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Full-Text Articles in Law
Behavioral Finance Symposium Summary Paper, Michael S. Barr, Annabel Jouard, Andrew Norwich, Josh Wright, Katy Davis
Behavioral Finance Symposium Summary Paper, Michael S. Barr, Annabel Jouard, Andrew Norwich, Josh Wright, Katy Davis
Other Publications
On September 14-15, 2017, the University of Michigan’s Center on Finance, Law, and Policy and behavioral science research and design lab ideas42 brought together influential leaders from academia, government, nonprofits and the financial sector for a two-day symposium on behavioral finance. Behavioral finance is the study of how behavioral biases and tendencies affect financial decisions, and in turn how those impact financial markets.
Financial Reform: Making The System Safer And Fairer, Michael S. Barr
Financial Reform: Making The System Safer And Fairer, Michael S. Barr
Articles
In the fall of 2008, the financial crisis crushed the U.S. economy and plunged the country into the Great Recession. The crisis shuttered American businesses, cost millions of Americans their jobs, and wiped out home values and household savings. The macro effects hit hardest and were the longest lasting for those least able to bear the brunt of the crisis. It was devastating to middle-income families and perhaps even more so to low- and moderate-income households, who had little financial buffer (Barr 2012a). Financial stability, never robust for these families, dropped precipitously (Barr and Schaffa 2016). Both in the United …
Framing Address: A Framework For Analyzing Financial Market Transformation, Steven L. Schwarcz
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.
Institutional Choice In An Economic Crisis, David A. Skeel Jr.
Institutional Choice In An Economic Crisis, David A. Skeel Jr.
All Faculty Scholarship
Neil Komesar’s work has transformed our understanding of how institutional analysis should be done. There is one very surprising omission from the breathtaking range of Komesar’s oeuvre, however: he has never directly applied his framework to crises. My aim in this Article is to advance, at least in a small way, our understanding of institutional choice during and after an economic crisis. Part I very briefly revisits the recent crisis, emphasizing its institutional dimensions. Part II identifies three puzzles posed by a crisis for standard Komesarian analysis. Part III then shows how Eric Posner and Adrian Vermeule’s executive-centered theory partially …
Too Libor, Too Late: Time To Move To A Market Rate, Michael S. Barr
Too Libor, Too Late: Time To Move To A Market Rate, Michael S. Barr
Articles
Barclays has been fined, the British have issued their report, and now the market is anxious for everything to go on as usual with the London Interbank Offer Rate (“LIBOR”). I think that would be a serious mistake. The U.S. and British investigations into rate-fixing by Barclays revealed a widespread culture of pervasive, deceitful conduct in the setting of the most important private sector benchmark for over $300 trillion in derivative contracts and $10 trillion in adjustable-rate loans. It is highly unlikely that Barclays was the only major bank engaging in this conduct, and public investigations and private lawsuits against …
Behaviorally Informed Regulation, Michael S. Barr, Sendhil Mullainathan, Eldar Shafir
Behaviorally Informed Regulation, Michael S. Barr, Sendhil Mullainathan, Eldar Shafir
Book Chapters
Policy makers typically approach human behavior from the perspective of the rational agent model, which relics on normativc, a priori analyses. The model assumes people make insightful, well-planned, highly controlled, and calculated decisions guided by considerations of personal utility. This perspective is promoted in the social sciences and in professional schools and has come to dominate much of the formulation and conduct of policy. An alternative view, developed mostly through empirical behavioral research, and the one we will articulate here, provides a substantially difierent perspective on individual behavior and its policy and regulatory implications. According to the empirical perspective, behavior …
Adaptive Regulation In The Amoral Bazaar, Lawrence G. Baxter
Adaptive Regulation In The Amoral Bazaar, Lawrence G. Baxter
Faculty Scholarship
Twelfth Oliver Schreiner Memorial Lecture,delivered on 20 October 2010 at the School of Law, University of the Witwatersrand, Johannesburg, South Africa. Many gradual changes in science, law and society are crystallizing to shape a significant transformation in administrative law. The doctrinal framework within which Justice Schreiner himself attempted to modernize how law should regulate government and private economic activity seems from our vantage point to be quite antiquated. In explaining why, my examples will come from the world of financial services, but they could easily be found anywhere in the area of law and regulation. First I will outline the …
Populist Retribution And International Competition In Financial Services Regulation, Adam C. Pritchard
Populist Retribution And International Competition In Financial Services Regulation, Adam C. Pritchard
Articles
The pattern of regulatory reform in financial services regulation follows a predictable pattern in democratic states. A hyperactive market generates a bubble, the bubble deflates, and much financial pain ensues for those individuals who bought at the top of the market. The financial mess brings the scrutiny of politicians, who vow "Never again!" A political battle ensues, with representatives of the financial services industry fighting a rearguard action to preserve its prerogatives amidst cries for the bankers' scalps. Regulations, carefully crafted to win the last war, are promulgated. Memories fade of the foolish enthusiasm that fed the last bubble. Slowly, …
Lincoln's Populist Sovereignty: Public Finance Of, By, And For The People, Timothy A. Canova
Lincoln's Populist Sovereignty: Public Finance Of, By, And For The People, Timothy A. Canova
Faculty Scholarship
No abstract provided.
Keynote Address: The Case For A Market Liquidity Provider Of Last Resort, Steven L. Schwarcz
Keynote Address: The Case For A Market Liquidity Provider Of Last Resort, Steven L. Schwarcz
Faculty Scholarship
This short paper, prepared as a keynote address, explains why the credit crunch is fundamentally a story about financial markets, not banks. Its cause was a collapse of securitization and other debt markets, which have become major sources of financing for consumers and companies. Deprived of this financing, consumers have had difficulty purchasing homes and automobiles, and companies have had difficulty purchasing inventory and making capital investments, causing the real economy to shrink. This paper examines how these financial markets should be protected. Although already subject to many prescriptive regulatory protections, these markets evolve faster than regulation can adapt. The …
The Case For Behaviorally Informed Regulation, Michael S. Barr, Sendhil Mullainathan, Eldar Shafir
The Case For Behaviorally Informed Regulation, Michael S. Barr, Sendhil Mullainathan, Eldar Shafir
Book Chapters
Policymakers approach human behavior largely through the perspective of the “rational agent” model, which relies on normative, a priori analyses of the making of rational decisions. This perspective is promoted in the social sciences and in professional schools, and has come to dominate much of the formulation and conduct of policy. An alternative view, developed mostly through empirical behavioral research, provides a substantially different perspective on individual behavior and its policy implications. Behavior, according to the empirical perspective, is the outcome of perceptions, impulses, and other processes that characterize the impressive machinery that we carry behind the eyes and between …
Behaviorally Informed Financial Services Regulation, Michael S. Barr, Sendhil Mullainathan, Eldar Shafir
Behaviorally Informed Financial Services Regulation, Michael S. Barr, Sendhil Mullainathan, Eldar Shafir
Other Publications
Financial services decisions can have enourmous consequences for household well-being. Households need a range of financial services - to conduct basic transactions, such as receiving their income, storing it, and paying bills; to save for emergency needs and long-term goals; to access credit; and to insure against life's key risks. But the financial services system is exceedingly complicated and often not well-designed to optimize house-hold behavior. In response to the complexity of out financial system, there has been a long running debate about the appropriate role and form of regulation. Regulation is largely stuck in two competing models - disclosure, …
Asset Securitization And Corporate Risk Allocation, Christopher W. Frost
Asset Securitization And Corporate Risk Allocation, Christopher W. Frost
Law Faculty Scholarly Articles
Asset securitization is a financial innovation in which corporations sell financial assets to a specially formed entity that in turn taps financial markets for the purchase price. The device provides firms an alternative to raising capital through traditional debt and equity markets. Practitioners of the approach tout securitization as a means through which a firm can lower its overall cost of capital by limiting the risk facing investors in the securitized assets. Commentators have described asset securitization as "one of the most important financing vehicles in the United States." Interest in the device is increasing dramatically as more companies see …