Law Commons^™

Regulating Shadows: Financial Regulation And Responsibility Failure, Steven L. Schwarcz

Faculty Scholarship

In the modern financial architecture, financial services and products increasingly are provided outside of the traditional banking system—and thus without the need for bank intermediation between capital markets and the users of funds. Most corporate financing, for example, no longer is dependent on bank loans but raised through special-purpose entities, money-market mutual funds, securities lenders, hedge funds, and investment banks. This shift, referred to as “disintermediation” and described as creating a “shadow banking” system, is so radically transforming finance that regulatory scholars need to rethink their assumptions. Two of the fundamental market failures underlying shadow banking—information failure and agency failure—were …

Don’T ‘Screw Joe The Plummer’: The Sausage-Making Of Financial Reform, Kimberly D. Krawiec

Faculty Scholarship

This Article examines agency-level activity during the preproposal rulemaking phase—a time period about which little is known despite its importance to policy outcomes—through an analysis of federal agency activity in connection with section 619 of the Dodd–Frank Act, popularly known as the Volcker Rule. By capitalizing on transparency efforts specific to Dodd–Frank, I am able to access information on agency contacts whose disclosure is not required by the Administrative Procedure Act and, therefore, not typically available to researchers.

I analyze the roughly 8,000 public comment letters received by the Financial Stability Oversight Council in advance of its study regarding Volcker …

Framing Address: A Framework For Analyzing Financial Market Transformation, Steven L. Schwarcz

Faculty Scholarship

To open an international conference on “Rethinking Financial Markets,” this address seeks to frame that inquiry from the perspectives of scholars in the fields of law, economics, finance, and accounting. In attempting to identify what it is about financial markets that is worth rethinking, the address focuses on market changes that increase decentralization, fragmentation, globalization, disintermediation, and funding mismatches. The address also argues that the scholarly perspectives are inherently interrelated: although scholars in each field proceed from their own toolkits, they all aim for the common normative goal of optimizing financial markets to enable capital formation.

Regulating Ex Post: How Law Can Address The Inevitability Of Financial Failure, Iman Anabtawi, Steven L. Schwarcz

Faculty Scholarship

Unlike many other areas of regulation, financial regulation operates in the context of a complex interdependent system. The interconnections among firms, markets, and legal rules have implications for financial regulatory policy, especially the choice between ex ante regulation aimed at preventing financial failure and ex post regulation aimed at responding to that failure. Regulatory theory has paid relatively little attention to this distinction. Were regulation to consist solely of duty-imposing norms, such neglect might be defensible. In the context of a system, however, regulation can also take the form of interventions aimed at mitigating the potentially systemic consequences of a …

Lawyers In The Shadows: The Transactional Lawyer In A World Of Shadow Banking, Steven L. Schwarcz

Faculty Scholarship

This article examines how the role of transactional lawyers should change in the new world of shadow banking. Although transactional lawyers should consider the potential systemic consequences of their client's actions, their actions should be tempered by their primary duties to the client and by their responsibilities to the l,egal system more broadly.