Banking and Finance Law Commons^™

Basel Iii And Credit Risk Measurement: Variations Among G20 Countries, Matt Schlickenmaier

San Diego International Law Journal

Most countries require banks to hold extra capital to protect against unforeseen financial calamities; banks with riskier loans must hold more capital than those with safer loans. Basel II, a set of international banking standards, allows banks to measure a loan’s risk in different ways: some banks make their own judgments; others use outside agencies. The recent mortgage crisis prompted banks to reevaluate these methods, in part due to banks having failed to perceive the high level of risk inherent in securitized mortgages. The international community’s response was Basel III, an updated version of its previous standards. This Comment will …

An Innovative Link Between The Internet, The Capital Markets, And The Sec: How The Internet Direct Public Offering Helps Small Companies Looking To Raise Capital, Daniel Everett Giddings

Pepperdine Law Review

No abstract provided.

The Volcker Rule's Hedging Exemption, Spencer A. Winters

Michigan Law Review First Impressions

The comment period for the proposed regulations to be promulgated under the Volcker Rule expired on February 13, 2012. The rulemakers received over 16,000 comments during that period, in what one commentator described as a "fecal storm." Though that description is hopefully an exaggeration, it is safe to say that the Rule's implementation has been contentious. The Volcker Rule, named for former chairman of the Federal Reserve Paul Volcker, is a component of the Dodd-Frank Act, which Congress passed in response to the recent financial crisis. The Rule's statutory provision charges the nation's financial regulators with issuing a body of …

Once A Failed Remic, Never A Remic, Bradley T. Borden, David J. Reiss

Cornell Law Faculty Working Papers

Investors in mortgage-backed securities, built on the shoulders of the tax-advantaged Real Estate Mortgage Investment Conduit (“REMIC”), may be facing extraordinary tax losses because of how bankers and lawyers structured (or failed to structure) these securities. This calamity is compounded by the fact that those professional advisors should have known that the REMICs they created were flawed from the start.

Wall Street Rules, Bradley T. Borden, David J. Reiss

Cornell Law Faculty Working Papers

Investors in mortgage-backed securities, built on the shoulders of the tax-advantaged Real Estate Mortgage Investment Conduit (“REMIC”), may be facing extraordinary tax losses because of how bankers and lawyers structured these securities. This calamity is compounded by the fact that those professional advisors should have known that the REMICs they created were flawed from the start. If these losses are realized, those professionals will face suits for damages so large that they could put them out of business.

Mad Money: Wall Street's Bonus Obsession, Jeanne L. Schroeder

Cardozo Law Review

No abstract provided.

Laughing Out Loud: Art, Culture, And Fantasy, Henrietta L. Moore

Cardozo Law Review

What makes art valuable? Why in times of crisis do people buy contemporary art? This Paper discusses whether or not investment in art can ever be seen as rational, and explores how the contemporary art market is expanding to include not just works of art, but art as a form of cultural practice. Audiences are no longer content simply to visit museums, galleries, and other cultural institutions. They want to participate, but why are art fairs, biennials, and museum events so popular? The contemporary art market has always been segmented, and reputation and display have been important motivators for rich …

The Challenge Of Optimism And Complexity: Inadequately Addressed By The Fcic's Report, Timothy E. Lynch

Faculty Works

No abstract provided.

Read Between The Lines: Why Recent Ilsa Litigation Is Bad For Business And Contravenes Congressional Intent, Joseph Einav

Cardozo Law Review

No abstract provided.

Were "It" To Happen: Contract Continuity Under Euro Regime Change, Robert C. Hockett

Cornell Law Faculty Working Papers

One way or another, the European Monetary Union (EMU) is apt to endure. The prospect of continuation under the precise contours of the regime as we presently find it, however, is anything but certain. Hence many investors and other actual or prospective contract parties are likely to remain skittish until matters grow clearer. This skittishness, importantly, can itself hamper the prospect of expeditious European recovery. Addressing particular sources of ongoing uncertainty about EMU prospects can itself therefore aid in the project of recovery.

This Essay accordingly aims to impose structure upon one particular, and indeed particularly complex, source of uncertainty …

Insider Trading, Informed Trading, And Market Making: Liquidity Of Securities Markets In The Zero-Sum Game, Stanislav Dolgopolov

William & Mary Business Law Review

This Article reexamines the nexus of relationships among informed transactions, information asymmetry, and liquidity of securities markets in the context of public policy debates about insider trading and its regulation.The Article analyzes this nexus, with the emphasis on recent empirical studies and developments in the securities industry, from a variety of perspectives and considers the validity of the alleged link between insider trading—as opposed to other forms of informed trading—and market liquidity as a justification for the existence of regulation.

The Quest For Financial Regulatory Reform: Will A Uniform Fiduciary Standard Guide The Way?, Bonnie M. Treichel

The Journal of Business, Entrepreneurship & the Law

No abstract provided.

Investor Protection Meets The Federal Arbitration Act, Barbara Black

Faculty Articles and Other Publications

In the past three decades, most recently in AT&T Mobility LLC v. Concepcion, the United States Supreme Court has advanced an aggressive proarbitration campaign, transforming the Federal Arbitration Act (FAA) into a powerful source of anti-consumer substantive arbitration law. In the aftermath of AT&T Mobility, which upheld a prohibition on class actions in a consumer contract despite state law that refused to enforce such provisions on unconscionability grounds, efforts have been made to prohibit investors from bringing class actions or joining claims, including claims under the Securities Exchange Act of 1934 (the Exchange Act). In the most egregious …

A Brave New World: Credit Default Swaps And Voluntary Debt Exchanges, 45 J. Marshall L. Rev. 1227 (2012), Mark Swantek

UIC Law Review

No abstract provided.

The Meaning Of The Market Myth, Benjamin Means

Michigan Business & Entrepreneurial Law Review

This Book Review contends that the perfectly rational market may be a myth, not just in the sense of a false or over-simplified account of reality, but also in the deeper, anthropological sense of cultural explanation. Part I describes how rational-market theories were developed by financial economists and applied to Wall Street, sometimes without adequate appreciation for the difference between simplified economic models and real-world behavior. Part II contends that if the rational-market theory has met with acceptance that outstrips its empirical support, the favorable reception may be explained in part by the theory’s congruence with broader normative views about …

A Very Quiet Revolution: A Primer On Securities Crowdfunding And Title Iii Of The Jobs Act, Thaya Brook Knight, Huiwen Leo, Adrian A. Ohmer

Michigan Business & Entrepreneurial Law Review

This essay introduces the complex regulatory regime that governs the public sale of all securities, no matter how small the offeror. It is intended as a rudimentary roadmap for the start-up or its counsel and will, hopefully, help to illuminate the traps for the unwary while providing an overview of the regulatory universe in which securities crowdfunding will operate.

The Use And Abuse Of Special-Purpose Entities In Public Finance, Steven L. Schwarcz

Faculty Scholarship

States increasingly are raising financing indirectly through special-purpose entities (SPEs), variously referred to as authorities, special authorities, or public authorities. Notwithstanding their long history and increasingly widespread use, relatively little is known or has been written about these entities. This article examines state SPEs and their functions, comparing them to SPEs used in corporate finance. States, even more than corporations, use these entities to reduce financial transparency and avoid public scrutiny, seriously threatening the integrity of public finance. The article analyzes how regulation could be designed in order to control that threat while maintaining the legitimate financing benefits provided by …

The Dynamics Of Contract Evolution, Mitu Gulati, Stephen J. Choi, Eric A. Posner

Faculty Scholarship

Contract scholarship has given little attention to the production process for contracts. The usual assumption is that the parties will construct the contract ex nihilo, choosing all the terms so that they will maximize the surplus from the contract. In fact, parties draft most contracts by slightly modifying the terms of contracts that they have used in the past, or that other parties have used in related transactions. A small literature on boilerplate recognizes this phenomenon, but little empirical work examines the process. This Article provides an empirical analysis by drawing on a data set of sovereign bonds. The authors …

More Money, More Problems: How Oklahoma’S Novel Approach To Ponzi Scheme Clawbacks In Oklahoma Department Of Securities Ex Rel. Faught V. Blair Means More Uncertainty For Investors, Elizabeth Blair Wozobski

Oklahoma Law Review

No abstract provided.

The Evolution Of Contractual Terms In Sovereign Bonds, Stephen J. Choi, Mitu Gulati, Eric A. Posner

Faculty Scholarship

In reaction to defaults on sovereign debt contracts, issuers and creditors have strengthened the terms in sovereign debt contracts that enable creditors to enforce their debts judicially and that enable sovereigns to restructure their debts. These apparently contradictory approaches reflect attempts to solve an incomplete contracting problem in which debtors need to be forced to repay debts in good states of the world; debtors need to be granted partial relief from debt payments in bad states; debtors may attempt to exploit divisions among creditors in order to opportunistically reduce their debt burden; debtors may engage in excessively risky activities using …

Cds Zombies, Anna Gelpern, Mitu Gulati

Faculty Scholarship

This paper examines the contract interpretation strategies adopted by the International Swaps and Derivatives Association (ISDA) for its credit derivatives contracts in the Greek sovereign debt crisis. The authors argue that the economic function of sovereign credit default swaps (CDS) after Greece is limited and uncertain, partly thanks to ISDA’s insistence on textualist interpretation. Contract theory explanations for textualist preferences emphasise either transactional efficiency or relational factors, which do not fit ISDA or the derivatives market. The authors pose an alternative explanation: the embrace of textualism in this case may be a means for ISDA to reconcile the competing political …

Controlling Financial Chaos: The Power And Limits Of Law, Steven L. Schwarcz

Faculty Scholarship

This Essay examines how law can help to control financial chaos. To that end, regulation should strive to not only maximize economic efficiency within the financial system but also protect the financial system itself. Any regulatory framework for achieving these goals, however, will be imperfect and have tradeoffs. Increasing financial complexity has created information failures that even disclosure cannot remedy, whereas law-imposed standardization would have its own flaws. Bounded human rationality limits the effectiveness of even otherwise ideal laws. Furthermore, the increasing dispersion of financial risk is undermining monitoring incentives. We also do not yet fully understand how systemic risk …

Regulating Shadow Banking, Steven L. Schwarcz

Faculty Scholarship

Inaugural Address for Boston University Review of Banking & Financial Law's Inaugural Symposium: “Shadow Banking” February 24, 2012.

Although shadow banking is said to be huge, estimated at over $60 trillion, it is not well defined. This short and accessible paper attempts to define shadow banking by identifying its overall scope and its basic characteristics. Based on the definition derived, the paper also conceptually examines how shadow banking can be regulated to try to maximize its efficiencies while minimizing its risks.

The Roberta Mitchell Lecture: Structuring Responsibility In Securitization Transactions, Steven L. Schwarcz

Faculty Scholarship

In this Lecture, Professor Schwarcz examines how complex securitization transactions may have created a “protection gap,” the conundrum that transaction parties may be unable to purchase or might not want to pay the price for full protection. As a result, they sometimes choose or are forced to assume the good faith of the other parties to the transaction and the consistency and completeness of protections provided in the transaction documents.

The End Of The Internal Compliance World As We Know It, Or An Enhancement Of The Effectiveness Of Securities Law Enforcement? Bounty Hunting Under The Dodd-Frank Act's Whistleblower Provision, Justin Blount, Spencer Markel

Fordham Journal of Corporate & Financial Law

In the wake of Bernard Madoff’s $65 billion Ponzi scheme and the recent economic crisis stemming largely from loosely regulated subprime lending and mortgage-backed securities, President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act on July 21, 2010, signaling loudly and clearly that change is coming to Wall Street. But Wall Street is not the only one receiving a message. Buried deep within the 2,319 pages of the Dodd-Frank Act, companies can find Section 922, the whistleblower provision, which provides a bounty for whistleblowers who report securities violations to the Securities and Exchange Commission.These bounty provisions and …

Lessons From The Flash Crash For The Regulation Of High-Frequency Traders, Edgar Ortega Barrales

Fordham Journal of Corporate & Financial Law

Are equity markets vulnerable to a sudden collapse if the traders who account for about half of the volume have no regulatory obligations to stabilize prices? After the “Flash Crash” of May 6, 2010, policymakers have resoundingly answered this question in the affirmative. During the worst of the crash, some of the so-called high-frequency trading firms that dominate equity markets stopped trading and prices collapsed, momentarily wiping out almost $1 trillion in market value. In response, the U.S. Securities and Exchange Commission is considering whether high-frequency trading firms should be required to act as the traders of last resort. This …

Burning Down The House Or Simply Rolling The Dice: A Comment On Section 621 Of The Dodd-Frank Act And Recommendation For Its Implementation, Joshua R. Rosenthal

Fordham Journal of Corporate & Financial Law

Section 621 of the Dodd-Frank Wall Street Reform and Consumer Protection Act modifies the Securities Act of 1933 to prohibit the underwriter, placement agent, initial purchaser, or sponsor, or any affiliate or subsidiary of any such entity of an asset-backed financial product from betting against that very product for one year after the product’s initial sale. The rule prohibits anyone who structures or sells an asset-backed security or a product composed of asset-backed securities from going short, in the specified timeframe, on what they have sold, and labels such transactions as presenting material conflicts of interest. This Comment discusses traces …

In Defense Of The Gses, Steven A. Ramirez

Faculty Publications & Other Works

No abstract provided.

Taming The Hydra Of Derivatives Regulation: Examining New Regulatory Approaches To Otc Derivatives In The United States And Europe, Daria S. Latysheva

Cardozo Journal of International and Comparative Law

The note examines the regulatory responses to the 2008 financial crisis, focusing on derivatives markets in the US and EU. It argues that while both the Dodd-Frank Act and the EU Proposal aim to enhance oversight and transparency, the EU's structured and centralized approach is more effective in achieving comprehensive regulation. The US framework, relying heavily on agency rulemaking and fragmented jurisdiction between the CFTC and SEC, risks inefficiencies and regulatory gaps, whereas the EU Proposal’s detailed provisions and centralized decision-making provide a more cohesive framework for reducing systemic risk.

Is Canada The New Shangri-La Of Global Securities Class Actions?, Tanya Monestier

Law Faculty Scholarship

There has been significant academic buzz about Silver v. Imax, an Ontario case certifying a global class of shareholders alleging statutory and common law misrepresentation in connection with a secondary market distribution of shares. Although global class actions on a more limited scale have been certified in Canada prior to Imax, it can now be said that global classes have "officially" arrived in Canada. Many predict that the Imax decision means that Ontario will become the new center for the resolution of global securities disputes. This is particularly so after the United States largely relinquished this role in Morrison v. …