Banking and Finance Law Commons^™

Fending For Themselves: Creating A U.S. Hedge Fund Market For Retail Investors, Houman B. Shadab

Articles & Chapters

No abstract provided.

Who Is The "Sovereign" In Sovereign Debt?: Reinterpreting A Rule-Of-Law Framework From The Early Twentieth Century, Odette Lienau

Cornell Law Faculty Publications

Combining legal interpretation with political science analysis, this Article highlights the competing "statist" and "popular" conceptions of sovereignty at stake in sovereign debt issues. It argues that these two dominant approaches do not exhaust the offerings of intellectual history and considers an alternative approach that emerged in the early twentieth century and may be of relevance again today. The Article contends that U.S. Chief Justice Taft's foundational 1923 "Tinoco" decision, which grounds the current approach to sovereign governmental recognition, has been misinterpreted to support a purely statist or absolutist conception of sovereignty. It argues that a proper interpretation presents an …

Carrying A Good Joke Too Far, Peter A. Alces, Jason M. Hopkins

Faculty Publications

No abstract provided.

Disney Examined; A Case Study In Corporate Governance And Ceo Succession, Lawrence Lederman

Articles & Chapters

No abstract provided.

The Debt Dilemma, Katherine Porter

Michigan Law Review

Part I describes the nature of credit card spending and explores the usefulness of Mann's comparative approach to studying credit cards. Part II evaluates Mann's findings on the overall relationships between individual credit card transactions and aggregate levels of spending, borrowing, and bankruptcy. It also briefly analyzes the relationship between his findings and policy recommendations. Part III explores data on families who refrain from credit card use and struggle with serious financial distress. Part IV revisits Mann's policy recommendations in light of this new data. I conclude that implementing credit card reform would offer families only partial, albeit valuable, protection …

The Enforceability Of Default Interest In Real Estate Mortgages, Steven W. Bender

Faculty Articles

This article examines the use of default interest rate provisions in real estate mortgage loan transactions and the varying ways courts assess the enforceability of such provisions. The authors argue that these provisions are important to lenders, ensuring that they are able to recover the transaction costs and risks associated with defaulting borrowers. The article asserts that, due to the importance of these provisions to lenders' financial stability, courts should apply the unconscionability standard with a deference to freedom of contract principles before refusing to enforce default interest rate provisions. The authors also outline guidelines lenders should follow in both …

Placing A Round Peg Into A Square Hole: The Third Circuit Applies Erisa To Hybrid Pension Plans In Register V. Pnc, Christopher Cognato

Villanova Law Review (1956 - )

No abstract provided.

Issue Brief: Overcoming Legal Barriers To The Bulk Sale Of At-Risk Mortgages, Michael S. Barr, James A. Feldman

Other Publications

This memorandum argues that the sale of loans and loan pools to new owners would help to stabilize housing prices, and that such a modification to the REMIC rules would be desirable and well within Congress’ constitutional authority. Furthermore, it would not lead to successful legal claims by investors in securitized loan pools under the Just Compensation or Due Process clauses, which provide the primary constitutional protections for property interests.

An Opt-Out Home Mortgage System, Michael S. Barr, Sendhil Mullainathan, Eldar Shafir

Other Publications

The current housing and financial crisis has led to significant congressional and executive action to manage the crisis and stem the harms from it, but the fundamental problems that caused the crisis remain largely unaddressed. The central features of the industrial organization of the mortgage market with its misaligned incentives, and the core psychological and behavioral phenomena that drive household financial decisionmaking remain. While the causes of the mortgage meltdown are myriad and the solutions likely to be multifaceted, a central problem that led to the crisis was that brokers and lenders offered loans that looked much less expensive and …

Behaviorally Informed Financial Services Regulation, Michael S. Barr, Sendhil Mullainathan, Eldar Shafir

Other Publications

Financial services decisions can have enourmous consequences for household well-being. Households need a range of financial services - to conduct basic transactions, such as receiving their income, storing it, and paying bills; to save for emergency needs and long-term goals; to access credit; and to insure against life's key risks. But the financial services system is exceedingly complicated and often not well-designed to optimize house-hold behavior. In response to the complexity of out financial system, there has been a long running debate about the appropriate role and form of regulation. Regulation is largely stuck in two competing models - disclosure, …

Confusion And Convergence In Consumer Payments: Is Coherence In Error Resolution Appropriate?, Anita Ramasastry

Articles

At present, there are no uniform rules governing retail payment systems in the United States. Checks, credit cards, debit cards, and new types of payment systems—such as stored-value cards and prepaid cards—are governed by different rules and provide consumers with varying protections. In addition, several phenomena may have confused consumers about the type of consumer protections they have when using different payment systems. First, new types of intermediaries have developed—such as online funds transmission and electronic bill presentment and payment—that piggyback on existing payment systems. Second, electronic check conversion systems may convert customer checks into a different payment system—electronic funds …

Global Network Finance: Organizational Hedging In Times Of Uncertainty, Katharina Pistor

Faculty Scholarship

The global financial crisis that began in 2007 revealed a fundamental weakness in the global financial system: Extensive financial interdependence of financial relations unmatched by a governance regime of similar reach. As multinational banks sought to fortify their capital base in the wake of the unfolding crisis, Sovereign wealth Funds (SWFs) and the banks’ home governments have become mutual stakeholders in some of the largest financial intermediaries with global reach. From the multitude of individual transactions has emerged a network of equity ties that spans the globe. These ties bridge institutional practices and governance regimes that previously operated largely independently …

Unsafe At Any Price, Ronald J. Mann

Faculty Scholarship

Making Credit Safer is a fascinating collaboration between two scholars of very different bents. Elizabeth Warren's career rests oil decades of careful empirical research, integrated into trenchant policy analysis, and deeply informed by the cultural and social significance of debt. Oren Bar-Gill, by contrast, is a formally trained economist, who is at the start of his academic career, and has gained wide recognition for his successful application of theories of behavioral economics to the products that dominate the modern credit card industry.

Reputational Sanctions In China's Securities Market, Benjamin L. Liebman, Curtis J. Milhaupt

Faculty Scholarship

Literature suggests two distinct paths to stock market development: an approach based on legal protections for investors, and an approach based on self-regulation of listed companies by stock exchanges. This Essay traces China's attempts to pursue both approaches, while focusing primarily on the role of the stock exchanges as regulators. Specifically, the Essay examines a fascinating but unstudied aspect of Chinese securities regulation – public criticism of listed companies by the Shanghai and Shenzhen exchanges. Based on both event study methodology and extensive interviews of market actors, we find that the public criticisms have significant effects on listed companies and …

"Goin' 'Round In Circles" ... And Letting The Bad Loans Win: When Subprime Lending Fails Borrowers: The Need For Uniform Broker Regulation, Cassandra Jones Havard

All Faculty Scholarship

This Article provides a framework for regulating mortgage brokers. After introductory comments about the prevalence of this industry and its functional importance in today's consumer mortgage finance market, the article briefly explores the underlying structural framework of the mortgage broker industry. Explaining the market in which mortgage brokers make sub-prime loans as a largely unregulated one, it examines the economics of the mortgage loan transaction from the perspective of the borrower and concludes that lenders are comfortable with the reckless nature of sub-prime home lending. Next, the article examines the dual banking system and its attendant concern of federalism. It …

The Federal Government's Implied Guarantee Of Fannie Mae And Freddie Mac's Obligations: Uncle Sam Will Pick Up The Tab, David Reiss

Georgia Law Review

This Article provides the most comprehensive statutory analysis to date of the federal government's implied guarantee of Fannie Mae and Freddie Mac's financial obligations. Fannie and Freddie together have $4.45 trillion in mortgage- related obligations. The magnitude of their obligations can only be understood in comparison to the amount of outstanding U.S. government debt-$5.04 trillion. Given the ongoing meltdown of the residential mortgage market, it is important that the implied guarantee be understood for what it is, a contingent liability of the federal government. After explaining the nature of the implied guarantee and the risks that it poses, the Article …

Odious Debts And Nation-Building: When The Incubus Departs, Mitu Gulati, Lee C. Buchheit

Faculty Scholarship

No abstract provided.

Bond Defaults And The Dilemma Of The Indenture Trustee, Steven L. Schwarcz, Gregory M. Sergi

Faculty Scholarship

The standard of care for indenture trustees after default is intolerably vague, generating cost and inefficiency in the public bond markets. Yet public bondholder governance is increasingly recognized as a critical component of the larger realm of corporate governance, and indeed more than eighty percent of capital market financing raised by U.S. corporations now occurs through public bond offerings. This article examines how that standard of care should be modified to make indenture trustees more effective.

Protecting Financial Markets: Lessons From The Subprime Mortgage Meltdown, Steven L. Schwarcz

Faculty Scholarship

Why did the recent subprime mortgage meltdown undermine financial market stability notwithstanding the protections provided by market norms and financial regulation? This article attempts to answer that question by identifying anomalies and obvious protections that failed to work, and then by examining hypotheses that might explain the anomalies and failures. The resulting explanations provide critical insights into protecting financial markets.

Making Sense Of Nation-Level Bankruptcy Filing Rates, Ronald J. Mann

Faculty Scholarship

Increased rates of consumer bankruptcy filings are a policy concern around the world. It is not easy, however, to explain the variations in per capita filing rates from country to country. Some of the variation is attributable to different levels of indebtedness. Some is attributable to different cultural attitudes about financial failure. And some is attributable to the accessibility of the legal system as a remedy for irremediable financial distress.

This paper analyzes the differences in nation-level, per capita filing rates. I start with a model that uses economic variables to explain nation-level variations in filing rates. The economic and …

Patterns Of Credit Card Use Among Low And Moderate Income Households, Ronald J. Mann

Faculty Scholarship

This chapter uses data from the Federal Reserve Board's Survey of Consumer Finances for 2004 (the "SCF") to examine the penetration of credit cards into LMI markets. The chapter has two purposes. First, I discuss the rise of the modern credit market, emphasizing the segmentation of product lines based on behavioral and financial characteristics of customer groups. Among other things, that trend involves the use of products aimed at LMI households that differ significantly from those aimed at middle-class households. Second, I describe the extent to which LMI households borrow on credit cards, the types of LMI households that borrow, …

Get Sick, Get Out: The Medical Causes Of Home Mortgage Foreclosures, Christopher Robertson, Richard Egelhof, Michael Hoke

Faculty Scholarship

In recent years, there has been national alarm about the rising rate of home foreclosures, which now strike one in every 92 households in America and which contribute to even broader macroeconomic effects. The "standard account" of home foreclosure attributes this spike to loose lending practices, irresponsible borrowers, a flat real estate market, and rising interest rates. Based on our study of homeowners going through foreclosures in four states, we find that the standard account fails to represent the facts and thus makes a poor guide for policy. In contrast, we find that half of all foreclosures have medical causes, …

The Problems Of Securitizing Sub-Prime Loans, Tamar Frankel

Faculty Scholarship

In October 2007, the board of directors of Merrill-Lynch, Smith & Fenner, one of the largest if not the largest brokerage houses in the United States, accepted the request for early retirement of its Chief Executive Officer. The brokerage firm disclosed that it has lost over $8 billion on its investments in sub-prime mortgage loans.¹ Merrill Lynch was not the only financial giant to sustain enormous losses. The losses caused market liquidity to dry up. The U.S. government took steps to ease the pressure.² But the high leverage of the system is still unravelling. The effect of these …

Do Patents Perform Like Property?, Michael J. Meurer, James Bessen

Faculty Scholarship

Do patents provide critical incentives to encourage investment in innovation? Or, instead, do patents impose legal risks and burdens on innovators that discourage innovation, as some critics now claim? This paper reviews empirical economic evidence on how well patents perform as a property system.

What Else Matters For Corporate Governance?: The Case Of Bank Monitoring, Joanna M. Shepherd, Frederick Tung, Albert H. Yoon

Faculty Scholarship

We address a crucial but underappreciated question: what else besides corporate law matters for corporate governance? We take the novel view that corporate governance must involve more than corporate law. Corporate scholars focus almost exclusively on corporate law mechanisms for controlling managerial agency costs. We contend, however, that contracting parties also attempt to control agency costs in their contracts with the firm. In particular, we hypothesize that banks, by monitoring firms in connection with their loans, enhance firm value for the benefit of shareholders.

We examine over one-thousand public firms for the period 1990-2004 to test the value of bank …

In Translation For The Latino Market Today: Acknowledging The Rights Of Consumers In A Multilingual Housing Market, Jo Carrillo

Faculty Scholarship

No abstract provided.

Dangerous Loans: Consumer Challenges To Adjustable Rate Mortgages, Jo Carrillo

Faculty Scholarship

No abstract provided.