Kathleen Engel is the Associate Dean for Intellectual Life and a Professor of Law at Suffolk University. She is a national authority on mortgage finance and regulation, subprime and predatory lending, and housing discrimination. Her many publications include a 2011 book published by Oxford University Press, The Subprime Virus: Reckless Credit, Regulatory Failure and Next Steps (with Prof. P. McCoy) and articles in Texas Law Review, Fordham Law Review, Washington University Law Quarterly, Connecticut Law Review, The Journal of Economics and Business, Fordham Urban Law Journal, and Housing Policy Debate. Professor Engel presents her research in academic, banking, and policy forums throughout the country and around the world. Her analysis of financial services markets and the laws that regulate them regularly catches the attention of the press; The New York Times, Business Week, The Economist, Newsweek, and The Wall Street Journal have all cited her work. Prof. Engel has advised federal and state agencies on various matters related to financing of loans and served for three years on the Consumer Advisory Council of the Federal Reserve Board.
Complex financial instruments can allocate risk in ways that help borrowers, investors and capital markets. As the financial crisis revealed, this complexity can also undermine economic stability. During the subprime boom, risky loans and the securities they backed were sliced and diced through securitization and resecuritizations. The entities involved in creating the securities had little incentive to police loan originators because they could pass off most of the risk. Those that stood to lose-borrowers and investors-often had the least information to protect themselves. The risks associated with subprime loans grew exponentially as firms developed ever more complex instruments, like collateralized debt obligations (CDOs) and credit default swaps that allowed investors to place bets on the performance of bonds and CDOs. Today, a single loan can be linked to hundreds of financial instruments around the world. Complexity not only impeded informed decision-making when it came to securities and derivatives linked to housing, but it has also restricted the recovery of housing markets. With multiple entities holding pieces of the stream of income from home loans, it is impossible to value the securities and derivatives. As a result, today almost all of the funding for home mortgages comes from the United States government through Fannie Mae and Freddie Mac rather than the private securitization market. In addition, loan modifications, foreclosures, and short sales, all of which would ultimately help stabilize the housing market are fraught with problems because of securitization. This is not to say that securitization is all bad. What we need is a secondary market where complexity adds value without sacrificing transparency or undermining economy recovery.
Alessandro Vespignani . Geoffrey West . Kathleen C. Engel . Ren Y. Cheng . Eric Bonabeau . Hamid Benbrahim . Marta Gonzalez . Michail Bletsas . Greta Meszoely . Stoyan Tanev . Jukka-Pekka Onnela . Charles Worrell . Dany Bahar . Brian Peltonen .
I cannot thank you and your team enough.
I've been to more conferences than I can remember in my 28 yr. career. But I can count with less than one hand those that gave me such an
intellectual satisfaction and shock as this one, and I am not a new comer to the Complexity field either.
I really look forward to the next one. This is such an important, emerging field. There are so many subjects across a vast array of
seemingly unrelated fields that can be united by basic principles in Complexity.
Thank you again.