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The Subprime VirusReckless Credit, Regulatory Failure, and Next Steps$
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Kathleen C. Engel and Patricia A. McCoy

Print publication date: 2011

Print ISBN-13: 9780195388824

Published to Oxford Scholarship Online: April 2015

DOI: 10.1093/acprof:osobl/9780195388824.001.0001

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Wall Street Skirts Regulation

Wall Street Skirts Regulation

(p.207) 11 Wall Street Skirts Regulation
The Subprime Virus

Kathleen C. Engel

Patricia A. McCoy

Oxford University Press

This chapter discusses how federal regulators contributed to the subprime crisis. Congress laid the groundwork back in 1999 and 2000, when it deregulated over-the-counter credit default swaps, which ultimately became pathways of contagion. The Securities and Exchange Commission (SEC) for its part looked the other way while banks issued droves of subprime bonds and collateralized debt obligations (CDOs) marred by shoddy due diligence, skimpy disclosures, and inflated credit ratings. Then federal banking regulators sealed the financial system's fate by allowing commercial banks to load up on toxic mortgage-backed securities.

Keywords:   Wall Street, federal banking regulators, subprime crisis, credit default swaps, Securities and Exchange Commission, subprime bonds, collateralized debt obligations, mortgage-backed securities

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