Helping to Stop Future Subprime Meltdowns

Regular readers of ThePopTort know that one of our favorite things about the civil justice system is its proven ability to encourage corporate accountability.  Reportedly, Congressman Barney Frank (D-Mass), Chairman of the U.S. House Financial Services Committee, is hoping to apply that same principle with legislation next year that would hold Wall Street entities liable for funding predatory and reckless mortgage loans.

According to Frank (as paraphrased by the Seattle Post-Intelligencer) “one of the most important methods for preventing a repeat of the mortgage crisis will be Congress imposing civil liability on anyone who holds or buys an unlawful or predatory mortgage loan—including Wall Street financiers.”  The P-I reports that the accountability principle, known as “assignee liability,” is already applicable to holders of consumer loans for other items such as cars and refrigerators.

Meanwhile, experts are lining up in support of such a measure—some, such as University of Connecticut law professor Patricia McCoy, have even gone so far as to say there is “no doubt” that “the industry would not have made those (risky) loans” had more aggressive assignee liability laws been in place.

Here’s hoping Congress passes meaningful assignee liability legislation soon—for all our sakes!