Law Commons^™

Total Return Meltdown: The Case For Treating Total Return Swaps As Disguised Secured Transactions, Colin P. Marks

Faculty Articles

Archegos Capital Management, at its height, had $35 billion in assets. But in the spring of 2021, in part through its use of total return swaps, Archegos sparked a $30 billion dollar sell-off that left many of the world's largest banks footing the bill. Mitsubishi UFJ Group estimated a loss of $300 million; UBS, Switzerland's biggest bank, lost $861 million; Morgan Stanley lost $911 million; Japan's Nomura lost $2.85 billion; but the biggest hit came to Credit Suisse Group AG, which lost $5.5 billion. Archegos itself lost $20 billion over two days. The unique characteristics of total return swaps and …

Secured Transactions History: The Impact Of Southern Staple Agriculture On The First Chattel Mortgage Acts In The Anglo-American World, George Lee Flint Jr, Marie Juliet Alfaro

Faculty Articles

The development of secured transaction law in colonial America was spurred by a litigious conflict between the recognizance and the chattel mortgage. The recognizance was the admission and recording of a debt before the court in order to secure credit. However, court hearings were infrequent in the colonies and often logistically impractical to the average farmer or merchant. The chattel mortgage was a more informal and practical solution to providing lines of credit on personal property. Without a system for recording chattel mortgages, lenders could not be sure in their investments.

In the southern colonies, the emergence of staple crops, …

Secured Transactions History: The First Chattel Mortgage Acts In The Anglo-American World, George Lee Flint Jr, Marie Juliet Alfaro

Faculty Articles

The chattel mortgage acts first arose in the southern mainland English-American colony of Virginia in 1643. Other colonies followed suit over the next 100 years. The function of the earliest chattel mortgage acts was not to legalize the transaction, but to declare it void if not registered, or to provide a priority rule favoring the registered transaction. Legislatures did not pass these colonial chattel mortgage acts to legalize an otherwise fraudulent transaction because reported cases indicate that the common law upheld the nonpossessory secured transaction prior to the passage of the earliest act in the southern states.

The Northeastern States’ …

Secured Transaction History: The Impact Of English Smuggling On The Chattel Mortgage Acts In The Spanish Borderlands, George Lee Flint Jr, Marie Juliet Alfaro

Faculty Articles

Spanish colonies, including the territories of Florida, Louisiana, and southwestern America, acknowledged the jurisdiction of Spanish royal decrees. The colonies approached the registration of mortgages in a similar but more tentative fashion, recognizing the distances between the borderlands and the registrar’s offices. The law developed differently in Florida and Louisiana, which were administered by a different governmental body. While the registration process was required for chattel mortgages on slaves, there is no evidence the rules were enforced or applied to other types of mortgages on personalty. However, in 1770, Louisiana adopted a filing requirement for chattel mortgages for all slaves …

Secured Transactions History: The Fraudulent Myth, George Lee Flint Jr

Faculty Articles

England first adopted Germanic law banning nonpossessory secured transactions because at the time, England was controlled by the Normans. The ban persisted as long as statutes favored alternative security devices, namely the pledge and the collusive judgment, the major competing security device. But the allowance of interest after 1571 obviated the advantage of the pledge to surreptitiously generate interest under the usury ban. The 1677 Statute of Frauds destroyed the priority of the collusive judgment, changing its priority from date of the judgment entered to the delivery of the writ of execution to the sheriff for execution. The nonpossessory secured …

Secured Transactions History: The Impact Of Textile Machinery On The Chattel Mortgage Acts Of The Northeast, George Lee Flint Jr

Faculty Articles

The northeastern states passed chattel mortgage statues in the 1830s to replace the rebuttable rule acknowledging third party rights to the collateral, which created litigation to enforce a nonpossessory secured transaction. The rebuttable rule presumed that debtor possession of the collateral was fraud, but also allowed the secured party to present rebuttal evidence of his good faith in the transaction. The rebuttable rule negatively affected the textile machinery industry, allowing third parties to collect over the original creditor. In an effort to maneuver around the rebuttable rule, machinery manufacturers turned to a host of legal remedies, but eventually decided on …