Law Commons^™

"Because That's Where The Money Is": A Theory Of Corporate Legal Compliance, William Bradford

william bradford

Upon his capture in 1934, the legendary bank robber Willie Sutton was asked by FBI agents, Why do you rob banks, Willie? Sutton, who believed the question to be rhetorical, replied, dryly, Because that's where the money is. In other words, Sutton understood his interrogator to be inquiring as to why he robbed banks rather than, say, homes, or gas stations, or church offering plates. Had he understood the query as intended - i.e., what was it about Willie Sutton the impelled Willie Sutton to crime when many others, struggling to survive the Great Depression, were not? - Sutton could …

Investing In Distressed Italian Companies Under The Reformed Italian Bankruptcy Law - A Comparison With The Us Bankruptcy Code, Pierantonio Musso

Pierantonio Musso

This article presents a scheme to profitably invest in distressed Italian companies by taking advantage of the Italian Bankruptcy Law in comparison with the US Bankruptcy Code. The risks connected to the insolvency proceeding are analyzed under their economic effects and foreseen in their general appearance. Specific remedies to avoid or mitigate the potential risks are provided. Singular advantages, available only in the proposed investment scheme under the Italian Law, are described. As a result the investment produces a less risky and more profitable outcome than an investment in a non-distressed and non-Italian target company.

Resolving Large, Complex Financial Firms, Thomas Fitzpatrick, Mark Greenlee, James Thomson

James B Thomson

How to best manage the failure of systemically important fi nancial fi rms was the theme of a recent conference at which the latest research on the issue was presented. Here we summarize that research, the discussions that it sparked, and the areas where considerable work remains.

Restoring The Natural Law: Copyright As Labor And Possession, Alfred C. Yen

Alfred C. Yen

In this Article, Professor Yen explores the problems associated with viewing copyright solely as a tool for achieving economic efficiency and advocates for the restoration of natural law to copyright jurisprudence. The Article demonstrates that economics has not been solely responsible for copyright’s development and basic structure, but has rather developed along lines suggested by neutral law, despite modern copyright jurisprudence. The Article considers the consequences of extinguishing copyright’s natural law facets in favor of the blind pursuit of efficiency and concludes by exploring the implications of restoring natural law thinking to copyright jurisprudence.

Applying Anti-Money Laundering/Anti-Terrorist Financing Controls To The United States Legal Profession: A Response To The Senate Permanent Subcommittee Report On The Proceeds Of Foreign Corruption, Nicholas S. Kazmerski

Nicholas S. Kazmerski

"Applying Anti-Money Laundering/Anti-Terrorist Financing Controls to the United States Legal Profession: A Response to the Senate Permanent Subcommittee Report on the Proceeds of Foreign Corruption" ***Abstract:This paper examines and comments on the reforms to the U.S. legal profession as proposed by the Senate Permanent Subcommittee Report on the Proceeds of Foreign Corruption (issued February 2010), specifically whether these proposed reforms are realistic or necessary given the existing attorney regulatory framework. To do so, it will first be necessary to provide a general overview of money laundering/terrorist financing followed by a background of anti-money laundering regulation starting with the Bank Secrecy …

Damages To Business Interests, R. Steven Thing

R. Steven Thing

No abstract provided.

Justice, The Bretton Woods Institutions And The Problem Of Inequality, Frank J. Garcia

Frank J. Garcia

The Bretton Woods Institutions are, together with the WTO, the preeminent international institutions devoted to managing international economic relations. This mandate puts them squarely in the center of the debate concerning development, inequality and global justice. While the normative analysis of the WTO is gaining momentum, the systematic normative evaluation of the World Bank and the International Monetary Fund is comparatively less developed. This essay aims to contribute to that nascent inquiry. How might global justice criteria apply to the ideology and operations of the Bank and Fund? Political theory offers an abundance of perspectives from which to conduct such …

Evaluating Imf Crisis Prevention As A Matter Of Global Justice, Frank J. Garcia

Frank J. Garcia

No abstract provided.

Save The Economy: Break Up The Big Banks And Shape Up The Regulators, Charles W. Murdock

Charles W. Murdock

Save the Economy: Break Up the Big Banks and Shape Up the Regulators

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 …

Rating The Regulation Of Rating Agencies: Credit Rating Agency Reform In The Aftermath Of The Global Financial Crisis, Nan S. Ellis

Nan S Ellis

In this article, we identify five issues related to performance of credit rating agencies and consider the Dodd-Frank Act in light of these five interrelated issues. Others have commented on credit rating agency performance and offered proposed solutions. Our article is unique, however, in that it offers a comprehensive examination of these interrelated issues. We recognize that any regulatory reform must consider all aspects of the issue rather than to deal with isolated, incremental reform. Moreover, we offer an interdisciplinary approach which considers the relevant finance literature as well as legal commentary.

Freezing Assets In The War On Terror: Ofac And The Fourth Amendment, Rebecca Kagan Sternhell

Rebecca Kagan Sternhell

In 2001, President Bush issued Executive Order 13224 declaring a state of national emergency and triggering an array of emergency powers. Chief among these powers was the International Emergency Economic Powers Act (“IEEPA”), which permits the Treasury Department’s Office of Foreign Asset Control (“OFAC”) to freeze the assets and accounts of suspected terrorists and their affiliates. Recently OFAC has gone after U.S. charities. Three US charities filed suit alleging Fourth Amendment violations. Each organization received a different judicial determination on the Fourth Amendment question. The paper discusses these three cases and demonstrates no consensus on the Fourth Amendment issue. There …

Complexity, Innovation And The Regulation Of Modern Financial Markets, Dan Awrey

Dan Awrey

The intellectual origins of the global financial crisis (GFC) can be traced back to blind spots emanating from within conventional financial theory. These blind spots are distorted reflections of the perfect market assumptions underpinning the canonical theories of financial economics: modern portfolio theory; the Modigliani and Miller capital structure irrelevancy principle; the capital asset pricing model and, perhaps most importantly, the efficient market hypothesis. In the decades leading up to the GFC, these assumptions were transformed from empirically (con)testable propositions into the central articles of faith of the ideology of modern finance: the foundations of a widely held belief in …

The Case Against Credit Bidding: Optimal Creditor Behavior In Chapter 11 Collateral Auctions, Jared Kawalsky

Jared Kawalsky

This paper will attempt to advance some theoretical justifications for recent bankruptcy decisions that have denied the existence of a right for secured creditors to credit bid in the course of a reorganization under § 1129 of the Bankruptcy Code. § 363 of the Bankruptcy Code specifically grants secured creditors the right to bid their credit in a sale of their collateral as part of a going concern sale. However, in a reorganiztion under § 1129, secured creditors are not necessarily permitted to participate in an auction of the collateral underlying their liens. Relying on the broad auction theory literature …

Delaware’S Relevance In Chapter 22: Who Is “Courting Failure” Now?, Ruth S. Lee

Ruth S Lee

This study presents surprising new statistical evidence that contributes to the current “over-heated” academic debate about the Delaware courts’ role in Chapter 11 failure. In 2001, Professor LoPucki published an influential article suggesting that when large corporations file for bankruptcy under Chapter 11, they fail at a dramatically higher rate in Delaware courts than in other jurisdictions. He attributed this to corruption. His article enraged many academics and practitioners, and ignited many articles in the past two decades. This study presents startling evidence that while Chapter 11s filed in Delaware courts did have much higher failure rates from 1991-1996, after …

Reconsidering Competition, Maurice E. Stucke

College of Law Faculty Scholarship

In light of the financial crisis and the empirical findings from behavioral economics, policymakers should reconsider the fundamental question: what is competition? Only in understanding competition can one understand what competition can or cannot achieve under certain circumstances.

This Article reexamines one premise of competition, namely the extent to which firms, consumers, and the government are rational and act with perfect willpower. In varying this assumption, this Article maps four scenarios of competition.

Competition authorities should revisit their conception of competition, including the underlying assumptions, to better understand the competitive dynamics in different industries. In engaging in this review, competition …

What Your Lender And Mortgage Broker Didn’T Tell You: , George W. Kuney

College of Law Faculty Scholarship

California Code of Civil Procedure § 580b protects a California homeowner from a deficiency judgment when the homeowner’s purchase-money lender forecloses upon the home after default. In other words, if the price the lender realized at the foreclosure sale is less than the outstanding amount of the debt, the homeowner will not be liable for the deficiency. Section 580b was enacted to discourage the purchase money lenders from over-valuing real property by requiring a lender to look solely to the collateral’s value for recovery in the event of foreclosure, and to prevent the aggravation of an economic downturn caused by …

The Myth Of Investor Protection: The Dodd-Frank Act And The Office Of The Investor Advocate, Chelsea Ferrette

Chelsea P. Ferrette

Are security investors protected when investor advocacy is a form of regulation? This article asks that question and answers “no.” This article looks at the SEC’s Office of the Investor Advocate (“OIA”) mandated by the Dodd-Frank Act of 2010. The OIA’s prime-objective is the advocacy and protection of investors. The OIA plans to meet its objective by ensuring retail investors’ interests are adequately represented, assisting them in conflict resolution, and identifying areas where regulatory changes benefit investors. This article posits, however, that the OIA cannot achieve its goals, because, first, the ever-increasing complexity of financial securities; second, the conflicts of …

Development Lending To Municipalities By The World Bank Group, Asheesh Bhalla

Asheesh Bhalla

The World Bank Group has recently shifted its development lending policies to have a greater focus on lending to municipalities and developing financial institutions and systems of market creation at the local level. The author reviews this policy shift, and the consequences of such policy changes on local government institutions and law.

Pay For Regulator Performance, Todd Henderson, Frederick Tung

Todd Henderson

Few doubt that executive compensation arrangements encouraged the excessive risk taking by banks that led to the recent Financial Crisis. Accordingly, academics and lawmakers have called for the reform of banker pay practices. In this Article, we argue that regulator pay is to blame as well, and that fixing it may be easier and more effective than reforming banker pay. Regulatory failures during the Financial Crisis resulted at least in part from a lack of sufficient incentives for examiners to act aggressively to prevent excessive risk. Bank regulators are rarely paid for performance, and in atypical cases involving performance bonus …

Codifying Bankruptcy Law's Fastpass: New Value And The Absolute Priority Rule, David P. Hamm Jr

David P Hamm Jr

The notion behind the absolute priority rule is not novel to any of us. We all learned at a very young age that if someone is in front of you in line—they get served first. This basic notion of fairness affects our lives in several everyday contexts—including bankruptcy. The people in the “bankruptcy” line are the holders of interests in the debtor. If the interest held by party A is “senior” to that of party B, then party A is in front of party B in line. The absolute priority rule essentially provides that the party A must be paid …

Learning From Financial History: An Academic Never Forgets, David J. Reiss

David J Reiss

Those with short-term memories have been dominating our debate over the future of the Consumer Financial Protection Bureau. They argue that the financial industry has learned its lesson and they point to a more rational marketplace today. But the Bureau was designed to regulate the subprime mortgage market and other consumer credit markets through the credit cycle. A strong Bureau should be built today to deal with the inevitable irrational exuberance of lenders and consumers once the cycle rises from its current depths to the heights of tomorrow.

Held Hostage: How The Banking Sector Has Distorted Financial Regulation And Destroyed Technological Progress, Aaron Greenspan

Aaron Greenspan

In 2008, a global financial crisis second only to the Great Depression shed light on the utterly dysfunctional system of financial regulation governing the United States. A cacophony of laws and agencies, charged with regulating retail and investment banks, ultimately failed to prevent (and ultimately accelerated) an epic economic disaster that required enormous taxpayer bailouts of private enterprise, sunk two investment banks (Lehman Brothers and Bear Stearns), imploded an enormous insurance provider (A.I.G.), leveled the American auto industry (General Motors and Chrysler), and destroyed the student loan and mortgage industries, among many, many others. Drafted quickly amidst the wreckage, the …

Eliminating Wall Street's Safety Net: How A Systemic Risk Premium Can Solve "Too Big To Fail", Jason Rudderman

Jason Rudderman

Eliminating Wall Street’s Safety Net: How a Systemic Risk Premium Can Solve “Too Big to Fail” The financial crisis of 2007 – 2009 sent the United States and the global economy into its worst recession since the great depression. Large, interconnected financial and non-financial institutions were at the center of the financial crisis. The institutions highly leveraged positions during the crisis led the government to take extreme measures, including bailing out some of these “too big to fail,” but failing institutions. The crisis led the United States Congress to pass the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank …

Pay For Regulator Performance, Todd Henderson, Fred Tung

Todd Henderson

Few doubt that executive compensation arrangements encouraged the excessive risk taking by banks that led to the recent Financial Crisis. Accordingly, academics and lawmakers have called for the reform of banker pay practices. In this Article, we argue that regulator pay is to blame as well, and that fixing it may be easier and more effective than reforming banker pay. Regulatory failures during the Financial Crisis resulted at least in part from a lack of sufficient incentives for examiners to act aggressively to prevent excessive risk. Bank regulators are rarely paid for performance, and in atypical cases involving performance bonus …

The Case Against The Dodd-Frank Act’S Living Wills: Contingency Planning Following The Financial Crisis, Nizan Geslevich Packin

Nizan Geslevich Packin

The Dodd-Frank Act’s “living will” requirement mandates that systemically important financial institutions develop wide-ranging strategic analyses of their business affairs, and submit comprehensive contingency plans for reorganization or resolution of their operations to regulators. The goal is to mitigate risks to the financial stability of the US and encourage last-resort planning, which will allow for a rapid and efficient response in the event of an emergency. Beyond the general framework set forth in the Dodd-Frank Act, very little is known about living wills; no legal literature currently exists on what the concept entails, and regulators have not yet created any …

The End Of Mortgage Securitization? Electronic Registration As A Threat To Bankruptcy Remotenes, John P. Hunt, Richard Stanton, Nancy Wallace

John P Hunt

A central tenet of asset securitization in the United States—that assets are bankruptcy remote from their sponsors—may be threatened by innovations in the transfer of mortgage loans from the loan-originators (sponsors) to the legal entities that own the mortgage pools (the Special Purpose Vehicles (SPVs)). The major legal argument advanced in the paper is that because the mortgage is an interest in real property, the bankruptcy-remoteness rules applicable to real property, including § 544(a)(3) of the Bankruptcy Code, create a risk to the bankruptcy remoteness of mortgage transactions unless proper recording occurs. We review the traditional mortgage transfer process and …

Criminal Affirmance: Going Beyond The Deterrence Paradigm To Examine The Social Meaning Of Declining Prosecution Of Elite Crime, Mary Kreiner Ramirez

mary k ramirez

Recent financial scandals and the relative paucity of criminal prosecutions in response suggest a new reality in the criminal law system: some wrongful actors appear above the law and immune from criminal prosecution. As such, the criminal prosecutorial system affirms much of the wrongdoing giving rise to the crisis. This leaves the same elites undisturbed at the apex of the financial sector, and creates perverse incentives for any successors. Their position of power results in massive deadweight losses for the entire economy as a result of their crimes. Further, this undermines the legitimacy of the rule of law and encourages …

"Systemic Poverty As A Cause Of Recessions", Robert Ashford

Robert Ashford

This article argues that the failure to address and ameliorate systemic poverty is a major cause of recessions. Recessions occur (and sub-optimal employment and growth persist) when a critical mass of market participants come to believe that the distribution of future earning capacity is not sufficient to purchase what can be produced despite the physical and technological capacity to employ available labor and capital to produce more over the same period even at lower unit cost. The essence of systemic poverty is widespread inadequate earning capacity. In recessionary periods, with rising unemployment, the problem of inadequate earning capacity (which perennially …

To Empower, Prohibit, Or Delegate?: Regulatory Strategies For Modernizing The Consumer Credit Market, Yoon-Ho A. Lee

Yoon-Ho A Lee

A number of proposals currently exist to bolster regulation in the market for consumer credit products. How should regulators evaluate their various options? Our diagnosis of the market—based on a review of empirical evidence and economic models—is that consumer are failing to minimize the economic cost of debt as a result of lack of information, lack of expertise, or lack of self-awareness. Consequently, the market lacks competitive dynamics and fails to eliminate welfare-reducing products. We view the space of regulatory options as a triangle with three nodes—empowerment, prohibition, or delegation—depending on whether a particular decision regarding consumer credit arrangement should …

Information Failures In Structured Finance And Dodd'frank's "Improvements To The Regulation Of Credit Rating Agencies", Steven R. Mcnamara

Steven R. McNamara

This article analyzes the credit rating agency reform provisions of the Dodd-Frank Act’s “Improvements to the Regulation of Credit Rating Agencies” in light of the massive failures in the ratings of structured finance securities leading up to the 2008 credit crisis. The primary cause of ratings failure was the flawed quantitative ratings models used by the rating agencies; conflicted behavior on the part of the rating agencies was also an important but secondary cause. The key mechanical flaw in the ratings models was the method used to determination correlation, a measure of the likelihood that one borrower would default in …