Law Commons^™

The Big Banks: Background, Deregulation, Financial Innovation And Too Big To Fail, Charles W. Murdock

Charles W. Murdock

Summary: The Big Banks: Background, Deregulation, Financial Innovation and Too Big to Fail

The U.S. economy is still reeling from the financial crisis that exploded in the fall of 2008. This article asserts that the big banks were major culprits in causing the crisis, by funding the non-bank lenders that created the toxic mortgages which the big banks securitized and sold to unwary investors. Paradoxically, banks which were then too big to fail are even larger today.

The article briefly reviews the history of banking from the Founding Fathers to the deregulatory mindset that has been present since 1980. It …

Competition And Crisis In Mortgage Securitization, Michael N. Simkovic

Michael N Simkovic

U.S. policymakers often treat market competition as a panacea. However, in the case of mortgage securitization, policymakers’ faith in competition is misplaced. Competitive mortgage securitization has been tried three times in U.S. history - during the 1880s, the 1920s, and the 2000s - and every time it has failed. Most recently, competition between mortgage securitizers led to a race to the bottom on mortgage underwriting standards that ended in the late 2000s financial crisis. This article provides original evidence that when competition was less intense and securitizers had more market power, securitizers acted to monitor mortgage originators and to maintain …

Application Of The Concept Of Project Finance In Iraq - A Comparative And Analytical Study, Faris K. Nesheiwat

Ferris K Nesheiwat

Many scholars and experts have addressed the issue of project finance, but one area that remains without detailed examination is its legal treatment under the legal systems of developing countries. The legal concepts applied under project finance are Western and are not necessarily identical to or compatible with legal concepts in Middle Eastern countries in general or Iraq in particular. In that sense, project finance is a transplanted legal concept when examined in the Middle Eastern legal framework. Although this Paper tackles the legal and strategic issues arising from the use of project finance in Iraq, its analysis and comparative …

Mitigating Financial Risk For Small Business Entrepreneurs, Michelle M. Harner

Michelle M. Harner

Financial distress by definition threatens a company’s viability. Entrepreneurial and start-up entities are particularly vulnerable to this threat. Yet, much of the discussion following the recent recession focuses almost exclusively on financial institutions and “too-big-to-fail” entities. This essay re-examines lessons gleaned from the recession in the context of smaller, entrepreneurial entities. Specifically, it analyzes how small business entrepreneurs might invoke principles of enterprise risk management to mitigate the long-term impact of financial distress on their business models. It also considers related refinements to extant small business regulations, including the U.S. bankruptcy laws. The essay’s primary objective is to help policymakers, …

Risk In Sentencing: Constitutionally-Suspect Variables And Evidence-Based Sentencing, James C. Oleson

James C Oleson

It is said that imposing punishment is one of the most difficult things a judge will ever do. Implicit in the imposition of punishment are a number of competing philosophical considerations: retribution, incapacitation, deterrence, and rehabilitation, among others. In many jurisdictions, judges enjoy broad authority over sentencing decisions; in others, judicial discretion is limited by mandatory-minimum penalties or sentencing guidelines. A new, actuarial approach to sentencing (“evidence-based sentencing”) focuses upon the reduction of recidivism, using data to maximize the utilitarian ends of sentencing. Research suggests that statistical assessments outperform clinical judgment of even trained experts. But which variables should judges …

The Dodd-Frank Wall Street Reform And Consumer Protection Act: What Caused The Financial Crisis And Will Dodd-Frank Succeed In Preventing Future Crises?, Charles W. Murdock

Charles W. Murdock

Summary: The Dodd-Frank Wall Street Reform and Consumer Protection Act: What Caused the Financial Crisis and Will Dodd-Frank Succeed in Preventing Future Crises?

We are still experiencing the devastating impact of the financial crisis which came to a head on September 18, 2008 when Secretary Paulson told Congressional leaders that “[u]nless you act, the financial system of this country and the world will melt down in a matter of days.”

To prevent future crises of this magnitude, last year Congress enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act. However, this year, legislation has already been introduced to repeal …

Creativity, Improvisation, And Risk: Copyright And Musical Innovation, Olufunmilayo B. Arewa

Olufunmilayo B. Arewa

The goals and beneficiaries of copyright frameworks have long been contested in varied contexts. Copyright is often treated as a policy tool that gives creators incentives to create new works. Incentive theories of copyright often emphasize appropriability, which enables copyright owners to ensure that they profit from their copyrighted works by exercising control over uses of, and access to, such works. Although copyright clearly imposes costs in the form of restrictions on access to copyright-protected works and inefficiencies in the form of deadweight loss, the benefits of copyright are thought by many to outweigh the costs. Copyright discussions may at …

Liability For Future Harm, Alex Stein, Porat Ariel

Alex Stein

This Article considers the possibility of imposing liability in torts for a wrongfully created risk of future harm. We examine the American and English court decisions pertaining to this issue and consider whether a probability-based compensation for the victim’s expected—albeit not yet materialized—harm is just and efficient. We demonstrate how the virtues of a legal regime that allows a tort victim to recover compensation for her expected harm overshadow its vices. We conclude that a person’s risk of sustaining harm in the future should be actionable whenever the risk is substantial. We further conclude that it should be left to …

Lessons In Price Stability From The U.S. Real Estate Market Collapse, Andrea J. Boyack

Andrea J Boyack

The U.S. residential housing market collapse illustrates the consequences of ignoring risk while funding mortgage borrowing. Collateral over-valuation was a foundational piece of the crisis. Over the past few decades, secondary markets, securitization, policy and psychology increased the flow of funds into real estate. At the same time, financial market segmentation divorced risk from reward. Increased mortgage capital availability, unmitigated by proper risk allocation, led to real estate price inflation. Social trends and government policies exacerbated both the mortgage capital over-supply and the risk-valuation disconnect.

The Dodd-Frank Act inadequately addresses the underlying asset valuation problem. Federal regulation may support market …

Fairness, Utility, And Market Risk, Jeff Schwartz

Jeff Schwartz

In this Article, I argue that we lack a satisfactory theory about how disclosure, the centerpiece of securities regulation, serves investor interests. To close this gap, I contend that the regulations should be viewed as part of a broader societal framework that protects individuals from stock-market risk. I flesh out this notion in three ways. First, I set out to justify protection from market risk as a valid societal goal. To do so, I appeal to Rawlsian and utilitarian notions of justice. These moral theories contain the principle that a just society helps individuals manage risk. I argue that this …

The Board's Duty To Monitor Risk After Citigroup, Robert T. Miller

Robert T Miller

When Citigroup suffered billions of dollars in losses on subprime securities, some of its shareholders sued the bank’s directors alleging that the losses resulted from breaches by the directors of their duty to properly monitor the risks that the bank was running by holding and dealing in such securities. After the Delaware Court of Chancery dismissed the complaint on the pleadings, many academic commentators argued that the court should have taken the opportunity to articulate more stringent legal standards governing director oversight. This contribution to a symposium at the University of Pennsylvania Law School argues that any significant expansion of …

Civilians In Cyberwarfare: Casualties, Susan W. Brenner, Leo L. Clarke

Susan Brenner

This article is a sequel to Civilians in Cyberwarfare: Conscripts, to be published by the Vanderbilt Journal of Transnational Law. Conscripts addresses the essential role of civilians as participants in cyberwarfare. Here, we explore the potential losses cyberwarfare might cause to civilian entities, including multi-national corporations, utilities, universities and local governments. We explain why cyberwarfare presents unique risks and requires unique executive responses. We also analyze how civilians should manage specific legal liability, political and reputational risks. Finally, we consider whether civilians can expect compensation if the federal government imposes new regulations, appropriates intellectual property, or even conscripts entire businesses …

Risky Business: The Credit Crisis And Failure, Olufunmilayo B. Arewa

Olufunmilayo B. Arewa

The credit crisis represents a watershed event for global financial markets and has been linked to significant declines in real economy performance on a level of magnitude not experienced since World War II. Recognition of the crisis in 2008 has been followed in 2009 and 2010 by a plethora of competing proposals in response to the credit crisis. The result has been a cacophony of visions, voices, and approaches. The sheer noise that has ensued threatens to drown out the fundamental core questions that should be asked about the credit crisis. Among the most important are questions about the relationships …

The Environmental Deficit: Applying Lessons From The Economic Recession, Christine Klein

Christine A. Klein

In 2007, the nation entered a financial downturn unprecedented since the Great Depression of the 1930s. A period of national introspection followed, including memorable moments such as Federal Chairman Alan Greenspan’s gut-wrenching admission that his “whole intellectual edifice” had collapsed during the summer of 2007. Although prescriptions for financial rescue varied widely in the details, a surprisingly-broad consensus began to emerge as to the underlying pathology of the crisis. This Essay focuses on three underlying errors: rejecting rules through deregulation, trivializing risk through overly-optimistic analyses, and recklessly borrowing and lending money. Those powerful lessons, accepted by a stunned nation in …

Trading Places: Securities Regulation, Market Crisis, And Network Risk, Olufunmilayo B. Arewa

Olufunmilayo B. Arewa

The rising power of traders has fundamentally transformed financial market networks and risks. Further, the increased complexity of traded securities and trading strategies within financial networks has magnified shortcomings of existing industry risk management practices as well as dominant regulatory regimes. Financial markets are ultimately places where people trade. Broader social and technological changes have altered the nature of trading activities in financial markets. Innovations in technology, financial instruments, and trading strategies have increased financial market efficiency but have also transformed sources of financial market risks. Financial market networks heighten the need for fundamental rethinking of financial market regulation and …

International Harmonization Of Regulation Of Nanomedicine, Gary E. Marchant, Douglas J. Sylvester, Kenneth W. Abbott, Tara Lynn Danforth

Gary E. Marchant

Nanomedicine holds enormous promise for the improved prevention, detection and treatment of disease. Yet, at the same time, countervailing concerns about the potential safety risks of nanotechnologies generally, and nanomedical products specifically, threaten to derail or at least delay the introduction and commercial viability of many nanomedicine applications. All around the globe, national governments are struggling with balancing these competing benefits and risks of nanotechnology in the medical and other sectors. It is becoming increasingly clear that reasonable, effective and predictable regulatory structures will be critical to the successful implementation of nanotechnology. The question examined in this paper is whether …

Supplying The Adverb: Corporate Risk-Taking And The Business Judgment Rule, David Rosenberg

David Rosenberg

The business judgment rule precludes judicial review of most decisions by corporate directors. The rule is necessary to protect directors from potential liability for “good faith” decisions that ultimately end in failure. Courts and legal commentators have long emphasized the importance that the rule has in promoting the kind of risk-taking by corporations that has resulted in new ideas, new technologies and new markets. In recent years, Delaware courts have shown so much deference to risk-taking that they have misapplied the still-evolving doctrine of good faith. Professor Rosenberg argues that courts should use the same standards of good faith to …

The Analysis Of The Compulsory Legislation On Employers’ Liability Insurance From The Practice In Dalian, Chang Liu

Chang Liu

ABSTRACT

Employers’ Liability Insurance is compulsory insurance with the legislative guarantee in most of the developed countries; however under China’s present situation with frequent accidents in the high-risk profession such as those accidents in coal mine, the legislative status concerning Employers’ Liability Insurance fall behind. Compulsive legislative practice of the employers’ liability insurance is a significant measure to strengthen and improve the safety of manufacture, while the lacking and flaw concerning the relative law and other legal documents directly have negative influence on the compulsive legislative practice.

First, this paper analyzes the serious backward status quo in comparison with other …

How The Government Can Protect Home Mortgage Consumers: A Proposal To Provide Consumers A Risk Assessment Of Mortgages, Adeline Park

Adeline Park

The recent sub-prime mortgage crisis has revealed the consumer’s vulnerability in the home mortgage marketplace. Consumers face an overwhelming variety of mortgage options, and are not motivated to invest the necessary time and resources to comprehend the meaning and implications of each loan feature. I propose that the government assess the risk of each loan feature available in the home mortgage market, based on the historical number of foreclosures each loan type has yielded. The government will then require lenders to display the risk assessment icon on all sales, marketing, and advertising materials. The risk assessment icon will identify the …

Chapter 09: Societal Order, Personhood, And Human Rights (The Anthropology Of Constitutional Justice), Wolfgang Fikentscher

Wolfgang Fikentscher

Inclusive online updates jan10. Next to family and kinship, society is the closest framework and mark of orientation to a “higher mammal” such as the human being (cf. Chapter 7; and I., below). Chapter 9 deals with societal and social ordering of human life and thus represent the “public side” of personhood. This gives rise to a simultaneous discussion of the concept of personhood in anthropology. Johann Wolfgang Goethe once remarked in his drama “Dr. Faustus”: “It’s in their gods that humans paint themselves” (In seinen Göttern malt sich der Mensch). Similarly, Goethe could have said: “In his companionships man …

Two Crises Of Confidence: Securing Non-Proliferation And The Rule Of Law Through Security Council Resolutions, Vik Kanwar

Vik Kanwar

This timely article describes the powers of the United Nations Security Council as they have developed in the field of non-proliferation, and demonstrated in recent resolutions, and goes on to propose a normative framework based on the model of reciprocal “confidence-building” measures to ensure the legality and legitimacy of these resolutions.

Recent proliferation crises (concerning Iran, North Korea, and non-state proliferation networks) have led the Council draw upon various sources-- express and implied powers under the UN Charter, powers granted by specific treaties, and an unusual degree of international consensus-- to expand its powers. This paper attempts to transcend false …

Whose Eyes Are You Going To Believe: Scott V. Harris And The Perils Of Cognitive Illiberalism, Dan Kahan, David A. Hoffman, Don Braman

David A Hoffman

This paper accepts the unusual invitation to see for yourself issued by the Supreme Court in Scott v. Harris, 127 S. Ct. 1769 (2007). Scott held that a police officer did not violate the Fourth Amendment when he deliberately rammed his car into that of a fleeing motorist who refused to pull over for speeding and instead attempted to evade the police in a high-speed chase. The majority did not attempt to rebut the arguments of the single Justice who disagreed with its conclusion that no reasonable juror could find the fleeing driver did not pose a deadly risk to …

Reasonableness, Justice And The No-Duty-To-Rescue Rule Of Torts, Alan Calnan

Alan Calnan

The no-duty-to-rescue rule says that people are not required to rescue others in distress. Thus, someone who fails to offer aid cannot be held civilly liable if the victim later succumbs to the danger. This liability exemption applies no matter how grave the risk facing the victim, and no matter how simple, easy and safe the rescue opportunity for the bystander. To most people, the no-duty-to-rescue rule seems clearly at odds with the concept of moral fault. Instinctively, it feels wrong to stand idly by as another human being suffers harm. This instinct could be rooted in a number of …

The Risk Concept On Modern Tort Map: An Analytical Approach To English Law, Mashael Alhajeri

Mashael Alhajeri

No abstract provided.

Shifting Risk And Fixing Blame: The Vexing Problem Of Credit Card Obligations In Bankruptcy, Margaret Howard

Margaret Howard

No abstract provided.