Noah Feldman, Columnist

Why the Law Failed to Punish Wrongdoers in the Financial Crisis

The Countrywide case shows that lawmakers never anticipated a systemic collapse. They no longer have that excuse.

May 24, 2016 at 5:36 PM UTC

Noah Feldman is a Bloomberg Opinion columnist. A professor of law at Harvard University, he is author, most recently, of “To Be a Jew Today: A New Guide to God, Israel, and the Jewish People."

Not a Wall Street scene.
Photographer: ANTHONY WALLACE/AFP/Getty Images

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Historians of the future will want to know why almost no one went to jail in connection with the collapse of mortgage-backed securities that triggered the 2007-8 financial crisis. Monday’s appeals court decision reversing a $1.2 billion fraud judgment against Bank of America will be an important part of the answer. To put it bluntly, the law failed -- because the law as it existed didn’t properly anticipate or cover the events that occurred.

The decision, by the U.S. Court of Appeals for the Second Circuit, was the result of an appeal by Bank of America from a judgment by federal district court Judge Jed Rakoff, the most outspoken judicial critic of how the legal system responded to the crisis.