Law Commons^™

Leverhulme Lecture: The Future Of Securitization, Steven L. Schwarcz

Faculty Scholarship

Lecture given November 11, 2010, the third of three delivered by Prof. Schwarcz as Leverhulme Visiting Professor of Law, Oxford University.

The securitization of subprime mortgage loans is widely viewed as a root cause of the financial crisis. This lecture balances the costs and benefits of securitization, focusing on what went wrong and on what needs to be fixed to curtail securitization’s abuses and make it viable again as an important financing tool. Finally, the lecture examines alternatives to securitization, focusing on covered bonds and comparing and contrasting covered bonds and securitization.

Leverhulme Lecture: The Global Financial Crisis And Systemic Risk, Steven L. Schwarcz

Faculty Scholarship

Lecture given November 9, 2010, is the first of three delivered by Prof. Schwarcz as Leverhulme Visiting Professor of Law, Oxford University. Prof. Schwarz examines the causes of the global financial crisis, showing it was triggered by market failures, not by financial institution failures, and arguing that any regulatory framework for managing systemic risk must address markets as well as institutions. The lecture also analyzes how regulation should be designed under that broader framework to mitigate systemic risk and its consequences. Finally, the lecture examines the potential systemic effects of sovereign debt crises, demonstrating how regulation can mitigate those effects.

Leverhulme Lecture: Regulating Complexity In Financial Markets, Steven L. Schwarcz

Faculty Scholarship

Lecture given November 9, 2010, the second of three delivered by Prof. Schwarcz as Leverhulme Visiting Professor of Law, Oxford University.

Complexity is the greatest challenge to 21st Century financial regulation, having the potential to impair markets and investments in several interrelated ways. Furthermore, complexity can cause failures that individual market participants cannot, or will not have incentive to, remedy. These failures are driven by information uncertainty, misalignment of interests and incentives among market participants, and nonlinear feedback and tight coupling that result in sudden unexpected market changes. These are the same types of failures that engineers have long faced …

Too Big To Fail?: Recasting The Financial Safety Net, Steven L. Schwarcz

Faculty Scholarship

Government safety nets in the United States and abroad focus, anachronistically, on problems of banks and other financial institutions, largely ignoring financial markets which have become major credit sources for consumers and companies. Besides failing to protect these markets, this narrow focus encourages morally hazardous behavior by large institutions, like AIG and Citigroup, that are "too big to fail." This paper examines how a safety net should be recast to protect financial markets and also explains why that safety net would mitigate moral hazard and help resolve the too-big-to-fail dilemma.