Law Commons^™

Public Actors In Private Markets: Toward A Developmental Finance State, Robert Hockett, Saule Omarova

Saule T. Omarova

The recent financial crisis brought into sharp relief fundamental questions about the social function and purpose of the financial system, including its relation to the “real” economy. This Article argues that, to answer these questions, we must recapture a distinctively American view of the proper relations among state, financial market, and development. This programmatic vision – captured in what we call a “developmental finance state” – is based on three key propositions: (1) that economic and social development is not an “end-state” but a continuing national policy priority; (2) that the modalities of finance are the most potent means of …

Comment On The Fhfa's Small Multifamily Subgoal, David J. Reiss, Jeffrey Lederman

David J Reiss

As the FHFA sets the housing goals for 2015-2017, it should focus on maximizing the creation and preservation of affordable housing. Less efficient proposed subgoals should be rejected unless the FHFA has explicitly identified a compelling rationale to adopt them. The FHFA has not identified one in the case of the proposed small multifamily subgoal. Thus, it should be withdrawn.

The Law And Economics Of Microfinance, Katherine Helen Mary Hunt

Katherine Helen Mary Hunt

Financial inclusion may be jargon which appeals to international donors and academics, but the strategic implementation in developing countries is often based on international du jour priorities, such as microfinance. The topic of microfinance is highly debated in the academic literature, although little empirical work has been published. Further, no literature to date has considered microfinance from a law and economics perspective. This paper seeks to contribute to the gap in the literature by considering how microfinance has evolved to address the credit market failure, and how microfinance regulation should be designed to promote long term financial inclusion via financially …

Encouraging Cooperation: Harmonizing The Battle Of Association And Mortgagee Lien Priority In America’S Common Interest Communities, Christian J. Bromley

Christian J Bromley

As the United States grappled with millions of foreclosures in recent years, the delinquency of mortgage and community association payments threatened the sustainability of over 300,000 common interest communities that house 63.4 million Americans. When owners of residential property fall behind on mortgage and association assessments, a battle for lien priority emerges between the associations and mortgagees. Each respectively holds a lien on the property to secure the debt owed to them, but it is the priority of these liens that determines the amount the lienholder recovers from a foreclosure sale. There is no uniform approach to priority in the …

The Reasons For The Gramm-Leach-Bliley Act, Raymond Natter

Raymond Natter

One of the most repeated allegations about the financial crisis is that the passage of the Gramm-Leach-Bliley Act (GLBA) that repealed two sections of the Glass-Steagall Act in 1999 was a significant contributing factor in the subprime mortgage meltdown. However, these allegations never specify the exact link between GLBA and the crisis. The reason is that there is no readily apparent link between the two events. Simply put, the provisions of the Glass-Steagall Act that were repealed by GLBA did not prohibit the origination of subprime mortgage loans, to the securitization of mortgage loans, or to the purchase of mortgage-backed …

Testimony To The Committee On Financial Institutions, Kansas House Of Representatives March 13, 2014, Brian M. Mccall

Brian M McCall

This document contains the text of testimony given before the Committee on Financial Institutions, Kansas House of Representatives March 13, 2014, in a hearing to address potential changes to the regulation of payday lending in Kansas.

Bounties For Bad Behavior: Rewarding Culpable Whistleblowers Under The Dodd-Frank Act And Internal Revenue Code, Jennifer M. Pacella

Jennifer M. Pacella, Esq.

In 2012, Bradley Birkenfeld received a $104 million reward or “bounty” from the Internal Revenue Service (“IRS”) for blowing the whistle on his employer, UBS, which facilitated a major offshore tax fraud scheme by assisting thousands of U.S. taxpayers to hide their assets in Switzerland. Birkenfeld does not fit the mold of the public’s common perception of a whistleblower. He was himself complicit in this crime and even served time in prison for his involvement. Despite his conviction, Birkenfeld was still eligible for a sizable whistleblower bounty under the IRS Whistleblower Program, which allows rewards for whistleblowers who are convicted …

Prudential Regulation And The Knowledge Problem: Towards A New Paradigm Of Systemic Risk Regulation, Michael T. Cappucci

Michael T Cappucci

In this article I examine the regulatory structure created by Title I of the Dodd-Frank Act and ask whether the prudential regulatory authority given to the Financial Stability Oversight Council is an effective tool for accomplishing the mission of identifying and containing risk in the financial system. Prudential regulation, the principal tool at the disposal of the FSOC, was developed in the 19th century to counteract moral hazard in the banking system. Over time, prudential supervision has become policymakers’ regulation of choice, to the point where it is now employed in the oversight and regulation of non-bank financial firms. However, …

Preventing And Countering The Financing Of Terrorism Within The Roman Catholic Church, Ryan J. Pulkrabek

Ryan J Pulkrabek

The Holy See/Vatican City State has taken vast measures toward international compliance with Anti-Money Laundering/Countering Financing of Terrorism laws since 2010. The HS/VCS submitted its original AML/CFT law to a MONEYVAL review. The key takeaway from the MONEVYAL assessment was that the Vatican has come a long way in a short period of time. Most of the deficiencies will be ironed out with continued communication with MONEYVAL, trial and error of enforcing Laws NN. CLXVI and XVIII, and continued efforts toward compliance with other international counter-terrorism conventions. Notably, Law No. CLXVI was passed after MONEYVAL’s November visit; thus, Law No. …

Remic Tax Enforcement As Financial-Market Regulator, Bradley T. Borden, David J. Reiss

David J Reiss

Lawmakers, prosecutors, homeowners, policymakers, investors, news media, scholars and other commentators have examined, litigated, and reported on numerous aspects of the 2008 Financial Crisis and the role that residential mortgage-backed securities (RMBS) played in that crisis. Big banks create RMBS by pooling mortgage notes into trusts and selling interests in those trusts as RMBS. Absent from prior work related to RMBS securitization is the tax treatment of RMBS mortgage-note pools and the critical role tax enforcement should play in ensuring the integrity of mortgage-note securitization.

This Article is the first to examine federal tax aspects of RMBS mortgage-note pools formed …

Federalism And Fiduciaries: A New Framework For Protecting State Benefit Funds, Richard E. Mendales

Richard E. Mendales

The financial crisis has underlined difficulties faced by states and their subdivisions in paying benefits to their employees. The most spectacular example is Detroit's bankruptcy, but state and local employers across the country face sharp cuts in benefits as their employers fight for solvency. A federal solution such as ERISA is precluded by considerations of federalism and the impracticability of getting major legislation through Congress. This Article proposes an alternative solution: a uniform state code, following other uniform state laws such as the Uniform Commercial Code, that states could adopt to govern both state and local plans. It would finance …

Dodd-Frank Regulators, Cost-Benefit Analysis, And Agency Capture, Paul Rose, Christopher J. Walker

Christopher J. Walker

The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) has raised the stakes for financial regulation by requiring more than twenty federal agencies to promulgate nearly 400 new rules. Scholars, regulated entities, Congress, courts, and the agencies themselves have all recognized — even before Dodd-Frank — the lack of rigorous cost-benefit analysis in the context of financial rulemaking. The D.C. Circuit has struck down several financial regulations because of inadequate cost-benefit analysis, with three more challenges to be decided this summer. Members of Congress have introduced legislation to address this problem, including a call for the President to intervene …

Janus Capital Group, Inc. V. First Derivative Traders: The Culmination Of The Supreme Court’S Evolution From Liberal To Reactionary In Rule 10b-5 Actions, Charles W. Murdock

Charles W. Murdock

“Political” decisions such as Citizens United and National Federation of Independent Business (“Obamacare”) reflect the reactionary bent of several Supreme Court justices. But this reactionary trend is discernible in other areas as well. With regard to Rule 10b-5, the Court has handed down a series of decisions that could be grouped into four trilogies. The article examines the trend over the past 40 years which has become increasingly conservative and finally reactionary.

The first trilogy was a liberal one, arguably overextending the scope of Rule 10b-5. This was followed by a conservative trilogy which put a brake on such extension, …

Functional Government In 3-D, Robert L. Glicksman, Alejandro E. Camacho

Robert L. Glicksman

The creation of new administrative agencies and the realignment of existing governmental authority are commonplace and high-stakes events, as illustrated by the recent creation of the Department of Homeland Security after 9/11 and of new financial regulatory agencies after the global recession of 2009. Scholars and policymakers have not devoted sufficient attention to this subject, failing to clearly identify the different dimensions along which government authority may be structured or to consider the relationships among them. Analysis of these institutional design issues typically also gives short shrift to whether authority should be allocated differently based on agency function. These failures …

Janus Capital Group, Inc. V. First Derivative Traders: The Culmination Of The Supreme Court’S Evolution From Liberal To Reactionary In Rule 10b-5 Actions, Charles W. Murdock

Charles W. Murdock

“Political” decisions such as Citizens United and National Federation of Independent Business (“Obamacare”) reflect the reactionary bent of several Supreme Court justices. But this reactionary trend is discernible in other areas as well. With regard to Rule 10b-5, the Court has handed down a series of decisions that could be grouped into four trilogies. The article examines the trend over the past 40 years which has become increasingly conservative and finally reactionary.

The first trilogy was a liberal one, arguably overextending the scope of Rule 10b-5. This was followed by a conservative trilogy which put a brake on such extension, …

Hola Preemption And The Original Intent Of Congress: Are Federal Thrifts Necessary To Stabilize The Housing Market?, Carliss N. Chatman

Carliss N Chatman

This article studies legislation, regulations, and case law to analyze whether the Homeowners Loan Act, as well as other measures taken to stabilize federal thrifts in the last forty years, have served their original purpose. It also examines the impact of federal intervention on states and homeowners and the role that federally-chartered institutions such as banks and savings and loan associations played in the 2008 market collapse. Over the course of this analysis, particular attention is given to Title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act. This act has numerous goals including implementing stronger consumer protections, …

Dodd-Frank Act And Remittances To Post-Conflict Countries: The Law Of Unintended Consequences Strikes Again, Raymond Natter

Raymond Natter

The Dodd-Frank Act established a new Federal framework for the regulation of international remittance payments that originate in the U.S. However, the statute and implementing regulations may have the unintended consequence of disrupting the flow of remittance funds to post-conflict nations.

Regulation Not Prohibition: The Comparative Case Against The Insurable Interest Doctrine, Sharo Michael Atmeh

Sharo M Atmeh

American law requires an insurable interest—a pecuniary or affective stake in the subject of an insurance policy—as a predi-cate to properly obtaining insurance. In theory, the rule prevents both wagering on individual lives and moral hazard. In practice, the doctrine is avoided by complex insurance transaction structuring to effectuate both origination and transfers of insurance by individuals without an insurable interest. This paper argues that it is time to ab-andon the insurable interest doctrine. As both the English and Aus-tralian experiences indicate, elimination of the insurable interest doctrine will have little detrimental pecuniary effect on the insurance industry, while freeing …

Barriers To Market Discipline: A Comparative Study Of Mortgage Market Regulation, Vincent Di Lorenzo

Vincent Di Lorenzo

This paper explores mortgage market reforms in the U.S. and U.K. in response to the recent mortgage market crisis. Two issues are examined. First, the paper explores the extent to which regulatory bodies have recognized behavioral barriers to market discipline on the part of not only consumers but also industry actors. Second the paper examines the varied response in the U.S. and U.K. to both market limitations and behavioral limitations to self-protection and self-discipline that led to unsafe lending practices in the period 2003 through 2007. The greater emphasis on rules-based regulation in the U.S. after 2008 is compared with …

Public Funds Private Investors: Analysis Of Ppip, Steven Zakharyayev Esq.

Steven Zakharyayev Esq.

In October of 2008, the U.S. Congress enacted The Emergency Economic Stabilization Act of 2008 (“EESA”) in response to the deterioration in the U.S. housing market and the subsequent illiquidity amongst U.S. financial institutions. The severity and scope of the financial crisis required unprecedented actions by the U.S. treasury to prevent further deterioration of the global economy. This included a $700 billion dollar investment of taxpayer funds to purchase troubled assets from financial institutions and subsequently improve the flow of credit throughout the U.S. economy.