Law Commons^™

The Logic And Limits Of The Federal Reserve Act, Lev Menand

Faculty Scholarship

The Federal Reserve is a monetary authority subject to minimal executive and judicial oversight. It also has the power to create money, which permits it to disburse funds without drawing on the U.S. Treasury. Since 2008, it has leveraged this power to an unprecedented extent. It has rescued teetering financial conglomerates, purchased trillions of dollars of mortgage-backed securities, and opened numerous ad hoc lending facilities to support ordinary businesses, nonprofits, and municipalities.

This Article identifies the causes and consequences of the Federal Reserve's expanded footprint by recovering the logic and limits of its enabling act. It argues that to understand …

How To Help Small Businesses Survive Covid-19, Todd Baker, Kathryn Judge

Faculty Scholarship

Small businesses are among the hardest hit by the COVID-19 crisis. Many are shuttered, and far more face cash flow constraints, raising questions about just how many will survive this recession. The government has responded with a critical forgivable loan program, but for many of these businesses, this program alone will not provide the cash they need to retain workers, pay rent, and help their business come back to life when Americans are no longer sheltering in place. This essay calls on regulators to find new and creative ways to work with existing intermediaries, including banks and online lenders, who …

Fiduciary Law In Financial Regulation, Howell E. Jackson, Talia B. Gillis

Faculty Scholarship

This chapter explores the application of fiduciary duties to regulated financial firms and financial services. At first blush, the need for such a chapter might strike some as surprising in that fiduciary duties and systems of financial regulation can be conceptualized as governing distinctive and nonoverlapping spheres: fiduciary duties police private activity through open-ended, judicially defined standards imposed on an ex post basis, whereas financial regulations set largely mandatory, ex ante obligations for regulated entities under supervisory systems established in legislation and implemented through expert administrative agencies. Yet, as the chapter documents, fiduciary duties often do overlap with systems of …

Interbank Discipline, Kathryn Judge

Faculty Scholarship

As banking has evolved over the last three decades, banks have become increasingly interconnected. This Article draws attention to an effect of this development that has important policy ramifications yet remains largely unexamined – a dramatic rise in interbank discipline. The Article demonstrates that today's large, complex banks have financial incentives to monitor risk taking at other banks, They also have the infrastructure, competence, and information required to be fairly effective monitors and mechanisms through which they can respond when a bank changes its risk profile. Interbank discipline thus affects bank risk taking, discouraging banks from taking some types of …