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¬Reverse Regulatory Arbitrage: An Auction Approach To Regulatory Assignments, Todd Henderson, Fred Tung
¬Reverse Regulatory Arbitrage: An Auction Approach To Regulatory Assignments, Todd Henderson, Fred Tung
Todd Henderson
In the years before the Financial Crisis, banks got to pick their regulators, engaging in a form of regulatory arbitrage that we now know was a race to the bottom. We propose to turn the tables on the banks by allowing regulators, specifically, bank examiners, to choose the banks they regulate. We call this “reverse regulatory arbitrage,” and we think it can help improve regulatory outcomes. Building on our prior work that proposes to pay bank examiners for performance—by giving them financial incentives to avoid bank failures—we argue that bank supervisory assignments should be set through an auction among examiners. …
Pay For Regulator Performance, Todd Henderson, Frederick Tung
Pay For Regulator Performance, Todd Henderson, Frederick Tung
Todd Henderson
Few doubt that executive compensation arrangements encouraged the excessive risk taking by banks that led to the recent Financial Crisis. Accordingly, academics and lawmakers have called for the reform of banker pay practices. In this Article, we argue that regulator pay is to blame as well, and that fixing it may be easier and more effective than reforming banker pay. Regulatory failures during the Financial Crisis resulted at least in part from a lack of sufficient incentives for examiners to act aggressively to prevent excessive risk. Bank regulators are rarely paid for performance, and in atypical cases involving performance bonus …
Pay For Regulator Performance, Todd Henderson, Fred Tung
Pay For Regulator Performance, Todd Henderson, Fred Tung
Todd Henderson
Few doubt that executive compensation arrangements encouraged the excessive risk taking by banks that led to the recent Financial Crisis. Accordingly, academics and lawmakers have called for the reform of banker pay practices. In this Article, we argue that regulator pay is to blame as well, and that fixing it may be easier and more effective than reforming banker pay. Regulatory failures during the Financial Crisis resulted at least in part from a lack of sufficient incentives for examiners to act aggressively to prevent excessive risk. Bank regulators are rarely paid for performance, and in atypical cases involving performance bonus …