Business Commons^™

The New Bond Workouts, William W. Bratton, Adam J. Levitin

All Faculty Scholarship

Bond workouts are a famously dysfunctional method of debt restructuring, ridden with opportunistic and coercive behavior by bondholders and bond issuers. Yet since 2008 bond workouts have quietly started to work. A cognizable portion of the restructuring market has shifted from bankruptcy court to out-of-court workouts by way of exchange offers made only to large institutional investors. The new workouts feature a battery of strong-arm tactics by bond issuers, and aggrieved bondholders have complained in court. The result has been a new, broad reading of the primary law governing workouts, section 316(b) of the Trust Indenture Act of 1939 (“TIA”), …

Single Point Of Entry And The Bankruptcy Alternative, David A. Skeel Jr.

All Faculty Scholarship

This Essay, which will appear in Across the Great Divide: New Perspectives on the Financial Crisis, a Brookings Institution and Hoover Institution book, begins with a brief overview of concerns raised by the Lehman Brothers bankruptcy about the adequacy of our existing architecture for resolving the financial distress of systemically important financial institutions. The principal takeaway of the first section is that Title II as enacted left most of these issues unanswered. By contrast, the FDIC’s new single point of entry strategy, which is introduced in the second section, can be seen as addressing nearly all of them. The …

Bankers And Chancellors, William W. Bratton, Michael L. Wachter

All Faculty Scholarship

The Delaware Chancery Court recently squared off against the investment banking world with a series of rulings that tie Revlon violations to banker conflicts of interest. Critics charge the Court with slamming down fiduciary principles of self-abnegation in a business context where they have no place or, contrariwise, letting culpable banks off the hook with ineffectual slaps on the wrist. This Article addresses this controversy, offering a sustained look at the banker-client advisory relationship. We pose a clear answer to the questions raised: although this is nominally fiduciary territory, both banker-client relationships and the Chancery Court’s recent interventions are contractually …

Striking The Right Balance: Investor And Consumer Protection In The New Financial Marketplace: Introduction, Lisa Fairfax, Arthur E. Wilmarth Jr

All Faculty Scholarship

On March 2, 2012, The George Washington University Law School's Center for Law, Economics & Finance and The George Washington Law Review jointly hosted a symposium entitled "Striking the Right Balance: Investor and Consumer Protection in the New Financial Marketplace."' The symposium focused on two principal topics. First, participants analyzed the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank") on investors and consumers in three areas of federal regulation-securities markets, derivatives markets, and consumer financial products. Second, the symposium evaluated the Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley") on its tenth anniversary and considered whether Sarbanes-Oxley's legacy might …

Adapting To The New Shareholder-Centric Reality, Edward B. Rock

All Faculty Scholarship

After more than eighty years of sustained attention, the master problem of U.S. corporate law—the separation of ownership and control—has mostly been brought under control. This resolution has occurred more through changes in market and corporate practices than through changes in the law. This Article explores how corporate law and practice are adapting to the new shareholder-centric reality that has emerged.

Because solving the shareholder–manager agency cost problem aggravates shareholder–creditor agency costs, I focus on implications for creditors. After considering how debt contracts, compensation arrangements, and governance structures can work together to limit shareholder–creditor agency costs, I turn to available …

A Theory Of Preferred Stock, William W. Bratton, Michael L. Wachter

All Faculty Scholarship

No abstract provided.

The New Financial Deal: Understanding The Dodd-Frank Act And Its (Unintended) Consequences, David A. Skeel Jr.

All Faculty Scholarship

Contrary to rumors that the Dodd-Frank Act is an incoherent mess, its 2,319 pages have two very clear objectives: limiting the risk of the shadow banking system by more carefully regulating derivatives and large financial institutions; and limiting the damage caused by a financial institution’s failure. The new legislation also has a theme: government partnership with the largest Wall Street banks. The vision emerged almost by accident from the Bear Stearns and AIG bailouts of 2008 and the commandeering of the bankruptcy process to rescue Chrysler and GM in 2009. Its implications for derivatives regulation could prove beneficial: Dodd-Frank will …