Law Commons^™

Dozens Of Groups Brought To Market Via Spacs To Enter Key Russell Index, Usha Rodrigues

Popular Media

Dozens of companies that entered US markets through deals with blank-cheque vehicles in the past year are set to graduate into the Russell 3000 index on Friday evening, giving a potential boost to the fortunes of electric vehicle developers and other speculative ventures.

FTSE Russell, which maintains the popular benchmark, is conducting the annual refresh of its indices this month, adding and removing companies based on their market capitalisations and other factors.

Index Funds And Millennial Assets, Christopher Bruner

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This piece is a review of a forthcoming article titled “Shareholder Value(s): Index Fund ESG Activism and the New Millennial Corporate Governance” (in the Southern California Law Review by M. Barzuza, Q. Curtis and D. Webber). Bruner is a contributing editor to JOTWELL’s Corporate Law section.

Law And The Blockchain, Usha Rodrigues

Scholarly Works

All contracts are necessarily incomplete. The inefficiencies of bargaining over every contingency, coupled with humans’ innate bounded rationality, mean that contracts cannot anticipate and address every potential eventuality. One role of law is to fill gaps in incomplete contracts with default rules. The blockchain is a distributed ledger that allows the cryptographic recording of transactions and permits “smart” contracts that self-execute automatically if their conditions are met. Because humans code the contracts of the blockchain, gaps in these contracts will arise. Yet in the world of “smart contracting” on the blockchain, there is no place for the law to step …

Asset Partitioning And Financial Innovation, Christopher Bruner

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Review of the article by Ofer Eldar and Andrew Verstein titled “The Enduring Distinction between Business Entities and Security Interests”, 92 Southern California Law Review, no. 2 (2019).

Winning And Losing In Investor-State Arbitration, Tim Samples

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As tensions between investors’ rights and sovereign power escalate, investor-state dispute settlement has become a focal point of backlash and controversy. As a result, ISDS now embodies two opposing currents in international law: (i) the erosion of sovereignty that accompanied economic globalization, trade frameworks, and investment treaties following the Second World War and (ii) more recently, reassertions of sovereignty prompted by recent backlashes against the global economic order. This Article measures and evaluates outcomes of the ISDS system for sovereign participants. Using the best available data, this Article contributes more detailed assessments of sovereign winners (home states of claimants) and …

Financial Contracting With The Crowd, Usha Rodrigues

Scholarly Works

Equity crowdfunding is broken. The current model imposes too many burdens on entrepreneurs in exchange for too little money. For alternative models, this Article looks to the time-tested venture capital financial contract, and the recent experience of initial coin offerings (ICOs). ICOs made headlines over the past two years, as the means by which blockchain technology companies raised billions of dollars to launch new cryptocurrency ventures. Although their novelty as a monetary and investing device is well known, ICOs also presented significant, unappreciated insights into financial contracting.

ICOs furnished an unprecedented experiment into how bargains would look if entrepreneurs raised …

Elizabeth Warren’S New Housing Proposal Is Actually A Brilliant Plan To Close The Racial Wealth Gap, Mehrsa Baradaran, Darrick Hamilton

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Last month, Sen. Elizabeth Warren released a $450 billion housing plan called the American Housing and Economic Mobility Act. The proposal is a comprehensive and bold step toward providing affordable housing for the most vulnerable Americans. The bill is the first since the Fair Housing Act with the explicit intent of redressing the iterative effects of our nation’s sordid history of housing discrimination. Critically, it has the potential to make a substantive dent in closing our enormous and persistent racial wealth gap.

Commentary: Why We Need To Stop Fining Big Banks Like Wells Fargo, Mehrsa Baradaran

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When big banks behave badly, they know that the worst thing they’ll get is a fine; no one is going to end up in jail. Instead, shareholders end up paying the cost, not the bank employees responsible. Shareholders are a diffuse group of investors, many of whom hold shares as a part of a diverse portfolio. They are not the ones who commit such fraud, nor do they have much power to change the bank’s day-to-day operations.

Clearly fines don’t work to prevent misconduct. We should instead rely on the constitutional method of dealing with wrongdoing: the criminal justice system.

Between Economic Planning And Market Competition: Institutional Law And Economics In The Us, Laura Phillips Sawyer

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In 1926 John Maurice Clark published a seminal text in institutionalist economics, Social Control of Business, surveying the ways in which business was subject to control by a variety of formal and informal constraints. 1 The text rejected mainstream ideas in neoclassical political economy by explaining how individual self-interest and competition could be manipulated not only through legal rules but also by custom, habit, codes of ethics, and morals. Representative of the institutionalist movement, Clark discarded presumptions of an individualistic economy based on market competition. Instead, he posited that long-term public goals of prosperity and equity could be achieved through …

Postal Banking's Public Benefits, Mehrsa Baradaran

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The basic idea of postal banking is to have a public bank that would offer a wide range of transaction services, including deposit-taking and small lending. Post offices could offer these services at a much lower cost than banks and the fringe banking industry because (1) they can use natural economies of scale and scope to lower the costs of the products; (2) their existing infrastructure significantly reduces overhead costs, and (3) they do not have profit-demanding shareholders and would be able to offer products at cost.

Corporate Governance Reform In Post-Crisis Financial Firms: Two Fundamental Tensions, Christopher Bruner

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The manner in which financial firms are governed directly impacts the stability and sustainability of both the financial sector and the "real" economy, as the financial crisis and associated regulatory reform efforts have tragically demonstrated. However, two fundamental tensions continue to complicate efforts to reform corporate governance in post-crisis financial firms. The first relates to reliance on increased equity capital as a buffer against shocks and a means of limiting leverage. The tension here arises from the fact that no corporate constituency desires risk more than equity does, and that risk preference only tends to be stronger in banks, and …

Banks: A Broken Social Contract, Mehrsa Baradaran

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This article explores how how the Financial Crisis of 2008 affected the banking industry and brought three specific problems: The first was that the banks and non‐bank financial institutions created due to deregulation were huge, interconnected, and highly leveraged; Second, the panic started in the “shadow banking” sector and showed that the short‐term credit transactions and derivatives that non‐bank financial institutions traded and used for funding for years were similar to banking, and thus prone to runs; and Third, the entire premise of deregulation rested on an assumption that individual firms and market players could accurately calculate and manage risks, …

Payday Lending Isn’T Helping The Poor. Here’S What Might, Mehrsa Baradaran

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This article appearing in the Washington Post on June 28, 2016 by Mehrsa Baradaran, J. Alton Hosch Associate Professor of Law at the University of Georgia School of Law explores how postal banking could benefit the poor and reduce their reliance on payday lending.

Credit Is A Double Edge Sword, Mehrsa Baradaran

Popular Media

This commentary, which appeared in the Atlantic on April 26, 2016 discusses the Marquette decision by the Supreme Court and how it de-stigmatized the practice of usury.

Postal Banking Worked—Let’S Bring It Back, Mehrsa Baradaran

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This article appearing in The Nation on January 9, 2016 examines how Postal Banking could assist low-income individuals.

Why The Poor Face A Higher Cost Of Banking, Mehrsa Baradaran

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Professor Baradaran appeared on PBS Newshour to discuss inequality in the banking system on January 6, 2016.

It's Time For A Public Option In Banking, Mehrsa Baradaran

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Associate Professor Mehrsa Baradaran published this article in The Harvard Law Record on November 16, 2015. It discusses how post offices can provide ordinary citizens with banking services.

How The Us Post Office Can Save America—And Itself, Matt Phillips

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Professor Mehrsa Baradaran is interviewed by Quartz on her thoughts about postal banking.

If The U.S. Government Treated Poor People As Well As It Treats Banks, Mehrsa Baradaran

Popular Media

One of the great ironies in modern America is that the less money you have, the more you pay to use it. The country’s “unbanked” must pay high fees to fringe banks to turn their paychecks into cash, pay their monthly bills, or send money to a spouse or a child. The unbanked pay much of their income—up to 10 percent—just to use their money. For these families, the total price of simple financial services each month is more than they spend on food. Indeed, it is very expensive to be poor. This article makes a proposal, transform underused post …

Postal Banking: A Lifesaver For America's Poor, Mehrsa Baradaran

Popular Media

If banks are not providing credit to the poor, the state should provide it directly.The existing post office framework represents the most promising path toward effectuating such a public option. American banks long ago deserted their most impoverished communities, but post offices, even two centuries later, have remained — still rooted in an egalitarian mission. There have never been barriers to entry at post offices, and their services have been available to all, regardless of income.

Hold The Champagne On Ge Capital's Breakup, Mehrsa Baradaran

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General Electric announced last week plans to sell off the bulk of its financing arm, GE Capital. Some have claimed that this move is a win for regulators trying to curb "too big to fail" conglomerates and suggested it's a sign that financial reform is working. I'm not so sure. I think it just means that the conglomerates left standing are now even more homogeneous and risk-prone.

Maggie Walker's Bank, Mehrsa Baradaran

Popular Media

Maggie Walker was the first woman of any race to own a bank. What makes this achievement remarkable is that she was born in 1867 to a former slave in Richmond, Va. Her mother was widowed and left destitute when her father was murdered. She and her mother survived by doing laundry for whites families in the area, an experience that shaped her understanding of wealth and race inequality. But Maggie was a brilliant student and finished high school at 16. She became a teacher, but was forced to quit when she married as it was unlawful for married women …

The Shrews That Tame Wall Street?, Mehrsa Baradaran

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Although plenty of men are whistleblowers and financial reformers, too, the ones making the most noise are women. Women are significantly underrepresented in Wall Street firms as well as in Congress and the regulatory agencies.

Regulation By Hypothetical, Mehrsa Baradaran

Scholarly Works

A new paradigm is afoot in banking regulation—and it involves a turn toward the more speculative. Previous regulatory instruments have included geographic restrictions, activity restrictions, disclosure mandates, capital requirements, and risk management oversight to ensure the safety of the banking system. This Article describes and contextualizes these regulatory tools and shows how and why they were formed to deal with industry change. The financial crisis of 2008 exposed the shortcomings in each of these regimes. In important ways, the Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank”) departs from these past regimes and proposes something new: Call it …

A Short History Of Postal Banking, Mehrsa Baradaran

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Every other developed country in the world has postal banking, and we actually did too. It is important to remember this forgotten history as we begin to talk seriously about reviving postal banking because the system worked and it worked well. Postal banking, which existed in the United States from 1911 to 1966, was in fact so central to our banking system that it was almost the alternative to federal deposit insurance, and served as such from 1911 until 1933. The system prevented many bank runs during a turbulent time in the nation’s banking history—essentially performing central banking functions before …

The Post Office Banks On The Poor, Mehrsa Baradaran

Popular Media

Approximately 88 million people in the United States, or 28 percent of the population, have no bank account at all, or do have a bank account, but primarily rely on check-cashing storefronts, payday lenders, title lenders, or even pawnshops to meet their financial needs. And these lenders charge much more for their services than traditional banks. The average annual income for an “unbanked” family is $25,500, and about 10 percent of that income, or $2,412, goes to fees and interest for gaining access to credit or other financial services. But a possible solution has appeared, in the unlikely guise of …

Corporate Governance Theory And Review Of Board Decisions, Christopher M. Bruner

Scholarly Works

No abstract provided.

Banking And The Social Contract, Mehrsa Baradaran

Scholarly Works

This article asserts that there exists today and has always existed an interdependent relationship between banks and the state. I refer to this connection and its mutual benefits and responsibilities as a social contract. When Alexander Hamilton responded to President Washington’s inquiry about the advisability of a national bank, he wrote that “such a Bank is not a mere matter of private property, but a political machine of the greatest importance to the State.” This social contract has existed since the inception of banking in the United States and has been reinforced over time, but it has recently become weakened …

It’S Time For Postal Banking, Mehrsa Baradaran

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This essay makes the case that the USPS is in a unique position to provide much-needed financial services for the large population of unbanked or underbanked Americans. First, the post office can offer credit at lower rates than fringe lenders by taking advantage of economies of scale as well as their position in the federal bureaucracy. Second, they already have branches in many low-income neighborhoods that have been long deserted by commercial banks. And, third, people at every level of society, including the unbanked, have a level of familiarity and comfort with the post office that they do not have …

Conceptions Of Corporate Purpose In Post-Crisis Financial Firms, Christopher M. Bruner

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American "populism" has had a major impact on the development of U.S. corporate governance throughout its history. Specifically, appeals to the perceived interests of average working people have exerted enormous social and political influence over prevailing conceptions of corporate purpose - the aims toward which society expects corporate decision-making to be directed. This article assesses the impact of American populism upon prevailing conceptions of corporate purpose - contrasting its unique expression in the context of financial firms with that arising in other contexts - and then examines its impact upon corporategovernance reforms enacted in the wake of the financial and …