Law Commons^™

The Orderly Liquidation Authority: Fanatical Or Familiar? Idealistic Or Unrealistic?, Stephanie P. Massman

Stephanie P Massman

The systemic financial crisis of 2008 spurred the failure of numerous financial and non-financial entities. Regulators addressed each of these failures on an ad hoc ex-post basis, granting multiple bailouts in various forms. The refusal to extend these bailouts to one firm, Lehman Brothers, however, caused further panic and contagion throughout the already unstable market as one of the largest financial institutions of the U.S. underwent an extremely lengthy and value-destructive Chapter 11 bankruptcy. Criticism surrounding not only the bailouts, but also the decision to allow Lehman to fail under the Bankruptcy Code, led to the inclusion of the Orderly …

Against Regulatory Displacement: An Institutional Analysis Of Financial Crises, Jonathan C. Lipson

Jonathan C. Lipson

This paper uses “institutional analysis”—the study of the relative capacities of markets, courts, and regulators—to make three claims about financial crises.

First, financial crises are increasingly a problem of “regulatory displacement.” Through the ad hoc rescues of 2008 and the Dodd-Frank reforms of 2010, regulators displace market and judicial processes that ordinarily prevent financial distress from becoming financial crises. Because regulators are vulnerable to capture by large financial services firms, however, they cannot address the pathologies that create crises: market concentration and complexity. Indeed, regulators may inadvertently aggravate these conditions through resolution tactics that consolidate firms, and the volume and …

The Uncertainty Of “True Sale” Analysis In Originator Bankruptcy, Stephen P. Hoffman

Stephen P. Hoffman

While much of law is complex or unclear, it is unusual for a judge to comment that a legal doctrine is so unsettled that courts “could flip a coin” to decide an issue. Unfortunately for practitioners, determining what constitutes a “true sale” for bankruptcy purposes is such an issue. Add to this the recent novel and innovative processes of structured finance and asset-backed securitization, and you have the stuff of law students’—and corporate counsels’—nightmares. As a result, courts and legislatures need to provide clarity in this area so that originators can safely structure investments and transactions, not only for the …

Should Ad Hoc Committees Have Fiduciary Duties?: Judicial Regulation Of The Bankruptcy Market, David L. Perechocky

David L Perechocky

This article is the first to substantively and directly address the question of whether informal creditor groups in bankruptcy cases could and should have fiduciary duties to other creditors. The rise of activist investors and claims traders in bankruptcy proceedings has significantly changed the bankruptcy process, to much controversy. One particularly contentious topic is the growing presence of informal, or “ad hoc,” creditor groups. Proponents argue that these groups are beneficial by enabling creditors to work together efficiently and effectively, but critics view their actions as disruptive and often unfair to other creditors. A recent decision in the Washington Mutual …