Law Commons^™

Usury And Loan Transfers, Roger Bernhardt, Alex Volkov

Publications

This Article is primarily concerned with the effect of transferring a mortgage loan from its originating loan broker to a group of small investors when that loan was at its inception usurious. However, because the rules applicable to that situation are not confined to mortgage law, we begin with a general explanation of usury rules before dealing with the particular real estate loan transaction mentioned.

Quarterback By Committee: A Response In Memory Of Dan Markel, Andrew A. Schwartz

Publications

In Catalyzing Fans, Dan Markel, Michael McCann and Howard Wasserman propose so-called “Fan Action Committees” (“FACs”), whereby fans would crowdfund a sum of money and then spend it to influence the personnel decisions of their favorite teams. This Response — dedicated to the memory of Dan Markel — suggests that an effective FAC could upset a team’s overall hiring and compensation system, thereby risking a downturn in team performance to the detriment of all concerned.

The Digital Shareholder, Andrew A. Schwartz

Publications

Crowdfunding, a new Internet-based securities market, was recently authorized by federal and state law in order to create a vibrant, diverse, and inclusive system of entrepreneurial finance. But will people really send their money to strangers on the Internet in exchange for unregistered securities in speculative startups? Many are doubtful, but this Article looks to first principles and finds reason for optimism.

Well-established theory teaches that all forms of startup finance must confront and overcome three fundamental challenges: uncertainty, information asymmetry, and agency costs. This Article systematically examines this “trio of problems” and potential solutions in the context of crowdfunding. …

The Nonfinancial Returns Of Crowdfunding, Andrew A. Schwartz

Publications

Securities crowdfunding — the sale of unregistered securities to the public over the Internet — has come under attack before it has even begun. Legal scholars in particular have expressed concern that investors will lose any money they invest in crowdfunding companies. Even assuming that this may be true from a purely financial perspective, these critics are missing an important point: Crowdfund investors with negative returns will not simply have lost their money, but rather they will have spent it (at least in part) on nonpecuniary benefits, including entertainment, political expression and community building. These nonfinancial returns of crowdfunding are …

Private And Public Ordering In Safe Asset Markets, Anna Gelpern, Erik F. Gerding

Publications

An influential literature in economics explores the phenomenon of “safe assets” – when participants across financial markets act “as if” certain debt is risk free – as well as its role in the global financial crisis and its implications for post-crisis reform.

We highlight the role of private ordering in constructing safe assets. Private ordering, including contractual devices and transaction structures, contributes to the creation of these debt contracts, to their collective treatment in financial markets as low risk investments, and to the making of deep and liquid markets in them. These contracts and transaction structures also provide a template …

Bank Regulation And Securitization: How The Law Improved Transmission Lines Between Real Estate And Banking Crises, Erik F. Gerding

Publications

This essay examines how securitization served as a new coupling rod joining cycles in real estate and banking markets and created a new pathway for financial contagion in the “subprime” financial crisis. Legal changes promoted the growth of securitization and improved this crisis transmission line. The essay examines the history of legislative and regulatory changes that facilitated bank participation in the markets for mortgage-backed securities. The essay then explains how securitization failed to mitigate the credit, liquidity, and interest rate risk associated with real estate when losses in residential markets became correlated nationwide. It then discusses how regulation contributed to …