Banking and Finance Law Commons^™

Finance In The Courtroom: Appraising Its Growing Pains, Eric L. Talley

Faculty Scholarship

This short essay provides an overview of the current state of finance in corporate law, emphasizing its role in a series of pending appraisal cases at the Delaware Supreme Court.

Stilling The Pendulum: Regulatory, Supervisory, And Structural Approaches, Lev Menand

Faculty Scholarship

Financial regulation is often described as a swinging pendulum. A crisis occurs, and some number of years are spent crafting reforms to prevent another crisis from striking. Unfortunately, all too aware of the enormous costs of the recent disruption, policymakers go too far, stifling salutary financial activity and slowing economic growth. As memories fade, policymakers become increasingly focused on the costs of regulation. Stability is taken for granted, and restrictions are loosened. Markets stay stable and retrenchment continues. Regrettably, however, policymakers err again, and to our collective shock and horror, another crisis hits and the cycle repeats.

If this model …

If It Ain't Broke, Don't Fix It, Kathryn Judge

Faculty Scholarship

A prescription is only as good as the diagnosis on which it is based. This is just as true in finance as it is in medicine. And, in Hal Scott's assessment, the reforms adopted in the wake of the 2007-09 financial crisis ("Crisis") are based on a fundamental misunderstanding of the reasons for that crisis. The future is accordingly bleak.

Beyond Tpp: Legal Reform For Financing Intellectual Property And Innovation In Vietnam, Xuan-Thao Nguyen

SMU Science and Technology Law Review

No abstract provided.

How The United States Postal Service (Usps) Could Encourage More Local Economic Development, Randall K. Johnson

Faculty Works

No abstract provided.

Exploring Cuba's New Role In The World Economy: Paths And Perils, Wentong Zheng

UF Law Faculty Publications

With the normalization of relations with the United States and other countries, Cuba is ushering in a new era with unprecedented opportunities in a globalized world. Participating in the world economy, however, is a risky proposition. It requires policymakers to carefully weigh the pros and cons of each development path and choose the one that best suits Cuba. It also requires policymakers to be prepared for the perils, both economic and legal, that may arise from Cuba's participation in the world economy. This Article explores Cuba's new role in the world economy and the perils that accompany this new role. …

From Territorial To Monetary Sovereignty, Katharina Pistor

Faculty Scholarship

State sovereignty is closely intertwined with, but not limited to, control over territory and people. It has long been recognized that control over monetary affairs is a critical part of genuine sovereignty. In this Article, I go a step further and argue that the relevance and importance of territorial versus monetary sovereignty has shifted in favor of the latter. This shift goes hand in hand with the rise of credit-based financial systems. Such systems depend, in the last instance, on backstopping by an entity with control over its own money supply and no binding survival constraints. Only states with monetary …

Investor-Driven Financial Innovation, Kathryn Judge

Faculty Scholarship

Financial regulations often encourage or require market participants to hold particular types of financial assets. One unintended consequence of this form of regulation is that it can spur innovation to increase the effective supply of favored assets. This Article examines when and how changes in the law prompt the spread of “investor-driven financial innovations.” Weaving together theory, recent empirical findings, and illustrations, this Article provides an overview of why investors prefer certain types of financial assets to others, how markets respond, and how the spread of investor-driven innovations can transform the structure of the financial system. This examination suggests that …

The Black Hole Problem In Commercial Boilerplate, Stephen J. Choi, G. Mitu Gulati, Robert E. Scott

Faculty Scholarship

Rote use of a standard form contract term can erode its meaning, a phenomenon made worse when the process of encrustation introduces various formulations of the term. The foregoing process, when it occurs, weakens the communicative properties of boilerplate terms, leading some terms to lose much, if not all, meaning. In theory, if a clause is completely emptied of meaning through this process it can create a contractual “black hole.” The more frequent and thus potentially more pervasive problem arises when, as the term loses meaning, random variations in language appear and persist, resulting in what we term a “grey …

Principal Costs: A New Theory For Corporate Law And Governance, Zohar Goshen, Richard Squire

Faculty Scholarship

The problem of managerial agency costs dominates debates in corporate law. Many leading scholars advocate reforms that would reduce agency costs by forcing firms to allocate more control to shareholders. Such proposals disregard the costs that shareholders avoid by delegating control to managers and voluntarily restricting their own control rights. This Essay introduces principal-cost theory, which posits that each firm’s optimal governance structure minimizes the sum of principal costs, produced when investors exercise control, and agent costs, produced when managers exercise control. Both principal costs and agent costs can arise from honest mistakes (which generate competence costs) and …

Blockchain And Payment Systems: What Are The Benefits And Costs?, Benjamin Geva, Gene Neyer

Articles & Book Chapters

No abstract provided.

Differing Perceptions? Market Practice And The Evolution Of Foreign Sovereign Immunity, W. Mark C. Weidemaier, Mitu Gulati

Faculty Scholarship

The 20th century witnessed a transformative, “tectonic” shift in international law, from “absolute” to “restrictive” theories of sovereign immunity. As conventionally understood, however, this dramatic transformation represented only a shift in the default rule. Under absolute immunity, national courts could not hear lawsuits and enforce judgments against a foreign sovereign without its consent. Under restrictive immunity, foreign sovereigns were presumptively not immune when they engaged in commercial acts. We demonstrate that market practices undermine this conventional understanding. Using an extensive, two-century data set of contracts between foreign governments and private creditors, we show that contracting parties have long treated absolute …

Restructuring Sovereign Debt After Nml V. Argentina, Lee C. Buchheit, G. Mitu Gulati

Faculty Scholarship

The decade and a half of litigation that followed Argentina’s sovereign bond default in 2001 ended with a great disturbance in the Force. A new creditor weapon had been uncloaked: The prospect of a court injunction requiring the sovereign borrower to pay those creditors that decline to participate in a debt restructuring ratably with any payments made to those creditors that do provide the country with debt relief.

For the first time holdouts succeeded in fashioning a weapon that could be used to injure their erstwhile fellow bondholders, not just the sovereign issuer. Is the availability of this new weapon …

Mandatory Arbitration In Consumer Finance And Investor Contracts, Michael S. Barr

Book Chapters

This chapter focuses on the use of mandatory pre-dispute arbitration clauses in a subset of consumer contracts – those involving consumer finance and investor products and services. Arbitration clauses are pervasive in financial contracts – for credit cards, bank accounts, auto loans, broker-dealer services, and many others. In the wake of the recent financial crisis, Congress enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank). Dodd-Frank authorises the new Consumer Financial Protection Bureau (CFPB) and the Securities and Exchange Commission (SEC) to prohibit or condition the use of arbitration clauses in consumer finance and investment contracts, …

Financial Reform: Making The System Safer And Fairer, Michael S. Barr

Articles

In the fall of 2008, the financial crisis crushed the U.S. economy and plunged the country into the Great Recession. The crisis shuttered American businesses, cost millions of Americans their jobs, and wiped out home values and household savings. The macro effects hit hardest and were the longest lasting for those least able to bear the brunt of the crisis. It was devastating to middle-income families and perhaps even more so to low- and moderate-income households, who had little financial buffer (Barr 2012a). Financial stability, never robust for these families, dropped precipitously (Barr and Schaffa 2016). Both in the United …

Bank Governance And Systemic Stability: The "Golden Share" Approach, Saule T. Omarova

Cornell Law Faculty Publications

The global financial crisis of 2008-2009 has sharply reframed the debate on the role of bank corporate governance as a mechanism of systemic crisis prevention. Among other things, it revealed how often the incentives of bank managers and shareholders to maximize short-term private gains are perfectly aligned as a matter of internal governance, but work directly against the broader public interest in preserving long-term financial stability. This Article accepts the existence of that built-in potential conflict as the critical starting point for answering the central question of post-crisis bank governance: How do we ensure that the board of directors of …

The Federal Housing Administration And African-American Homeownership, David Reiss

Cornell Law Faculty Publications

The United States Federal Housing Administration (“FHA”) has been a versatile tool of government since it was created during the Great Depression. It achieved success with some of its goals and had a terrible record with others. Its impact on African-American households falls, in many ways, into the latter category. The FHA began redlining African-American communities at its very beginning. Its later days have been marred by high default and foreclosure rates in those same communities.

At the same time, the FHA’s overall impact on the housing market has been immense. Over its lifetime, it has insured more than 40 …

The Costs Of Bailouts In The 2007-08 Financial Crisis, Xiaoxi Liu

Fordham Journal of Corporate & Financial Law

The 2007-08 bailout programs were initially created under the emergent situation of financial crisis. Despite their effectiveness in stopping the collapse of financial system, those bailouts have been criticized as ill-planned governmental intervention. Nonetheless, based on the calculation of both the dollar amount of return and the rate of return of each program, this Comment argues that the bailouts are in fact good investments. Furthermore, since Dodd-Frank was invented with the primary purpose of curtailing future bailouts, this Comment also argues that Dodd-Frank reflected an unwise, overhasty decision by Congress.

Regulating A Revolution: From Regulatory Sandboxes To Smart Regulation, Dirk A. Zetzsche, Ross P. Buckley, Janos N. Barberis, Douglas W. Arner

Fordham Journal of Corporate & Financial Law

Prior to the global financial crisis, financial innovation was viewed very positively, resulting in a laissez-faire, deregulatory approach to financial regulation. Since the crisis the regulatory pendulum has swung to the other extreme. Post-crisis regulation, plus rapid technological change, have spurred the development of financial technology (FinTech). FinTech firms and data-driven financial service providers profoundly challenge the current regulatory paradigm. Financial regulators increasingly seek to balance the traditional regulatory objectives of financial stability and consumer protection with promoting growth and innovation. The resulting regulatory innovations include RegTech, regulatory sandboxes, and special charters. This Article analyzes possible new regulatory approaches, ranging …

The Big Patent Short: Hedge Fund Challenges To Pharmaceutical Patents And The Need For Financial Regulation, Ariel D. Multak

Fordham Journal of Corporate & Financial Law

The enactment of the America Invents Act (AIA) in 2011 ushered in a new system for post-grant patent review. In the interest of enhancing the efficiency of the patent regime by invalidating “bad” patents, certain requirements were relaxed. For example, the AIA created an examination process called inter partes review, which allows a party without legal standing to challenge the validity of a patent in front of the Patent Trial and Appeal Board. In the pharmaceutical patent context, it was expected that inter partes review would be utilized mostly by generic drug makers seeking to invalidate patents without incurring the …

Off The Chain! A Guide To Blockchain Derivatives Markets And The Implications On Systemic Risk, Ryan Surujnath

Fordham Journal of Corporate & Financial Law

Blockchains are publicly viewable and theoretically unalterable records of bitcoin transactions. They are thus crucial to the functionality of cryptocurrencies. Through the blockchain, bitcoin algorithmically decentralizes the maintenance of the transaction ledger and delegates the task to users on its network.

Blockchain technology shows promise beyond cryptocurrency: banking and financial institutions have established partnerships with fintech firms to explore the applicability of blockchains in capital markets. Blockchains, used in conjunction with self-executing smartcontracts, present particularly compelling opportunities in derivatives markets, which are typically beset by numerous intermediaries. The blockchain could radically reinvent the existing market infrastructure. Certain intermediaries like central …

Quasi-Appraisal: Appraising Breach Of Duty Of Disclosure Claims Following "Cash-Out" Mergers In Delaware, Zachary A. Paiva

Fordham Journal of Corporate & Financial Law

In recent years, Delaware has served as the hot bed for the dramatic increase in merger appraisal litigation and the proliferation of “appraisal arbitrage” whereby opportunistic shareholders buy into companies following merger announcements and challenge announced deal prices as an investment strategy. While this has not always proved profitable, it has increased scrutiny over the Delaware appraisal regime and the ability for shareholders to avail themselves of the opportunity for a judicial valuation of their shares. Furthermore, it has highlighted information asymmetries in which controlling shareholders, particularly those seeking to cash out their minority shareholders, are incentivized to underpay or …

Multinational Efforts To Limit Intellectual Property Income Shifting: The Oecd’S Base Erosion And Profit Shifting (Beps) Project, Jeffrey Maine

SMU Science and Technology Law Review

No abstract provided.

The History And Legacy Of The Pound Conferences, Lara Traum, Brian Farkas

Cardozo Journal of Conflict Resolution

In light of the GPC, it is useful to take a brief step back to consider the legacy of self-reflection that brings the field to this exciting moment. As we reflect, we find ourselves facing new challenges and raising new questions about the direction of alternative dispute resolution ("ADR") in the 21st century. In this Article, Sections II and III will introduce the "Framers" of the ADR industry's "Constitution," and Section IV will evaluate their 100-year legacy and consider the extent to which it now needs further amendments.

Investor Corruption As A Defense Strategy Of Host States In International Investment Arbitration: Investors' Corrupt Acts Give An Unfair Advantage To Host States In Investment Arbitration, Margareta Habazin

Cardozo Journal of Conflict Resolution

First, the paper will analyze the issue of corruption in international investment arbitration. Second, the paper will examine the deployment of corruption as a defense strategy by host states in international investment arbitration. Next, it will address the jurisdictional consequences of proving corruption in the making of the investment. Further, it will describe the distinctive features of relevant ICSID awards and key issues that led to the dismissal of claims. The paper will also estimate the possible implications of the awards to future ICSID claims affected by bribery and try to predict the outcome of the MOL v. Republic of …

The Limits Of Gatekeeper Liability, Andrew F. Tuch

Scholarship@WashULaw

Gatekeeper liability – the framework under which actors such as law firms, investment banks and accountants face liability for the wrongs committed by their corporate clients – is one of the most widely used strategies for controlling corporate wrongdoing. It nevertheless faces well-recognized flaws: gatekeepers often depend financially on the clients whose conduct they monitor; to carry out their gatekeeping function, gatekeepers rely on individuals – often their employees – whose interests diverge from their own; and major transactions typically involve multiple gatekeepers, each with specific areas of expertise and information, which produces both gaps and overlaps in the gatekeeping …

The Finance Franchise, Robert C. Hockett, Saule T. Omarova

Cornell Law Faculty Publications

The dominant view of banks and other financial institutions is that they function primarily as intermediaries, managing flows of scarce funds from those who have accumulated them to those who have need of them and can pay for their use. This understanding pervades textbooks, scholarly writings, and policy discussions – yet it is fundamentally false as a description of how a modern financial system works. Finance today is no more primarily “intermediated” than it is pre-accumulated or scarce.

This Article challenges the outdated narrative of finance as intermediated scarce private capital and maps the basic structure and dynamics of the …

ปัญหาเกี่ยวกับการโอนสิทธิในรายได้ในอนาคต ศึกษากรณีกองทุนรวมโครงสร้างพื้นฐาน, อัญรินทร์ จิระตระกูลวัชร์

Chulalongkorn University Theses and Dissertations (Chula ETD)

กองทุนรวมโครงสร้างพื้นฐานเป็นเครื่องมือทางการเงินในการระดมทุนรูปแบบหนึ่งของผู้ประกอบกิจการโครงสร้างพื้นฐาน ไม่ว่าจะเป็นภาครัฐหรือภาคเอกชน โดยมีวัตถุประสงค์หลักเพื่อลงทุนในกิจการโครงสร้างพื้นฐานของประเทศไทย กองทุนรวมโครงสร้างพื้นฐานสามารถลงทุนในทรัพย์สินกิจการโครงสร้างพื้นฐานได้หลายประเภท แต่ส่วนใหญ่จะเน้นลงทุนในสิทธิในการรับประโยชน์จากรายได้ในอนาคตหรือสิทธิในรายได้ในอนาคต โดยการเข้าทำสัญญาโอนสิทธิในการรับประโยชน์จากรายได้ในอนาคตกับผู้ประกอบกิจการโครงสร้างพื้นฐาน ซึ่งเมื่อพิจารณาลักษณะ รูปแบบและเงื่อนไขของการเข้าทำสัญญาโอนสิทธิในการรับประโยชน์จากรายได้ในอนาคต และสัญญาอื่นๆ ที่เกี่ยวข้องแล้วพบว่า การโอนสิทธิในการรับประโยชน์จากรายได้ในอนาคตดังกล่าวมีลักษณะเป็นธุรกรรมที่ค่อนข้างซับซ้อน จึงเกิดปัญหาว่า สัญญาโอนสิทธิในการรับประโยชน์จากรายได้ในอนาคตควรจะเป็นธุรกรรมประเภทใด เข้าลักษณะเป็นสัญญาซื้อขาย หรือสัญญากู้ยืมเงิน หรือธุรกรรมอื่นใด ซึ่งลักษณะที่ไม่ชัดเจนของสัญญาโอนสิทธิในการรับประโยชน์จากรายได้ในอนาคตดังกล่าวทำให้เกิดปัญหาในการจัดเก็บภาษีอากรว่า ผู้ประกอบกิจการโครงสร้างพื้นฐานและกองทุนรวมโครงสร้างพื้นฐานควรจะมีภาระภาษีในธุรกรรมดังกล่าวอย่างไร และเนื่องจากในปัจจุบันยังไม่มีบทบัญญัติในประมวลรัษฎากรหรือกฎหมายลำดับรองกำหนดหลักเกณฑ์หรือแนวทางในการจัดเก็บภาษีอากรสำหรับธุรกรรมการโอนสิทธิในการรับประโยชน์จากรายได้ในอนาคตไว้เป็นการเฉพาะ จึงมีการนำบทบัญญัติซึ่งเป็นหลักเกณฑ์ทั่วไปของกฎหมายภาษีอากรมาปรับใช้ ซึ่งการนำมาปรับใช้ดังกล่าวก่อให้เกิดปัญหาค่อนข้างมากในทางปฏิบัติ โดยมีการตีความธุรกรรมการโอนสิทธิในการรับประโยชน์จากรายได้ในอนาคตในลักษณะที่แตกต่างกันไป ก่อให้เกิดความไม่เป็นธรรมและความไม่แน่นอนในการจัดเก็บภาษีซึ่งขัดต่อหลักการบริหารภาษีอากรที่ดี ด้วยเหตุนี้ ผู้เขียนจึงได้ศึกษาเพื่อเสนอแนะให้กำหนดหลักเกณฑ์หรือแนวทางในการจัดเก็บภาษีอากรสำหรับธุรกรรมการโอนสิทธิในการรับประโยชน์จากรายได้ในอนาคต กรณีกองทุนรวมโครงสร้างพื้นฐานเป็นรูปแบบธุรกรรมทางการเงิน (Financing) ให้ชัดเจน

The Chancery Bank Of Delaware: Appraisal Arbitrageurs Expose Need To Further Reform Defective Appraisal Statute, Stanley Onyeador

Vanderbilt Law Review

A dark pool, a form of Alternative Trading System ("ATS"), is a private securities trading platform that-unlike public exchanges such as the New York Stock Exchange-allows participants to execute large block trades with delayed public disclosure. As neither party in a dark market transaction is trading on the public, or "lit," market or knows the identity of its counterparty, dark market trades allow participants to trade anonymously and keep trade strategies from competitors. Further, because dark market trades do not have to be publicly disclosed in real time, the price of a given security will, theoretically, stay relatively stable as …

Putting The Substance Back Into The Economic Substance Doctrine, Nicholas Giordano

Brooklyn Journal of Corporate, Financial & Commercial Law

The foreign tax credit, which saves U.S. taxpayers from paying both foreign and domestic income taxes on the same income, is critical to facilitating global commerce. However, as savvy taxpayers discover increasingly complicated ways to abuse the foreign tax credit regime through the structuring of business transactions, courts have become increasingly skeptical of the validity of those transactions. Using the economic substance doctrine, a common law doctrine codified in 2010 at I.R.C. § 7701(o), courts will disallow tax benefits stemming from a transaction that is not profitable absent its tax benefits, and which the taxpayer had no incentive to undertake …