2008 Financial Crisis Primer  Tags: financial crisis  

• Jongho Kim, Can Risks Be Reduced in the Derivatives Market?  Lessons From the Deal Structure Analysis of Modern Financial Engineering Debacles, 6 De Paul Bus. & Com. L.J. 29 (2008). <link to article>.

Abstract: This law review article explores a wide range of over-the-counter (OTC) derivatives through the lens of the financial debacles they’ve been associated with.  The debacles include: Orange County and the floater rate note (FRN); Procter and Gamble, Gibson Greeting and the leverage interest rate swap; Long Term Capital Management; Diamond Fund and the total return swap; MGRM’s commodity futures stack hedge transaction; and NatWest’s interest rate options and swaptions.

• Frank Partnoy and David A. Skeel Jr., The Promise and Perils of Credit Derivatives, 75 U. Cin. L. Rev. 1019 (2007). <link to article>.

Abstract: This law review article presents an in-depth discussion of the two major categories of credit derivates: Credit-Default Swaps (CDSs) and Collateralized Debt Obligations (CDOs).  After describing the instruments in detail the article goes on to discuss the benefits and the risks associated with using these instruments. 

• Monica S. Tew, Student Author, The Dark Side of Derivatives: A Book Note on Infectious Greed: How Deceit and Risk Corrupted the Financial Markets by Frank Partnoy, 8 N.C. Banking Inst. 289 (2004). <link to article>.

• Frank Partnoy, Financial Derivatives and the Costs of Regulatory Arbitrage, 22 J. Corp. L. 211(1997). <link to article>.

Abstract: This law review article examines the various classes and uses of financial derivatives.  In particular, the article focuses on the use of derivatives for regulatory arbitrage – using a derivative to reduce costs or capture profits from differences in tax treatment, accounting regulations, investment restrictions or government subsidies.  The article proposes an economic model for analyzing derivatives and regulatory arbitrage and explores the economic costs of regulation.

• Gandel, Stephen. “Town for Sale – The people of Union Point, Georgia trusted one of their own. When he turned out to be a swindler, they crashed and burned with him,” Time 34.2 (1 Feb. 2005): p. 78. America’s Newspapers, NewsBank.  IIT Downtown Campus Library, Chicago IL.  2 Nov. 2008. <link to article>.

Abstract: This article discusses the business and events surrounding the 2003 collapse of Stewart Finance a small town sub-prime lender that ultimately cost its investors $34 million.

• Pulliam, Susan et al. "Anatomy of the Morgan Stanley Panic – Trading Records Tell Tale of How Rivals’ Bearish Bets Pounded Stock in September.”  The Wall Street Journal.  24 Nov. 2008. Sec. A1.  LexisNexis.  IIT Downtown Campus Library, Chicago, IL.  24 Nov. 2008 <link to article>.

Abstract: This article explores the events of Sept. 17, 2008, and suggests that certain hedge funds and Morgan Stanley rivals may have used a combination of aggressive CDS pricing, short selling and put options to punish the firm and profit at its expense.