Banking and Finance Law Commons^™

Article Iii's Constraints On The Legislative Power, Elizabeth Beske

Scholarly Articles in Law Reviews & Journals

Article III’s heightened concreteness standard for statutory harms takes federal judges deep into legislative terrain, jeopardizing statutory damage provisions and confining Congress to post hoc solutions rather than preemptive strikes. The Supreme Court has insisted that creating a cause of action is a legislative function. At the same time, its recent standing cases instruct lower federal courts to permit suit on statutory injuries only when they find actual harm that bears a tight connection to injuries recognized at common law. This new harm requirement rests uneasily with countless statutes featuring statutory damage provisions that are in place precisely because damages …

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

Scholarly Articles in Law Reviews & Journals

As central banks tightened interest rates during 2022 and 2023, important debates arose regarding the relationship between monetary policy and financial stability. This Article illuminates one path through which the prolonged period of accommodative monetary policy from 2009-2021 impacted financial stability: it traces how easy money and yield-seeking behavior in the wake of the Global Financial Crisis and COVID-19 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 account to illustrate the importance of proactive financial regulation …

Regulatory Sandboxes: One Decade On, Hilary J. Allen

Scholarly Articles in Law Reviews & Journals

Regulatory sandboxes have spread like wildfire since the U.K Financial Conduct Authority launched its sandbox for financial technology businesses (fintech) one decade ago. Despite widespread adoption, however, there is little empirical evidence available to assess whether the signature sandbox policy com- bination of regulatory rollbacks and regulatory guidance is in fact good policy. The empirical evidence that is available suggests that regulatory sandboxes are beneficial for the tech firms that participate in them, but tells us nothing about how regulatory sandboxes have impacted the broader enterprise of regulation, or whether the innovation generated by sandbox participants is beneficial for any- …

Fintech And Techno-Solutionism, Hilary J. Allen

Scholarly Articles in Law Reviews & Journals

Silicon Valley-style technological innovation is ill-suited to addressing complex problems like financial inclusion, concentrated market power, and privacy harms, yet promises abound that “fintech” can fix them. This oversimplified reduction of complex structural problems into technological puzzles is known as “techno-solutionism,” and it poses real dangers for public policy. When we start with the tech industry’s favored tools and then ask how to solve complex problems using those tools – rather than starting by defining the problem to be solved – it can distract policymakers from supporting real, structural solutions. Techno-solutionism can also deter policymakers from interrogating the limitations, and …

Reinventing Operational Risk Regulation For A World Of Climate Change, Cyberattacks, And Tech Glitches, Hilary J. Allen

Scholarly Articles in Law Reviews & Journals

Around 30 years ago, banking regulators began to construct the concept of “operational risk,” and devise rules to manage this newly created risk category. This “invention” of operational risk assembled a grab-bag of otherwise uncategorized risks associated with banking operations; this Article argues that the resulting operational risk regulation framework isn’t very well suited to some of those risks. In particular, this Article demonstrates that the existing operational risk regulation framework is becoming an increasingly inadequate response to banks’ exposure to operational losses following damage to their physical assets and business disruption and system failures. This is so for two …

Robots, Markets, And The Value Of Deal Lawyers, Heather Hughes

Scholarly Articles in Law Reviews & Journals

Emerging forms of automation using artificial intelligence (AI) and distributed ledgers are raising transformative questions for the practice of law. Deal lawyers are well-situated to understand the convergence of various modes of automation and their implications for their clients and the markets they facilitate. This Article contends that digesting threats and leveraging opportunities associated with new technologies calls for granular, context-specific assessment. It presents one instance of automation in one predominant market—the market for asset-backed securities (ABS)—by comparing securitization to a blockchain-based analog, tokenization. It considers how lawyers support the ABS market and how automation of lawyers’ functions could intersect …

Digital Bank Holidays, Hilary J. Allen

Scholarly Articles in Law Reviews & Journals

The March 2023 run on Silicon Valley Bank spurred renewed debate about how to structure deposit insurance to best eliminate future bank runs. This Article argues, however, that deposit insurance cannot be relied upon to eliminate all bank runs, especially if technological developments create potential new bank run triggers that deposit insurance may not be responsive to. We may be expecting too much of deposit insurance, and so it is worth considering other tools that might be useful in responding to future bank runs and broader banking panics. One such tool is the “bank holiday,” last deployed in the United …

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

Scholarly Articles in Law Reviews & Journals

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

Scholarly Articles in Law Reviews & Journals

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, …

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

Scholarly Articles in Law Reviews & Journals

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 …

Defi: Shadow Banking 2.0?, Hilary J. Allen

Scholarly Articles in Law Reviews & Journals

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 …

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

Scholarly Articles in Law Reviews & Journals

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

Scholarly Articles in Law Reviews & Journals

No abstract provided.

Payments Failure, Hilary Allen

Scholarly Articles in Law Reviews & 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 …

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

Scholarly Articles in Law Reviews & Journals

No abstract provided.

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

Scholarly Articles in Law Reviews & Journals

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 …

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

Scholarly Articles in Law Reviews & Journals

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 …

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

Scholarly Articles in Law Reviews & Journals

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 …

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

Scholarly Articles in Law Reviews & Journals

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 …

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

Scholarly Articles in Law Reviews & Journals

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 …

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

Scholarly Articles in Law Reviews & 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.

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

Scholarly Articles in Law Reviews & Journals

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, …

Court Capture, Jonas Anderson

Scholarly Articles in Law Reviews & 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 …

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

Scholarly Articles in Law Reviews & Journals

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

Scholarly Articles in Law Reviews & Journals

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

Scholarly Articles in Law Reviews & 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

Scholarly Articles in Law Reviews & 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 economy at large. Because financial institutions lack the incentives, information and tools to reduce the amount of risk in the financial system as a whole, the vital task of overseeing and regulating for financial stability must necessarily be carried out by a public body.

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

Scholarly Articles in Law Reviews & Journals

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 …

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

Scholarly Articles in Law Reviews & 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 …

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

Scholarly Articles in Law Reviews & 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 …