“It seems that Madoff’s strategy is to confess, shorten all proceedings as much as possible, avoid jury trial almost at all costs, perhaps serve some time in prison – if impossible to avoid – and then life will start again.  He did not take the route that Enron’s management has taken, to deny and protest the innocence that was not there.  Wiser for him.”

Contact Tamar Frankel, 617-353-3773, tfrankel@bu.edu 

Law Professor Charles Whitehead, a securities-law expert now at BU Law after 20 years as an in-house counsel in international securities and banking, comments on CDS market probes:

“The credit default swap market is a predictive market, meaning that CDS spreads tend to widen in advance of changes in the price of an issuer’s stocks. Why is that? Part of the reason is tied to who is involved in the CDS market. Large banks and other financial institutions are significant participants, often with special insight into the issuers who are involved.

“Thus, manipulating CDS prices — if that, in fact, occurred — may have involved more than simply sending a bad signal about the cost of hedging credit risk. It may have also been an attempt to manipulate the predictive nature of the CDS market, driving stock prices down in light of the apparent (but false) change in CDS spreads.”

Law professor Tamar Frankel, an authority on securities law, corporate governance, and legal ethics, comments on the Feds/NY joining in the CDS trading probe:

“Historically, Americans were deeply suspicious of government power. It is not by chance that American enforcement units have been so many and competed with each other. How come they have been joining forces lately without a murmer of protest from the public? How come their joining ranks is viewed now as beneficially efficient?

“One explanation is that antitrust laws have been relaxed and mergers have given rise to mamouth private-sector corporations and financial institutions. Their rising power is threatening to overcome governmental power. Therefore, government units unite.

“A second reason may be that different government departments lead to different laws, and multitude of laws and regulations are expensive. We are slowly moving towards unification and standardization of forms and laws.

“Third, the cost of splintered government units and duplicate information sources has become too high. The way things look today, government and enforcement is likely to acquire more clout.”

Contact Tamar Frankel, 617-353-3773, tfrankel@bu.edu