February 17, 2010
Contact: Joanne Doroshow
CONSUMER GROUP RELEASES NEW WHITE PAPER
ON HOW LAWSUIT LIMITS HELPED CAUSE THE FINANCIAL COLLAPSE
In a new White Paper released today, the national nonprofit consumer group Center for Justice & Democracy explores how the weakening of investors’ and borrowers’ legal rights since the 1990s has compounded deregulation and lax regulatory enforcement led to the recent economic collapse. In Legal Abandon: How Limiting Lawsuits Led To The Financial Collapse And What To Do About It, CJ&D shows how the legal rights of defrauded shareholders have been greatly restricted by both Congress and the U.S. Supreme Court, and the rights of subprime mortgage borrowers have been extremely limited, as well.
Said co-author Amy Widman, “Two laws are particularly problematic: the 1995 Private Securities Litigation Reform Act (PSLRA) and the Securities Litigation Uniform Standards Act of 1998 (SLUSA), which greatly restrict investor fraud cases. In addition, two Supreme Court cases, Central Bank of Denver, N.A. v. Interstate Bank of Denver, N.A. (1994) and Stoneridge Investment Partners v. Scientific-Atlanta, Inc. et al. (2007), both significantly limited the liability of those who aid in the commission of a securities fraud."
“Current law also prevents victims of predatory subprime mortgages from holding Wall Street firms accountable,” added co-author Joanne Doroshow. “Many believe the subprime mortgage crisis could have been avoided had investment banks been on the hook from the beginning.”
Widman said, “In calling for re-regulation, scholars and economists have crafted solutions that ensure legal responsibility for fraudulent actions up and down the chain. Despite the valiant efforts by some in Congress, like Senator Arlen Specter (D-Pa.), so far Congress has balked at reversing or modifying these decisions or laws, many of which were enacted during a disastrous wave of degulation in the 1990s.”
Doroshow added, “We hope this issue now gets the attention it deserves. Private civil lawsuits are as important as strong regulation and enforcement to properly manage the U.S. market. When legal rights are severely weakened as they have been continuously in this country, economic upheaval rooted in greed can flourish, as must be obvious now.”
Click here for a full copy of Legal Abandon
Click here for an Executive Summary (both PDF format)