Banking and Finance Law Commons^™

Systemic Regulation Of Global Trade And Finance: A Tale Of Two Systems, R. Michael Gadbaw

Georgetown Law Faculty Publications and Other Works

The recent financial crisis has put enormous strains on the global systems governing international finance and trade. These two important international regulatory systems, created after World War II to promote growth and stability in the global economy, were put to the test in ways unprecedented since the 1930s. This article seeks to analyze and compare their performance as systemic regulators in the course of the crisis and concludes that the trading system performed quite well while the financial system virtually collapsed. This article seeks to account for this difference by looking at the nature of the rules and the institutions …

Saving Up For Bankruptcy, Ronald J. Mann, Katherine Porter

Faculty Scholarship

Bankruptcy is a numbers game. Policymaking, public perception, and the scholarly literature are captivated with the number of annual bankruptcy filings, which hit one million in 2008. The number of annual bankruptcy filings has become a barometer of economic health, reflecting an implicit assumption that bankruptcy is a useful proxy for financial distress.

But at the level of the individual family, the causative relation between financial distress and bankruptcy filings is unclear. On the one hand, only a fraction of those in serious financial distress will ever file for bankruptcy. For example, a study by Michelle White examined a group …

Empirical Modalities: Lessons For The Future Of International Investment, Susan Franck

Scholarly Articles in Law Reviews & Journals

Empirical approaches add value to international investment law and aid in its evolution. Nevertheless, we must "fit the forum to the fuss." When transforming international law, we select proper methodologies for specific research questions and make international law empiricism part of a larger post-structuralist, pluralist legal dialogue. In connection with that, my remarks first place empirical research on international investment in a historical context. I then discuss where the research is today and offer an example of how empirical methods can be used to understand, reassess, and possibly transform international investment law and related institutions. Finally, I consider the future …

The Impact Of The Financial Crisis On Trade And Investment, Padideh Ala'i

Scholarly Articles in Law Reviews & Journals

No abstract provided.

Enabling Investment In Environmental Sustainability, Heather Hughes

Scholarly Articles in Law Reviews & Journals

No abstract provided.

Introduction: The Market Meltdown Of 2008 And The Future Of Financial Reregulation [Article], Faith Stevelman

Articles & Chapters

No abstract provided.

Ask The Professor: How Does The U.K. Client Money Rules Differ From The U.S. Customer Segregated Rules When The Custodian Firm Fails To Treat Customer Property Properly?, Ronald Filler

Articles & Chapters

No abstract provided.

Counterparty Regulation And Its Limits: The Evolution Of The Credit Default Swaps Market, Houman B. Shadab

Articles & Chapters

Over-the-counter (OTC) derivatives are widely regarded as “unregulated” financial instruments. While it is true that OTC derivatives are subject to relatively minimal federal regulation, OTC derivatives are in fact subject to a robust form of control and governance in the form of counterparty regulation. Counterparty regulation arises when two or more parties are continually exposed to counterparty credit risk for the duration of a long-term contract, and it consists of specific governance mechanisms such as the daily adjustment of collateral and the netting out of redundant trades. Counterparty regulation governs derivatives transactions but not securities transactions.

This essay reviews recent …

Guilty By Association? Regulating Credit Default Swaps, Houman B. Shadab

Articles & Chapters

A wide range of U.S. policymakers initiated a series of actions in 2008 and 2009 to bring greater regulation and oversight to credit default swaps (CDSs) and other over-the-counter derivatives. The policymakers’ stated motivations echoed widely expressed criticisms of the regulation, characteristics, and practices of the CDS market, and focused on the risks of the instruments and the lack of public transparency over their utilization and execution. Certainly, the misuse of certain CDSs enabled mortgage-related security risk to become overconcentrated in some financial institutions.

Yet as the analysis in this Article suggests, failing to distinguish between CDS derivatives and the …

Looking Back And Looking Ahead As The Home Mortgage Disclosure Act Turns Thirty-Five: The Role Of Public Disclosure Of Lending Data In A Time Of Financial Crisis, Richard D. Marsico

Articles & Chapters

This article examines the history of the Home Mortgage Disclosure Act (HMDA) and makes proposals for improving it to help prevent another economic crisis. Passed in 1975, HMDA requires most lenders to disclose information about their home mortgage loans, including the number of home mortgage applications it received; the purpose of each application; the type of loan; the decision on the application; the race, gender, and income of the loan applicant/borrower; the location of the loan and the median income and racial composition of the neighborhood; and the interest rate on the loan. HMDA was originally conceived of as a …

Payments Data Security Breaches And Oil Spills: What Lessons Can Payments Security Learn From The Laws Governing Remediation Of The Exxon Valdez, Deepwater Horizon, And Other Oil Spills?, Sarah Jane Hughes

Articles by Maurer Faculty

No abstract provided.

Just Say No (To American Capitalism): Why American Indians Should Reject The Model Tribal Secured Transactions Act And Other Attempts To Promote Economic Assimilation, Aaron Drue Johnson

American Indian Law Review

No abstract provided.

The Internationalization Of Law: The “Complex” Case Of Bank Regulation, Lawrence G. Baxter

Faculty Scholarship

International bank regulation has ramped to prominence over the past two decades, as nations and the global economy have lurched from one financial crisis to another. The current global financial crisis has brought unprecedented general attention to the subject. It is possible that we will witness fundamental changes in the way nations cooperate in the regulation of their financial institutions. Major reform efforts are underway. Yet international bank regulation has unusual characteristics and does not fit easily within the traditional framework of international law. The emerging system is also extremely fluid and complex-matching an extremely fluid and complex system of …

Distorting Legal Principles, Steven L. Schwarcz

Faculty Scholarship

Legal principles enable society to order itself by preserving broadly based expectations. Sometimes, however, parties transact in ways that are so inconsistent with generally accepted principles as to create uncertainty or confusion that undermines the basis for reasoning afforded by the principles. Such a distortion might occur, for example, if a normally mandatory legal rule were unexpectedly treated as a default rule. This article explores the problem of distorting legal principles, initially focusing on rehypothecation, a distortion whose uncertainty and confusion contributed to the downfall of Lehman Brothers and the resulting global financial crisis. But not all distortions are, on …

Leverhulme Lecture: The Future Of Securitization, Steven L. Schwarcz

Faculty Scholarship

Lecture given November 11, 2010, the third of three delivered by Prof. Schwarcz as Leverhulme Visiting Professor of Law, Oxford University.

The securitization of subprime mortgage loans is widely viewed as a root cause of the financial crisis. This lecture balances the costs and benefits of securitization, focusing on what went wrong and on what needs to be fixed to curtail securitization’s abuses and make it viable again as an important financing tool. Finally, the lecture examines alternatives to securitization, focusing on covered bonds and comparing and contrasting covered bonds and securitization.

Leverhulme Lecture: Regulating Complexity In Financial Markets, Steven L. Schwarcz

Faculty Scholarship

Lecture given November 9, 2010, the second of three delivered by Prof. Schwarcz as Leverhulme Visiting Professor of Law, Oxford University.

Complexity is the greatest challenge to 21st Century financial regulation, having the potential to impair markets and investments in several interrelated ways. Furthermore, complexity can cause failures that individual market participants cannot, or will not have incentive to, remedy. These failures are driven by information uncertainty, misalignment of interests and incentives among market participants, and nonlinear feedback and tight coupling that result in sudden unexpected market changes. These are the same types of failures that engineers have long faced …

The Market Reaction To Legal Shocks And Their Antidotes: Lessons From The Sovereign Debt Market, Michael Bradley, James D. Cox, Mitu Gulati

Faculty Scholarship

In October 2000 a hedge fund holding an unpaid debt claim won an enormous victory against the debtor, the Republic of Peru, through an opportunistic interpretation of the common pari passu clause by a Brussels court. This development was met by charges from policy makers and practitioners that the court's decision (its novel interpretation of the pari passu clause) would lead to a dramatic increase in the risks of holdout litigation faced by sovereign debtors. Over the ensuing years, multiple reform solutions were proposed including the revision of certain contractual terms, the filing of amicus briefs in a key case, …

Applied Legal History: Demystifying The Doctrine Of Odious Debts, Sarah Ludington, Mitu Gulati, Alfred L. Brophy

Faculty Scholarship

"Odious debts" have been the subject of debate in academic, activist, and policymaking circles in recent years. The term refers to the debts of a nation that a despotic leader incurs against the interests of the populace. When the despot is overthrown, the new government — understandably — does not wish to repay creditors who helped prop up the despot. One argument has focused on whether customary international law supports a "doctrine" of odious debts that justifies the nonpayment of sovereign debts when three conditions are met: (1) the debts were incurred by a despotic ruler (without the consent of …

Organizations Matter: They Are Institutions, After All, John Linarelli

Scholarly Works

Judge Posner (2010) offers a substantial agenda for organization economics. He advises us on how organization economics can shed substantial light on some of the most pressing social problems of the day. I comment on two of the areas he selects for discussion and offer some comments on the relationship of organization economics to new institutional economics. Judge Posner surely is right to argue that organization economics can help us understand the failures of corporate governance in regulating executive pay. Moreover, with additional and more institutionally nuanced theorizing, organizational economics should further our understanding of the work of judiciaries in …

The Sound Of Silence: The Continuing Legal Debate Over Class Action Rescission Under Tila, Jo Carrillo, Paul Kofoed

Faculty Scholarship

No abstract provided.

Private Enforcement Of Systemic Risk Regulation, Heidi Mandanis Schooner

Scholarly Articles

The failure of the regulatory system is at least one of the contributing causes to the 2008 Financial Crisis. The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) will have a far-reaching impact on the financial services industry particularly in its attempt to regulate systemic risk. The Dodd-Frank Act, however, does not sufficiently address the problem of agency discretion generally, or the problem of an agency’s discretion to forebear, in particular. Under Dodd-Frank, the agencies retain considerable discretion and the effectiveness of the new regime depends on the optimal exercise of such discretion. This Article maintains that an …

An Unfortunate "Tail": Reconsidering Risk Management Incentives After The Financial Crisis Of 2007-2009, Douglas O. Edwards

University of Colorado Law Review

In recent months, the legal academic community has taken a greater interest in the practice of risk management. Doubtless a response to the recent financial crisis, many have concluded that our current market structure allows for uninhibited risk taking and the pooling of systemic risk. Accordingly, most have suggested a regulatory response is necessary. This Comment, in unreserved agreement with these writers, attempts to contribute to this literature in two ways. First, this Comment explains the development of quantitative risk management to fill in the gaps in the existing legal research. Though I present nothing groundbreaking, my purpose is to …

Deregulation Pas De Deux: Dual Regulatory Classes Of Financial Institutions And The Path To Financial Crisis In Sweden And The United States, Erik F. Gerding

Publications

This article presents the following model of two regulatory classes of financial institutions interacting in financial and political markets to spur deregulation and riskier lending and investment, which in turn contributes to the severity of a financial crisis: 1) Regulation creates two categories of financial institutions. The first class faces greater restrictions in lending or investment activities but enjoys regulatory subsidies, such as an explicit or implicit government guarantee, while the second class is more loosely regulated and can make riskier loans or investments and earn additional profits. 2) These additional profits leads to calls for deregulation to enable the …