Law Commons^™

The Governance Structure Of Shadow Banking: Rethinking Assumptions About Limited Liability, Steven L. Schwarcz

Faculty Scholarship

In an earlier article, I argued that shadow banking — the provision of financial services and products outside of the traditional banking system, and thus without the need for bank intermediation between capital markets and the users of funds — is so radically transforming finance that regulatory scholars need to rethink their basic assumptions. This article attempts to rethink the corporate governance assumption that owners of firms should always have their liability limited to the capital they have invested. In the relatively small and decentralized firms that dominate shadow banking, equity investors tend to be active managers. Limited liability gives …

Götterdämmerung, Lawrence G. Baxter

Faculty Scholarship

In his panel remarks on the future direction of financial regulation after the 2012 elections, Professor Lawrence Baxter argues that the age of large banks and “too big to fail” is destined to come to an end, but not through the traditional avenue of governmental oversight. Baxter starts by detailing the warning signs that illuminate the unsustainable nature of the current financial model and moves to a discussion on the deficiencies of modern banking regulations. Some hope for an end to giant banking behemoths, Baxter finally posits, lies in stricter market discipline and a realization that smaller, less-complex banks provide …

Advising The Individual Investor: Comparing The Federal Regulation Of Investment Advisers, Banks, And Broker-Dealers, Alan M. Ahart

Pepperdine Law Review

No abstract provided.

Regulating Shadows: Financial Regulation And Responsibility Failure, Steven L. Schwarcz

Faculty Scholarship

In the modern financial architecture, financial services and products increasingly are provided outside of the traditional banking system—and thus without the need for bank intermediation between capital markets and the users of funds. Most corporate financing, for example, no longer is dependent on bank loans but raised through special-purpose entities, money-market mutual funds, securities lenders, hedge funds, and investment banks. This shift, referred to as “disintermediation” and described as creating a “shadow banking” system, is so radically transforming finance that regulatory scholars need to rethink their assumptions. Two of the fundamental market failures underlying shadow banking—information failure and agency failure—were …

Framing Address: A Framework For Analyzing Financial Market Transformation, Steven L. Schwarcz

Faculty Scholarship

To open an international conference on “Rethinking Financial Markets,” this address seeks to frame that inquiry from the perspectives of scholars in the fields of law, economics, finance, and accounting. In attempting to identify what it is about financial markets that is worth rethinking, the address focuses on market changes that increase decentralization, fragmentation, globalization, disintermediation, and funding mismatches. The address also argues that the scholarly perspectives are inherently interrelated: although scholars in each field proceed from their own toolkits, they all aim for the common normative goal of optimizing financial markets to enable capital formation.

Lawyers In The Shadows: The Transactional Lawyer In A World Of Shadow Banking, Steven L. Schwarcz

Faculty Scholarship

This article examines how the role of transactional lawyers should change in the new world of shadow banking. Although transactional lawyers should consider the potential systemic consequences of their client's actions, their actions should be tempered by their primary duties to the client and by their responsibilities to the l,egal system more broadly.

The Legal Relationship Between The Bank And Its Safe Deposit Customer, Richard A. Lord

Richard A. Lord

Today in the United States, virtually every commercial bank makes safe deposit services available for a small fee, either through a department of the bank or through a subsidiary or affiliated safe deposit company. Never before has the demand for safe deposit services been so great. More than ever before, Americans are turning to safe deposit companies and bank safe deposit vaults for the storage of their assets. This increased demand has caused increased concern among legislators and bankers about whether to regulate further the day-to-day affairs of the safe deposit business. Increased use of safe deposit vaults and boxes …

The Omnibus Clause Of U.C.C. Section 4-303(1)(D): A Holder's Sword Or A Payor's Shield?, Charles C. Lewis

Charles C. Lewis

In the years after the promulgation of the 1952 official text, particularly as the New York Law Revision Commission studied it, and as more and more states either studied the Code for enactment or actually enacted it during the late 1950's and early 1960's, law professors, practicing attorneys and bank attorneys commented on each provision of it. Section 4-303(1)(d) and its omnibus clause did not escape this scrutiny. Many of the commentators, however, did no more than describe the purpose of section 4-303's priority rules, point out that section 4-213(1)(c), a remarkably similar section in the Code, did not contain …

Shadow Banking, Financial Markets, And The Real Estate Sector, Steven L. Schwarcz

Faculty Scholarship

This is a relatively brief “firestarter” talk prepared by the author for the World Economic Forum’s Industry Partnership Strategists Meeting 2012 (held on October 3, 2012) on transformation of the real estate sector in light of ongoing shifts in the financial markets and broader global trends.

Shadow Banking, Financial Markets, And The Real Estate Sector, Steven L. Schwarcz

Faculty Scholarship

This is a relatively brief “firestarter” talk prepared by the author for the World Economic Forum’s Industry Partnership Strategists Meeting 2012 (held on October 3, 2012) on transformation of the real estate sector in light of ongoing shifts in the financial markets and broader global trends.

Regulating Shadow Banking, Steven L. Schwarcz

Faculty Scholarship

Inaugural Address for Boston University Review of Banking & Financial Law's Inaugural Symposium: “Shadow Banking” February 24, 2012.

Although shadow banking is said to be huge, estimated at over $60 trillion, it is not well defined. This short and accessible paper attempts to define shadow banking by identifying its overall scope and its basic characteristics. Based on the definition derived, the paper also conceptually examines how shadow banking can be regulated to try to maximize its efficiencies while minimizing its risks.

Fundamental Forces Driving United States And International Financial Regulations Reform, Lawrence G. Baxter

Faculty Scholarship

Multiple forces create a systemic crisis of the proportions of the Global Financial Crisis of 2008. Global and domestic financial reform is a difficult and perplexing task, one that is likely to take many years, and one that will surely continue to be shaped by a diverse range of forces. Recent measures remain incomplete and in some cases are even proving to be misdirected. This article considers seven fundamental forces shaping actions on future reform, specifically the (1) long term impact of the Crisis (and all financial crises); (2) increase in the “financialization” of the global economy, seemingly disproportionate to …

Rule Of Too Much Law? The New Safety/Soundness Rulemaking Responsibilities Of The Federal Banking Agencies, Lawrence G. Baxter

Faculty Scholarship

No abstract provided.

Deregulation, Reregulation, And The Myth Of The Market, Edward L. Rubin

Washington and Lee Law Review

No abstract provided.

The Myth Of "Reregulation": The Interest Group Dynamics Of Regulatory Change In The Financial Services Industry, Jonathan R. Macey

Washington and Lee Law Review

No abstract provided.

The Financial Institutions Regulatory And Interest Rate Control Act Of 1978, Federal Banking Agencies, And The Judiciary: The Struggle To Define The Limitation Of Cease And Desist Order Authority

Washington and Lee Law Review

No abstract provided.

The Validity Of Sec Rule 3b-9 Which Requires Banks To Register As Broker-Dealers

Washington and Lee Law Review

No abstract provided.

Glass-Steagall And Collective Investment Trusts For Individual Retirement Accounts: Fiduciary Purpose Or Investment?

Washington and Lee Law Review

No abstract provided.

The Deregulation Of Banks, H. Helmut Loring, James M. Brundy

Washington and Lee Law Review

No abstract provided.

The International Lending Supervision Act Of 1983: A First Step Toward Responsible Foreign Lending

Washington and Lee Law Review

No abstract provided.

Bank's Right Of Setoff In Virginia

Washington and Lee Law Review

No abstract provided.

Regulation Of Bank Securities Activities

Washington and Lee Law Review

No abstract provided.

Garn-St Germain: A Harbinger Of Change, Stanley M. Gorinson, Glenn B. Manishin

Washington and Lee Law Review

No abstract provided.

The Legal Relationship Between The Bank And Its Safe Deposit Customer, Richard A. Lord

Campbell Law Review

Today in the United States, virtually every commercial bank makes safe deposit services available for a small fee, either through a department of the bank or through a subsidiary or affiliated safe deposit company. Never before has the demand for safe deposit services been so great. More than ever before, Americans are turning to safe deposit companies and bank safe deposit vaults for the storage of their assets. This increased demand has caused increased concern among legislators and bankers about whether to regulate further the day-to-day affairs of the safe deposit business. Increased use of safe deposit vaults and boxes …

The Omnibus Clause Of U.C.C. Section 4-303(1)(D): A Holder's Sword Or A Payor's Shield?, Charles C. Lewis

Campbell Law Review

In the years after the promulgation of the 1952 official text, particularly as the New York Law Revision Commission studied it, and as more and more states either studied the Code for enactment or actually enacted it during the late 1950's and early 1960's, law professors, practicing attorneys and bank attorneys commented on each provision of it. Section 4-303(1)(d) and its omnibus clause did not escape this scrutiny. Many of the commentators, however, did no more than describe the purpose of section 4-303's priority rules, point out that section 4-213(1)(c), a remarkably similar section in the Code, did not contain …

Lewis V. Btim: State Regulation, The Bank Holding Company Act And The Commerce Clause

Washington and Lee Law Review

No abstract provided.

Correspondent Banking And Insider Loans After The Financial Institutions Regulatory And Interest Rate Control Act Of 1978

Washington and Lee Law Review

No abstract provided.

Bank Credit Cards And The Timing Of Deductions Under Revenue Ruling 78-38: A Return To Consistency

Washington and Lee Law Review

No abstract provided.

Recent Cases, Linda A. Bunsey, David M. Thompson, Charles K. Campbell, Jr., Keith B. Simmons, Thomas C. Hundley

Vanderbilt Law Review

If the instant case, rather than Northway, is to become the accepted rule in the area of discounting, consumers and state lenders will be protected while the national bank-lenders will be burdened only slightly, if at all. National banks located in states that permit state lenders to discount loans at the maximum rate, with-out regard to the actual yield, will not be affected. National banks located in states that permit state lenders to discount only to the extent that the actual yield is within the statutory maximum will need to change their practices merely by charging the statutory rate only …

Depositary Bank Liability Under § 3-419(3) Of The Uniform Commercial Code

Washington and Lee Law Review

No abstract provided.