Law Commons^™

Interest Rates, Venture Capital, And Financial Stability, Hilary J. Allen

Articles in Law Reviews & Other Academic Journals

Following several prominent bank failures and as central banks continue to tighten interest rates to fight inflation, there is increasing interest in the relationship between monetary policy and financial stability. This Article illuminates one path through which the prolonged period of low interest rates from 2009-2021 has impacted financial stability: it traces how yield-seeking behavior in the wake of the Global Financial Crisis and Covid pandemic led to a bubble in the venture capital industry, which in turn spawned a crypto bubble as well as a run on the VC-favored Silicon Valley Bank. This Article uses this narrative to illustrate …

Comments On Federal Trade Commission Non-Compete Ban Proposed Rule, Matter No. P201200, Chaz D. Brooks

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Within signed law professors and law students submitted this letter to the Federal Trade Commission, writing in their individual capacities, not as agents of their affiliated institutions, in support of the Federal Trade Commission’s proposed rule to ban most non-compete clauses (the “Proposal”) as an unfair method of competition.

This letter offers comments in response to areas where the FTC has requested public comment. To make our views clear, this letter contains the following sections: I. Summary of the Proposal; II. The Commission Should Consider Expanding Its Definition of Non-Compete Clauses to Prevent Employers from Requiring Workers to Quit Before …

Regulatory Managerialism Inaction: A Case Study Of Bank Regulation And Climate Change, Hilary J. Allen

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In November of 2029, Hurricane Penelope struck New York City as a category two storm. Work had started on a wall to protect Manhattan from rising sea levels and storm surges, but the work was incomplete, and significant damage to Manhattan real estate was sustained. While almost all that real estate was insured, insurance companies were compromised by the sheer magnitude of the losses. Even with significant federal subsidies, they were unable to meet their full commitments on insurance policies. Some commercial real estate firms, who had never really recovered from the shift to remote working during the Covid pandemic, …

Defi: Shadow Banking 2.0?, Hilary J. Allen

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The growth of so-called “shadow banking” was a significant contributor to the financial crisis of 2008, which had huge social costs that we still grapple with today. Our financial regulatory system still hasn’t fully figured out how to address the risks of the derivatives, securitizations, and money market mutual funds that comprised Shadow Banking 1.0, but we’re already facing the prospect o fShadow Banking 2.0in the form of decentralized finance, or “DeFi.” DeFi’s proponents speak of a future where sending money is as easy as sending a photograph–but money is not the same as a photograph. The stakes are much …

Regulatory Innovation And Permission To Fail: The Case Of Suptech, Hilary J. Allen

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The recent U.S. Supreme Court decision West Virginia v. EPA has cast a pall over the discretion of administrative agencies at a very inopportune time. The private sector is currently adopting new technologies at a rapid pace, and as regulated industries become more technologically complex, administrative agencies must innovate technological tools of their own in order to keep up. Agencies will increasingly struggle to do their jobs without that innovation, but the private sector is afforded something that is both critical to the innovation process, and often denied to administrative agencies: “permission to fail.” Without some grace for the inevitable …

On The Misuse Of Regressions Of Price On The Hhi In Merger Review, Jonathan Baker

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The article explains why regressions of price on HHI should not be used in merger review. Both price and HHI are equilibrium outcomes determined by demand, supply, and the factors that drive them. Thus, a regression of price on the HHI does not recover a causal effect that could inform the likely competitive effects of a merger. Nonetheless, economic theory is consistent with the legal presumption that a merger is likely to have adverse competitive effects if it occurs in a concentrated market and makes that market more concentrated.

The Complex Implications Of Fintech For Financial Inclusion, Heather Hughes

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No abstract provided.

Payments Failure, Hilary Allen

Articles in Law Reviews & Other Academic Journals

The processing of retail payments has traditionally been the domain of regulated banks, but technologically sophisticated players like Venmo, AliPay, Bitcoin and Ripple (and potentially Facebook’s Libra) are making incursions into the market. Even within regulated banks, payments processing is becoming increasingly reliant on new technologies – JPMorgan Chase’s “JPMCoin” is just one example. However, limited attention has been paid to the new kinds of operational risks associated with these complex new methods of processing retail payments. This Article argues that technological failures at a payments provider (bank or non-bank) could be amplified in unexpected ways as they interact with …

Why Central Banks Need To Take Human Rights More Seriously, Daniel D. Bradlow

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Most central bankers think that there is a tenuous connection between the operations of central banks and human rights. Their responsibility is to concentrate on the relatively narrow set of macro-economic variables that are relevant to their mandates and to leave to their country’s political leadership the decisions dealing with the complex and politically sensitive variables that affect the functioning of the economy and society.

This position is no longer tenable. Climate change is forcing the central banking community to rethink their view of their responsibilities. The recent release of the Network for Greening, the Financial System’s first comprehensive report …

Multilateral Development Banks, Their Member States And Public Accountability: A Proposal, Daniel D. Bradlow

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More than 25 years ago the multilateral development banks (MDBs) began establishing independent accountability mechanisms (IAMs), such as the World Bank’s Inspection Panel, to address concerns about MDB accountability to those communities and groups who were harmed by their decisions and actions. This essay argues that these mechanisms need updating. In the interests of promoting new and creative thinking about these mechanisms, it makes an ambitious two-part proposal designed to improve the efficacy of the IAMs, while also respecting the sovereignty of their member states and protecting an appropriate level of immunity for the MDBs. First, the MDBs should jointly …

Respect The Hustle: Necessity Entrepreneurship, Returning Citizens, And Social Enterprise Strategies, Priya Baskaran

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This Article addresses a pervasive and growing problem for returning citizens – high rates of economic insecurity – and as a novel solution, proposes the creation of Economic Justice Incubators a new municipally led social enterprise strategy.

Mass incarceration is a national problem and requires comprehensive criminal justice reform. In contrast, the process of reentry is locally focused thanks to a complex web of collateral consequences. An estimated 641,000 people return home from prison each year, many to a limited number of economically distressed communities. Once released, their mobility is limited by the terms of their parole and the collateral …

The Regulatory Accountability Act Loses Steam But The Trump Executive Order On Alj Selection Upturned 71 Years Of Practice, Jeffrey Lubbers

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No abstract provided.

Scaling Development Finance For Our Common Future, Daniel D. Bradlow, Kevin P. Gallagher, Leandro Serino, Jose Siaba Serrate

Articles in Law Reviews & Other Academic Journals

The G-20 and the broader world community has committed to ambitious goals to close global infrastructure gaps, mitigate climate change, and advance the 2030 Agenda for development. We call on G20 leaders to task development finance institutions (DFIs) such as the development banks in member countries and the Multilateral Development Banks (MDBs) of which G-20 countries are members, to commit to scaling up resources by 25 percent, to calibrate new financing to international commitments to mitigate climate change and the 2030 agenda, and to work together as an inclusive system toward achieving those shared goals.

Assessing The Potential For Global Economic Governance Reform, Daniel D. Bradlow

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Every dynamic social system’s adaptive capacity is finite. Eventually, the ability of the system’s legal and institutional arrangements to adapt to the changing operational context is exhausted. At this point, unless the system is significantly reformed, it begins losing its legitimacy and efficacy.

This article contends that the structure, operation and scale of the global economy has changed so dramatically that the current arrangements for global economic governance are approaching this crisis moment. They are failing to deliver an inclusive, sustainable and efficient international economic system that can contribute to peace, prosperity and human welfare. Their governance arrangements and operating …

A Human Rights Based Approach To International Financial Regulatory Standards, Daniel D. Bradlow

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Globalization and information and communication technologies pushed national financial regulators to establish international standard setting bodies (SSBs) which promote non-binding international financial regulatory standards. However, finance inevitably has social and human rights impacts and the SSBs and their members are not meeting their responsibility to account for these impacts in their international standards. This failure means that financial regulators and institutions may under-estimate the risks associated with their operations leading to misallocations of credit, less safe financial institutions and less efficient and transparent financial markets. To avoid this problem, SSBs should adopt a human rights approach to standard setting. The …

Court Capture, Jonas Anderson

Articles in Law Reviews & Other Academic Journals

Capture — the notion that a federal agency can become controlled by the industry the agency is supposed to be regulating — is a fundamental concern for administrative law scholars. Surprisingly, however, no thorough treatment of how capture theory applies to the federal judiciary has been done. The few scholars who have attempted to apply the insights of capture theory to federal courts have generally concluded that the federal courts are insulated from capture concerns.

This Article challenges the notion that the federal courts cannot be captured. It makes two primary arguments. As an initial matter, this Article makes the …

International Financial Regulatory Standards And Human Rights: Connecting The Dots, Daniel D. Bradlow, Motoko Aizawa, Margaret Wachenfeld

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This paper’s hypothesis is that the international standard setting bodies (SSBs) could improve the quality of their international standards by incorporating a human rights analysis. It focuses on five SSBs and seven of their international standards and its findings include the following: First, the standards all implicate the right of non-discrimination, and the rights to information, privacy and an effective remedy. Second, they each raises economic, social and cultural rights issues, including the obligation to allocate ‘maximum available resources’ to the progressive realization of economic, social and cultural rights; the human rights responsibilities of private actors exercising delegated regulatory authority, …

Using A Shield As A Sword: Are International Organizations Abusing Their Immunity?, Daniel D. Bradlow

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The starting point for this paper is that IOs are as subjects of international law. Since IOs do not control territory or a population and so always operate within the jurisdiction of one of their member states, they are vulnerable to interference by their member states. In order to mitigate this risk, IOs have been granted qualified immunity, usually referred to as functional immunity, from the jurisdiction of their member states. For most of the twentieth century, this grant of functional immunity made sense for two reasons.

First, the founding states envisaged that IOs would have limited capacity to act …

Can Parallel Lines Ever Meet? The Strange Case Of The International Standards On Sovereign Debt And Business And Human Rights, Daniel D. Bradlow

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This special issue is a cooperation of the Yale Journal of International Law and the United Nations Conference on Trade and Development (UNCTAD). It emerged from UNCTAD’s work on sovereign debt workouts, specifically from its Working Group on a Sovereign Debt Workout Mechanism (2013 to 2015). The working group developed a Roadmap and Guide for Sovereign Debt Workouts, published in 2015. It proposes an incremental approach to sovereign debt workouts that relies on the continuous, progressive development of sovereign debt restructuring practice. This work has inspired the adoption of Basic Principles for Sovereign Debt Restructuring by the United Nations General …

The Road To Precautionary Review Of Financial Products, Hilary Allen

Articles in Law Reviews & Other Academic Journals

Financial innovation introduces new and complex products into the financial system, providing market participants with more bespoke ways to manage their risk, return and liquidity. However, by increasing the complexity of the financial system, financial innovation also compromises financial stability. Faced with the rapid pace of financial innovation, regulators have two options. One is to seek to meet the complexity of the industry with complex regulation, in an arms race that under-resourced regulators are bound to lose. The less explored (and more controversial) path is for regulators to try to reduce the complexity of the financial system by limiting financial …

The Financial Stability Oversight Council (Fsoc): It's Not All About The Designation, Hilary Allen

Articles in Law Reviews & Other Academic Journals

The recession that followed the financial crisis of 2007-2008 illustrated just how important financial stability is:when the financial system fails, it results in credit contractions that can cause seismic problems for the economyat large. Because financial institutions lack the incentives, information and tools to reduce the amount of risk inthe financial system as a whole, the vital task of overseeing and regulating for financial stability must necessarilybe carried out by a public body.

Financial Product Complexity, Moral Hazard, And The Private Law, Heather Hughes

Articles in Law Reviews & Other Academic Journals

Extensive debate surrounds the question of how regulators should respond to the externalization of risk associated with moral hazard in financial markets. The capacity of market actors to externalize risk is related to transactional complexity. Complexity, for example, augments reliance on valuation methods that can obscure risk, aggravating moral hazard. Recently, scholars and policymakers have articulated strategies for regulating transactional complexity that, this Article finds, reflect a shift from a contract law to a property law rubric for understanding financial products. This Article articulates this shift and assesses its regulatory implications. Some call for standardization of financial products. Others call …

Sustainability And Infrastructure Investment: National Development Banks In Africa, Daniel D. Bradlow, Christopher Strong Humphrey

Articles in Law Reviews & Other Academic Journals

The need for infrastructure finance in Africa is tremendous. A 2009 report by the World Bank suggests that the continent faces needs of US$93 billion per year. More recent studies, pointing to economic and population growth trends and using more sophisticated methods of assessing needs, indicate that infrastructure needs are actually much higher. Existing financing sources have not been able to keep pace.

In this context, the role of national development banks (NDBs) in the continent merits attention. As will be shown below, many African countries have NDBs, although the vast majority are quite small, with limited access to finance …

Putting The 'Financial Stability' In Financial Stability Oversight Council, Hilary Allen

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For all the ink that has been spilled on the topic of financial regulation since the financial crisis of 2007-2008, there has been little examination of the competing normative goals of financial regulation. Should the financial system be treated as an end in itself such that the efficiency of that system is the primary goal? Or should financial regulation instead treat the financial system as a means to the end of broader economic growth? This Article argues for the latter approach, and stakes out the controversial normative position that financial stability, rather than efficiency, should be the paramount focus of …

Foreign Investments And The Market For Law, Susan Franck

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In this Article, Professors O'Hara O'Connor and Franck adapt and extend Larry Ribstein's positive framework for analyzing the role of jurisdictional competition in the law market. Specifically, the authors provide an institutional framework focused on interest group representation that can be used to balance the tensions underlying foreign investment law, including the desire to compete to attract investments and countervailing preferences to retain domestic policy-making discretion. The framework has implications for the respective roles of BITs and investment contracts as well as the inclusion and interpretation of various foreign investment provisions.

The Icc's Exit Problem, Rebecca Hamilton

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The International Criminal Court (ICC) was never meant to supplant the domestic prosecution of international crimes. And yet the Court is now entering its second decade of operations in four African nations, with no plan for exit in sight. This Article identifies the looming need for the ICC to consider when and how to exit situations in which it is currently active. In addition to the normative concern that a failure to start planning for exit undercuts the Court’s placement within a system of complementarity, the need to consider exit is also driven by a financial imperative. The Court’s caseload …

Is Financial Instability A Tax Problem With A Tax Solution?, Hilary Allen

Articles in Law Reviews & Other Academic Journals

Financial regulation and taxation are two fields of law that are notoriously complex and specialized. Given thiscircumstance, it is perhaps not surprising that financial regulators often pay little attention to tax, and focusinstead on their own sphere of influence. Unfortunately, financial regulators ignore tax incentives at the peril offinancial stability.

Let's Talk About Tax, Hilary Allen

Articles in Law Reviews & Other Academic Journals

No abstract provided.

Civil Liability Theories For Insufficient Security Authentication In Online Banking, Paul Rice

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No abstract provided.

Basel's Gone Cold On Cocos, But Is This A Blessing In Disguise For Banks?, Hilary Allen

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The last few months have seen a dramatic fall in the value of bank stocks both in Europe and the U.S., bringingback unpleasant memories of the depths of the financial crisis in 2008. Concerns about the sovereign debt crisisin Europe, continuing litigation relating to the American subprime mortgage crisis, and the generally poor stateof the world economy have increasingly put banks under pressure. However, some commentators have pointedout the “silver lining” in all of this: the big American and European banks are better capitalized than they wereduring the financial crisis, and therefore are better able to absorb these shocks and …