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35 J. Corp. L. 363 (2009-2010)
The Madoff Scandal, Market Regulatory Failure and the Business Education of Lawyers

handle is hein.journals/jcorl35 and id is 367 raw text is: The Madoff Scandal, Market Regulatory Failure and the Business Education of Lawyers Robert J. Rhee* 1. IN TRO DU CTION ........................................................................................................ 363 II. THE REALITY OF COM PLEXITY ................................................................................ 363 III. M ADOFF'S FRAUD AND THE SEC's FAILURE ........................................................... 365 IV. BUSINESS LITERACY AS THE OBJECT LESSON .......................................................... 377 V. A PRAGMATIC PROPOSAL (M AYBE) ........................................................................ 385 V I. C O N C LU SIO N ........................................................................................................... 39 1 I. INTRODUCTION The financial crisis of 2008 ushered in a new new era of financial folly. This historic chapter in American business and economic history has exposed failures of many institutions of society, from Main Street to Wall Street to K Street. For years to come, many commentators, like investigators of a plane crash, will comb through every minute detail of this catastrophe. This Article contributes in a small way to that process. It suggests that a deficiency in legal education is a contributing cause of the regulatory failure. The most scandalous malfeasance of this new era, the Madoff Ponzi scheme, provides a well-documented, important case study on how a deficit in competence and training of lawyer regulators contributed to market regulatory failure. This Article answers a question underlying these considerations: What can legal education do to better train business lawyers and regulators for a market that is becoming more complex? The answer, it suggests, is a simple one: teach a little more business and a little less law. II. THE REALITY OF COMPLEXITY It is obvious that our world is becoming more complex. The financial crisis conveys innumerable lessons for lawyers, bankers, regulators, and society at large. Perhaps the biggest lesson is a realization of just how complex our financial system and economic organization are.1 In the past several decades, the financial markets have seen geometric growth in complexity. The junk bond market matured in the 1980s, the derivatives market saw explosive growth in the 1990s, and the new century witnessed the evolution * Associate Professor of Law, University of Maryland School of Law; J.D., George Washington University; M.B.A., University of Pennsylvania (Wharton); B.A., University of Chicago. 1. See ALAN GREENSPAN, THE AGE OF TURBULENCE: ADVENTURES IN A NEW WORLD 488-90 (2007) (describing the increasing complexity of the financial markets).

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