In Why a Tax Crackdown Is Not Needed on Mortgage-Backed Securities, Professor Vic Fleisher argues that IRS enforcement of tax laws governing REMICs will merely complicate efforts to properly fix blame and allocate the costs of the financial crisis. Professor Fleisher relies upon poorly-defined policy reasons for his position. Nonetheless, the severity of disregard for the rules, a need to ensure that the mortgage-securitization industry honestly reform, and the potential additional revenue warrant IRS action with respect to REMICs. For additional discussion regarding the need for IRS and other enforcement in this industry see Bradley T. Borden & David J. Reiss, Wall Street Rules Applied to REMIC Classification; Bradley T. Borden, Did the IRS Cause the Financial Crisis; Bradley T. Borden & David J. Reiss, An Uneasy Justification for Prosecutorial Abdication in the Subprime Industry; Naked Capitalist, Yes, Virginia, The IRS does not Treat the Connected Like the Rest of Us (REMIC Edition).

In Did the IRS Cuase the Financial Crisis, Professor Brad Borden explains that competent IRS audits of REMICs would have uncovered many of the problems that led to the financial crisis. Competent audits and tax enforcement of REMICs would therefore have helped prevent the crisis.

In Wall Street Rules Applied to REMIC Classification, Professors Brad Borden and David Reiss explain how arrangements that fail to satisfy the REMIC requirements may benefit from the so-called Wall Street Rule. They argue, however, the IRS’s failure to audit REMICs may have contributed to the financial crisis and that audits and tax enforcement now will generate tax revenue, help clean up the mortgage securitization industry, and place the cost of the financial crisis on the parties who caused it.