Fraud is Already Illegal: Section 621 of the Dodd-Frank Act in the Context of the Securities Laws
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 The section should be repealed.