Affinities in the Savings & Loan, Enron, and Goldman Sachs Scandals

Image by William Bratton and Adam Levitin

In a paper titled A Transactional Geneology of Scandal: from Michael Milken to Enron to Goldman Sacks, William Bratton of U. Penn and Adam Levitin of Georgetown discuss similarlities in the Savings & Loan failures of the 1980's driven by the sales of junk bonds (originating from Drexel Burnham Lambert led by Michael Milken), Enron's accounting and securities fraud of the late 1990's to 2001 (which led to the Sarbanes-Oxley Act or "SOX"), and the Goldman Sachs securities fraud scandal surrounding "Abacus' deals in the mid to late 2000's (which led to the Dodd-Frank Wall Street Reform and Consumer Protection Act or "Dodd-Frank").  All involved collateralized debt obligations (a “CDO”) with special purpose entities (an “SPE”). The article is an excellent read on the history and problems with CDO-SPE transactions -- which have caused enormous economic problems for our country -- focusing on the significant shortcomings in the law's ability to address SPEs. Link via MetaFilter.