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Full-Text Articles in Law
The Problematic Case Of Clearinghouses In Complex Markets, Yesha Yadav
The Problematic Case Of Clearinghouses In Complex Markets, Yesha Yadav
Vanderbilt Law School Faculty Publications
This Article challenges the academic and policy consensus that clearinghouses adequately mitigate the risks of trading credit derivatives. The Article advances two arguments. First, scholars have devoted little attention to the risks posed by underlying assets (e.g. a mortgage loan) that the credit derivative references and the impact that these have on the clearinghouse. Credit derivatives enable the economic risk of debt to be separated from the legal rights attaching to that debt. This separation impacts the clearinghouse profoundly. As a contract party to each trade it processes, the clearinghouse can be saddled with economic risk of underlying debt without …
Making Money: Leverage And Private Sector Money Creation, Margaret M. Blair
Making Money: Leverage And Private Sector Money Creation, Margaret M. Blair
Vanderbilt Law School Faculty Publications
In the wake of the financial crisis of 2008-2009, practitioners and theorists in law, finance, and economics are rethinking our theories about how the financial sector influences the real economy. In particular, they are reexamining the linkages among financial innovation, supply of credit and money, monetary policy, bubbles, financial stability, and economic growth. One of the key issues that is being reconsidered is the dynamics of how banks and other financial institutions drive credit creation and credit allocation, and how these factors, in turn affect the performance of the macroeconomy. In this article, I argue that, by providing an alternative …
A Simpler Approach To Financial Reform, Morgan Ricks
A Simpler Approach To Financial Reform, Morgan Ricks
Vanderbilt Law School Faculty Publications
There is a growing consensus that new financial reform legislation may be in order. The Dodd-Frank Act of 2010, while well-intended, is now widely viewed to be at best insufficient, at worst a costly misfire. Members of Congress are considering new and different measures. Some have proposed substantially higher capital requirements for the largest financial firms; others favor an updated version of the old Glass-Steagall regime. This paper offers up a simpler approach, one that centers around the financial sector’s short-term funding. The simpler approach would be compatible with other financial stability reforms, but it is better understood as a …
Information Asymmetries In Consumer Credit Markets: Evidence From Payday Lending, Paige Marta Skiba, Will Dobbie
Information Asymmetries In Consumer Credit Markets: Evidence From Payday Lending, Paige Marta Skiba, Will Dobbie
Vanderbilt Law School Faculty Publications
Information asymmetries are prominent in theory but difficult to estimate. This paper exploits discontinuities in loan eligibility to test for moral hazard and adverse selection in the payday loan market. Regression discontinuity and regression kink approaches suggest that payday borrowers are less likely to default on larger loans. A $50 larger payday loan leads to a 17 to 33 percent drop in the probability of default. Conversely, there is economically and statistically significant adverse selection into larger payday loans when loan eligibility is held constant. Payday borrowers who choose a $50 larger loan are 16 to 47 percent more likely …