Inquiry Focuses on Banks' Withholding of Loan Data, N.Y. TIMES, January 12, 2008, at http://www.nytimes.com/2008/01/12/business/12lend.html?pagewanted=1&_r=1&sq=Inquiry%20Focuses%20on%20Banks'%20Withholding%20&st=nyt&scp=1 [hereinafter Bajaj & Anderson, Inquiry Focuses on Banks' Withholding of Loan Data]. [6] Jenny Anderson & Vikas Bajaj, Loan Reviewer Aiding Inquiry Into Big Banks, N.Y. TIMES, January 27, 2008, at http://www.nytimes.com/2008/01/27/business/27subprime.html?scp=4&sq=vikas+bajaj&st=nyt [hereinafter Anderson & Bajaj, Loan Reviewer Aiding Inquiry Into Big Banks]. [7] Id. [8] Id. [9] Kelly, supra note 2, at A3. [10] Anderson & Bajaj, Loan Reviewer Aiding Inquiry Into Big Banks, supra note 6. [11] Bajaj & Anderson, Inquiry Focuses on Banks' Withholding of Loan Data, supra note 5. [12] Id. [13] Kelly, supra note 2, at A3. [14] Ruth Simon, Subpoena Deepens Countrywide's Woes, WALL ST. J., January 31, 2008, at A12, available at http://online.wsj.com/article/SB120174792324430933.html. [15] Vikas Bajaj, FBI Opens Subprime Inquiry, INT'L HERALD TRIB., January 30, 2008, http://www.iht.com/articles/2008/01/30/business/30fbi.php. [16] Kelly, supra note 2, at A3. [17] Id. [18]  Dietrich L. Snell & Wendy T. Wu,  New York State's Martin Act: An Outline of the New York Attorney General's Powers and Practices, PRACT. LAW INST. PLI Order No. 14655 (2008). [19] Id. [20] Id. [21] Id. [22] Id. [23] Id. [24]  N.Y  GEN. BUS. LAW § 352(1) (2008). [25] Snell, supra note 18. [26] Id. [27] Id. [28] Id. [29] Kelly, supra note 2, at A3. [30] Id. [31] Snell, supra note 18. [32] Id.    

Multidisciplinary Practices: Unethical or Inevitable?

by Karen Lee February 5 2008, 00:31
I. Introduction



Multidisciplinary practices, or MDPs, have long been the subject of acrimonious debate between two opposing campaigns, each citing passionate reasons for why the organizational structure should be formally established or definitively barred. [1] Multidisciplinary practice refers to a professional entity in which lawyers partner with non-lawyers to provide a mix of legal and non-legal services. Efficiency and innovation by this new structure is dampened with fears of conflicts of interest and dilution of privilege. The crucial question as acerbically couched by one scholar has been “whether client and public interests are best served by ethics rules that preclude innovation in joint service delivery enterprises among lawyers and other professionals.” [2] [More]

IPO of China Construction Bank

by Lei Wang November 20 2007, 12:50
The Initial Public Offering (“IPO”) of Industrial and Commercial Bank of China (“ICBC”) set the record for the amount of money raised among all IPOs ever made over the world. The IPO of ICBC was actually one of the steps the Chinese government had taken to privatize (or at least partially privatize) its four major commercial banks: ICBC, China Construction Bank (“CCB”), Bank of China (“BoC”) and Agriculture Bank of China. CCB and BoC already performed IPOs during the last two years and the IPO of Agricultural Bank of China (“ABC”) is scheduled at 2008. ICBC, established in 1984 when China began its capitalist turn, boasted $724 billion in deposits, 355,000 employees and 18,038 branches, more than three times as many as Bank of America, the USA's largest bank.” In this article, we focus on the listing choices of CCB, as it was the first of the four big banks to have listed itself on public stock exchanges. [More]

Three Banks and Their SIV "Superfund" Baby

by Scott B. Wilson November 13 2007, 23:29
Introduction



Over the weekend of October 13, 2007, the U.S. Treasury hosted talks with some of the largest U.S. banks with the aim of creating a "superfund" that would be used to provide stability to the shaky credit markets.[1] The meeting included some of the biggest banking institutions such as Citigroup, Bank of America, and J.P. Morgan Chase.[2] This summer brought turmoil in the credit markets as the subprime mortgage fiasco began to bear fruit, and the goal of the proposed superfund is to hedge off fears of future bank defaults as well as invigorate demand for commercial paper, which has since this summer frozen up.[3] This article will review the details of the proposed superfund, its aims, and address some criticism leveled at it as well as the government's role in the process. [More]

Do Hedge Funds Need To Be Better Regulated?

by Lei Wang October 22 2007, 12:53
Introduction

One of the hottest topics, when Wall Street recently saw a market turmoil, was whether hedge funds need to be more strictly regulated. As a special investment vehicle designed for large institutions and rich personal investors, hedge funds are notorious for their ruthless trading strategies aiming to reap as high absolute returns as possible, which usually came with very high risks. The financial leverages hedge funds often utilize had more or less contributed to almost every financial crisis we have faced in the last decades. Typical examples include the fall of Long Term Capital Management (LTCM) in late 1990s and its recent counterpart Amaranth in 2006. [More]

Lender of Last Resort

by Scott B. Wilson October 16 2007, 23:33
     The New York Times headlines exclaimed, "Terrible and Disastrous Financial Panic in London...Lombard Street Blockaded by a Tumultous and terror Stricken Mob...The Panic without Parellel in the Financial History of England..."[1] Meanwhile, on the streets of London, what began as a slow trickle of people gushed into a torrent pouring on to the streets in order to line up outside the reputable bank. Hours earlier, the aforesaid bank had posted a notice on its premises that attracted some attention, "We regret to announce that a severe run on our deposits and resources has compelled us to suspend payment, the course being considereed under advice the best calculated to protect the interest of all parties..."[2] The crowds' focus was not just limited to the ailing bank, "the tumult became a rout...The doors of the most respectable banking houses were besieged and throngs heaving and tumbling about Lombard Street made that narrow thoroughfare impossible."[3] Even outside of the City "country bankers found their halls besieged by anxious depositors trying to withdraw money and begged their London agents to send them gold and cash."[4]      In order to clear Lombard from the clamoring crowds, the Lord Mayor was forced to call in a platoon of police.[5] News of the panic spread throughout the countryside and the bank crisis precipitated the closing of merchants' shops and freezing of banks and discount houses.[6] The reputable bank at mention was known as "the greatest instrument of credit in the Kingdom", virtually by perception unshakable.[7] Its holdings and financial influence were immense, second only to the Bank of England.[8] Aside from the odd mention of gold reserves, you might have concluded that such were the events resulting from the recent bank run on the British lender Northern Rock PLC. In fact, the aforementioned events are cumulatively known as "Black Friday" and occurred on May 10, 1866 when the well known bank Overlend & Gurney could not cover its payments, collapsed, and nearly brought down the entire British financial system. Prior to September 14, 2007, it was the last bank run on a British bank in over 140 years. This article will briefly restate the events leading up and subsequent to the September 14th bank run on Northern Rock as well as discuss the laws and policy at work.      On September 14, 2007, Northern Rock issued an official statement announcing the "extreme conditions" have led to it seeking a line of credit from the Bank of England, the U.K.'s central bank and "lender of last resort."[9] Upon learning that the lender Northern Rock may need a bailout from the Bank of England, customers including pensioners and others who had deposited their life savings in the bank lined up outside branches in Newcastle and throughout the United Kingdom. At on Newcastle branch, bank staff attempted to reassure customers by even asking for deposits, yet the announcement was met with predictable bursts of laughter from the queues of patient customers.[10] Other customers inquiring into their accounts and financial statements using the Internet were blocked from logging into the website.[11] In the course of the day, Northern Rock's shares plummeted 31%, knocking £846.7 million off its market value.[12] Customers withdrew in a matter of days about 4% (£1 billion) of the bank's more than £25 billion of deposits.[13]      Prior to its financial crisis, Northern Rock was the U.K.'s fifth-largest mortgage lender.[14] In fact, less than two months prior to the September crisis, Northern Rock reported its business outlook as "very positive."[15] Contrary to many major banks worldwide currently suffering under the subprime mortgage milieu, Northern Rock primarily lent to borrowers with good credit.[16] Two parts of the bank's business model, however, created substantial risk that led to its eventual financial demise. First, Northern Rock relied more heavily than other U.K. lenders on investors in its securitized mortgages, who of late have become risk-averse as a result of the U.S. subprime loan crisis.[17] Second, and perhaps more critical to its demise, Northern Rock depended heavily on short-term loans from other financial institutions, as opposed to relying primarily on customer deposits.[18] In fact, according to analysts, Northern Rock's borrowings from other banks exceed customer deposits "by more than three times."[19] This compared with other U.K. lenders whose ratios average around one and one-half and were projected to face funding shortages.[20]      What happened in turn was that once the money markets dried up and banks became unwilling to lend to one another for periods longer than overnight, Northern Rock was faced with borrowing ever-larger amounts amidst its inability to cover its own outstanding debts.[21] In early September, Northern Rock began talks with the Bank of England in lieu of its dire funding needs.[22] On September 13th, the BBC reported[23] that the Bank of England had promised Northern Rock emergency financial support, and the very next day Northern's CEO Adam Applegarth was forced to admit as to its holdings, "There are no funds available...It's an astonishing thing to see."[24] As word of the bank's sorry state spread, the Financial Services Authority (FSA), Britain's financial regulator, attempted to reassure the public, "If we believed Northern Rock was not solvent, we would not have allowed it to remain open for business."[25] Nevertheless, customers continued to withdraw their deposits while shareholders dumped their securities, so by Tuesday September 18th, the share price had plunged an additional 35%.[26]      Beginning in 1997 with the then Chancellor of the Exchequer, Gordon Brown, the U.K. stripped regulatory authority from the Bank of England and went to a three-tier system.[27] This system divided responsibility between the Bank of England, which primarily ensures the stability of the monetary system by setting interest rates; the FSA, two of its main duties being the "prudential supervision of banks"...and the "conduct of operations in response to problem cases" outside the Bank's role; and the Treasury, which is responsible for the "overall institutional structure of financial regulation."[28] Within this system both the FSA and Bank of England gather distinct information about the financial system and are expected to freely exchange such information with each other.[29] In crisis situations, the system calls for the three entities to come together and coordinate a support operation, keeping in mind that the Bank of England as the central bank can provide "liquidity assistance" as the lender of last resort.[30] The FSA is specifically tasked to "monitor the health of institutions that fall within its regulatory remit and ensure...continuing compliance with regulatory standards."[31]      Criticism on the government's role in the Northern Rock crisis has mainly focused on the FSA and the Bank of England. The FSA, as the main financial regulator, has been accused of being asleep at the wheel for failing to call attention to possible problems within its regulatory purview.[32] Moreover, the FSA's role was critical because it is the "guardian of the public scheme of deposit insurance"[33], which in the U.K. covers 100% of the first £2,000 and 90% of the next £33,000, for a possible total of £31,700.[34] As of late, the FSA has admitted its shortcomings.[35] However, the bulk of the criticism has focused on the Bank of England. There are two main arguments. First, the Bank broadly detected problems affecting the financial money markets many months previous to the Northern Rock crisis, but failed to timely act when a particular case demanded it. For instance, the Bank of England warned in April of the aforementioned funding gap between the levels of actual bank deposits and loans, which it contended stood at £530 billion.[36] With both investors and financial institutions tightening up because of the tumultuous credit markets, banks are having a difficult time borrowing, leaving the stark possibility of "A temporary glitch in the banking payment system or an unfounded rumour could leave an otherwise sound bank short of cash at the closes of business, forcing it to ask the Bank of England to tide it over--which may imperil its future health."[37] Thus, the Bank should have seen the Northern Rock crisis coming and pro-actively instituted preventative measures. This last point, concerning the secondary reliance on the central bank, leads to the second criticism of the Bank of England's response.      For months previous Mervyn King, the governor of the Bank of England, had criticized the American and European central banks' policies of injecting billions into the interbank-lending markets in response to the tightening credit.[38] Rather, Mr. King proposed that investors should bear the costs themselves of risky investments.[39] Mr. King was in essence worried about moral hazard, which "can occur if lenders make high-risk loans (normally the loans offering the highest returns) because they known they will be bailed out by a third-party if the loan fails."[40] This can cause two problematic results. First, the promise of a third-party bailout encourages lenders to act reckless by offering loans that have a high probability of failure, such as subprime mortgages.[41] Second, a big borrower is more apt to take on larger amounts of debt with higher interest rates on the notion that the central bank will prevent its insolvency.[42] Nevertheless, Mr. King did respond with at least a promise of emergency funding to Northern Rock, and many have argued this encourages moral hazard as well as being sheer hypocrisy.[43] In his defense, Mr. King could argue that in fact Northern Rock was not insolvent, it just suffered from temporary illiquidity, thus minimizing moral hazard.[44] Moreover, he could argue that such a response was justified to prevent a broader impact on Britain's financial system, which is within his role as governor.      However, the facts will bear this defense out. Particularly, the Northern Rock bank crisis highlights the potential ramifications of moral hazard and more broadly calls into question the role that the central bank has in the market.[45] No doubt Northern Rock, and by implication its competitors, realize their virtual guaranteed continued existence as is evident from a recent bold statement on Northern's website: "Your funds are safe at Northern Rock" [because]..."The Chancellor has made it very clear that all existing savings accounts with Northern Rock are safe and secure during the current instability in the financial markets."[46] Thus, by implication it is the financial markets that led to Northern's crisis, not its own mismanagement and high risk activities. This exemplifies the broader point that much government intervention in the market system distorts market behavior, encourages reckless risk-taking, increases costs, and generally causes unintended costly consequences. As of October 3, 2007, Northern Rock is up for sale to the  highest bidder, which probably will be a private equity firm.[47] As for the future role of the central bank in the financial markets, well that is unfortunately at this stage far more guaranteed. [1] Geoffrey Elliott, THE MYSTERY OF OVEREND AND GURNEY 1, (Methuen 2006). [2] Id. at 180. [3] Id. at 181. [4] Id. [5] Id. [6] Id. at 182. [7] Id. at 2. [8] Id. [9] Timeline: Northern Rock Bank Crisis, BBC NEWS, Sept. 24, 2007, http://news.bbc.co.uk/2/hi/business/7007076.stm. [10] Hit by a Rock, ECONOMIST.COM, Sept. 14, 2007, http://www.economist.com/finance/displaystory.cfm?story_id=9821067. [11] Joe Bolger and Marcus Leroux, Northern Rock Savers Rush to Empty Accounts, TIMESONLINE, Sept. 14, 2007, http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article2451069.ece. [12] Carrick Mollenkamp et al., U.K. Lender is Latest to Join Mortgage Crisis, WALL ST. J., Sept. 15-16, 2007, at B1, available at http://online.wsj.com/public/article/SB118975103917427544.html. [13] Carrick Mollenkamp and Jason Singer, A Weekend of Worry Tests Big U.K. Lender, WALL ST. J., Sept. 17, 2007, at C1, available at http://online.wsj.com/public/article/SB118998688873529222.html. [14] The Bank That Failed, THE ECONOMIST, Sept. 20, 2007, at 16, available at http://www.economist.com/opinion/displaystory.cfm?story_id=9832838. [15] Timeline: Northern Rock Bank Crisis, supra note 9. [16] Id. [17] Id. [18] Id. [19] Id. [20] Id. [21] The Great Northern Run, THE ECONOMIST, Sept. 22, 2007, at 92, available at http://www.economist.com/finance/displaystory.cfm?story_id=9833685. [22] Mollenkamp, supra note 12, at B1. [23] Timeline: Northern Rock Bank Crisis, supra note 9. [24] Mollenkamp, supra note 12, at B1. [25] Mollenkamp, supra note 13, at C1. [26] Carrick Mollenkamp, Northern Rock's Crisis Jangles Nerves in U.K., WALL ST. J., Sept. 118, 2007, at C3, available at http://online.wsj.com/public/article/SB119004858354329943.html. [27] The Bank That Failed, surpra note 14, at 16. [28] Memorandum of Understanding Between HM Treasury, the Bank of England and the Financial Services Authority, (Mar. 22, 2006) (on file with author), available at http://www.bankofengland.co.uk/financialstability/mou.pdf. [29] Id. [30] Id. [31] Id. [32] Great Northern Run, supra note 21, at 92. [33] The Bank That Failed, supra note 14, at 16. [34] Mollenkamp, supra note 13, at C1. [35] Adam Bradbery and Simon Kennedy, Credit Crunch: U.K. Regulator Admits Missteps, WALL ST. J., Oct. 10, 2007, at C3, available at http://online.wsj.com/public/article/SB119197708192054169.html. [36] Great Northern Run, supra note 21, at 92. [37] Id. [38] Mollenkamp, supra note 12, at B1. [39] Id. [40] Samuel Gregg, Central Banking's Hazardous Ways, ACTON INSTITUTE, Sept. 26, 2007, http://www.acton.org/commentary/commentary405.php. [41] Id. [42] Id. [43] Mollenkamp, supra note 12, at B1. [44] Gregg, supra note 39. [45] Gregg, supra note 39. [46] Northern Rock, http://www.northernrock.co.uk/index2.htm (last visited Sept. 27, 2007). [47] Jason Singer, U.S. Firms Circle Northern Rock, Oct. 4, 2007, WALL ST. J., at C3, available at http://online.wsj.com/public/article/SB119145077260448208.html.

Economically Reprehensible Behavior, or Benefits and Risks of Morality? (1 of 2)

by Kamran Chaudri October 5 2007, 19:08
I. Introduction



Whether it is through mutual funds, pensions or direct purchases of shares in companies, some investors are taking more than profit maximization into consideration when investing. These investors seek to promote individual social or moral preferences by choosing investments based on the products and procedures of an investment, rather than solely on accounting profitability. Essentially, these investors are looking to use their money for both moral and monetary profit. Of course, when it comes to capital markets, the customer, i.e. the investor, is still the boss. Thus understanding this trend is not merely an academic exercise but perhaps a lesson to those seeking funding. [More]

Privatization In China

by Lei Wang September 25 2007, 12:56
The term privatization was believed to be coined in 1936, first appearing in a chronicle published in “The Economist”. It did not become popular until 1980s when most European countries began their privatization efforts. With the fall of USSR and other socialist countries in the early 1990s, the tide of privatization has reached a lot of developing countries. As an example, for four Eastern European countries (namely Poland, Hungary, Czech and Slovak) in Eastern Europe, “the average share of national GDP attributable to the private sector increased from 20% to more than 50% over the three year period 1990-1993.” [1] [More]

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