Subprime Scriveners

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Long title: 
Subprime Scriveners
Markovic, Milan
Author(s)' contact information: 
Texas A&M University, USA
Conference title: 
International Legal Ethics Conference VI
Conference location: 
City University London

Although mortgage-backed securities (“MBS”) and other financial products that nearly brought about the collapse of the global financial system could not have been issued without the involvement of attorneys, the legal profession’s role in the financial crisis has received relatively little scrutiny.
This Article focuses on lawyers’ preparation of MBS offering documents that misrepresented the lending practices of mortgage loan originators. While attorneys may not have known that most MBS would become toxic, they lacked incentives to inquire into the shoddy lending of prominent originators such as Washington Mutual Bank (WaMu) when they and their clients were reaping significant profits from MBS offerings. Ethical rules and Securities and Exchange Commission (“SEC”) regulations also discourage attorneys from investigating claims in offering documents.
The subprime era illustrates that attorneys are not reliable gatekeepers of the financial markets because they are increasingly unlikely to evaluate the legality of the transactions they facilitate. The Article concludes by proposing that the SEC impose heightened investigative duties on attorneys who work on public offerings of securities.

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