In the aftermath of the financial crisis, lawmakers and the public focused on abuses in the securitization industry. Abacus, a Synthetic CDO created by Goldman Sachs & Co., became a symbol of what many felt was a corrupt system when it became known that Goldman and Fabrice Tourre, a Vice President at its Correlation Trading Desk, had assisted a hedge fund in designing the security to fail. Perceived failings of the securities laws to prevent transactions like Abacus spurred Congress to enact Section 621 of the Dodd-Frank Act, which prohibits conflicts of interest in asset-backed securitizations. But the law is unnecessary and counterproductive. Antifraud laws already address the abuses and certain conflicted transactions, if properly disclosed, can be beneficial. The section should be repealed.
Nathan R. Schuur,
Fraud is Already Illegal: Section 621 of the Dodd-Frank Act in the Context of the Securities Laws,
U. Mich. J. L. Reform
Available at: https://repository.law.umich.edu/mjlr/vol48/iss2/7