Banking and Finance Law Commons^™

The Federal Reserve As Agent To Another Principal: Monetary Penalties 1997-2022, David Zaring

Indiana Law Journal

Enforcement is how agencies make policy, but the Federal Reserve Board, perhaps the country’s most important independent agency, and certainly its most important regulator of banks, does most of its enforcement in secret. This secrecy means that it is difficult for outside observers to see what the Fed is prioritizing. One exception to the secret sanction paradigm is the civil monetary penalty: once the Fed decides to fine a bank or a banker, no matter how small the amount, it must publicize the fine and the basis for it. We read twenty-five years’ worth of civil monetary penalty orders to …

The Failure Of Market Efficiency, William Magnuson

Faculty Scholarship

Recent years have witnessed the near total triumph of market efficiency as a regulatory goal. Policymakers regularly proclaim their devotion to ensuring efficient capital markets. Courts use market efficiency as a guiding light for crafting legal doctrine. And scholars have explored in great depth the mechanisms of market efficiency and the role of law in promoting it. There is strong evidence that, at least on some metrics, our capital markets are indeed more efficient than they have ever been. But the pursuit of efficiency has come at a cost. By focusing our attention narrowly on economic efficiency concerns—such as competition, …

Floating Liens Over Crypto-In-Commerce, Christopher K. Odinet, Andrea Tosato

Faculty Scholarship

Commercial law and crypto are colliding. Against the backdrop of explosive growth (and discord) in the digital asset market, there has been a series of recent revisions to American commercial law aimed at addressing new and emerging technologies. These changes to the Uniform Commercial Code (UCC) are designed to facilitate the buying and selling of digital assets as well as their use as collateral. However, to date, the literature exploring these changes has mainly focused on understanding the basics of the new regime. This Essay moves beyond that baseline by showing how the UCC amendments can be used to structure …

International Investment Law And Climate Justice: The Search For A Just Green Investment Order, Olabisi D. Akinkugbe, Adebayo Majekolagbe

Articles, Book Chapters, & Popular Press

Efforts are underway to craft responses to the climate crisis within the international investment order. This Article highlights international investment law (“IIL”) and international climate law (“ICL”) as two basic governance contexts within which investment- related responses to climate change are being designed. There is, however, a multilevel—normative and institutional—dissonance between both regimes that makes for an asymmetric integration of the regimes at best, or worse still, the escalation of the injustices which have characterized both. While similar in their recognition of international investment as an important tool for responding to climate change, assumptions and approaches under both regimes are …

Offshore Entanglements, Martin W. Sybblis

Faculty Articles

For decades, scholars have struggled to determine how to deploy laws and legal institutions to spur economic prosperity. But, without knowing which legal rules and institutions to prioritize for a particular social context, the outcomes have been generally unsatisfactory. The case of offshore financial centers provides fresh and compelling new insights into this puzzle. This Article uses the sociological concept of community economic identity (“CEI”) to understand why some offshore financial centers prioritize investments in legal institutions that bolster their offshore finance enterprises while others do not. CEI refers to a community’s shared identity that is linked to a specific …

Financial Inclusion, Cryptocurrency, And Afrofuturism, Lynnise E. Pantin

Faculty Scholarship

As a community, Black people consistently face barriers to full participation in traditional financial markets. The decentralized nature of the cryptocurrency market is attractive to a community that has been historically and systematically excluded from the traditional financial markets by both private and public actors. As new entrants to any type of financial market, Black people have increasingly embraced blockchain technology and cryptocurrency as a path towards the wealth-building opportunities and financial freedom they have been denied in traditional markets. This Article analyzes whether the technology’s decentralized system will lead to financial inclusion or increased financial exclusion. Without reconciling the …

The Logic And Limits Of The Federal Reserve Act, Lev Menand

Faculty Scholarship

The Federal Reserve is a monetary authority subject to minimal executive and judicial oversight. It also has the power to create money, which permits it to disburse funds without drawing on the U.S. Treasury. Since 2008, it has leveraged this power to an unprecedented extent. It has rescued teetering financial conglomerates, purchased trillions of dollars of mortgage-backed securities, and opened numerous ad hoc lending facilities to support ordinary businesses, nonprofits, and municipalities.

This Article identifies the causes and consequences of the Federal Reserve's expanded footprint by recovering the logic and limits of its enabling act. It argues that to understand …

The Lost Promise Of Private Ordering, Cathy Hwang, Yaron Nili, Jeremy Mcclane

Faculty Scholarship

The agency problem is corporate law’s most enduring challenge: when corporate managers spend investors’ money, how does the law protect investors from reckless management? Scholars of law, finance, and accounting have suggested that in one corner of corporate law—corporate debt—a powerful tool exists to mitigate the agency problem. Specifically, through loan covenants, lenders can force borrowers to comply with lenders’ preferences, thereby mitigating the agency problem in lending.

But loan covenants are disappearing. Over the last decade, loan covenants have become fewer and skinnier, and so called “covenant-lite” or “cov-lite” loans have become dominant. If loan covenants do such a …

Finance Against Law: The Case Of China, Shitong Qiao

Faculty Scholarship

Can there be a highly developed financial market without legal protection for investors and creditors? The influential law and finance literature is built on the assumption that legal protection is essential to the development of an impersonal financial market. This Article investigates how two financial markets of trillions of dollars have developed extralegally in the past two decades despite the risk of regulatory enforcement and contract defaults. Specifically, I examine (1) how Chinese internet companies from Sina to Alibaba have designed contracts to circumvent the Chinese government’s ban on foreign capital in its internet industry and (2) how Chinese entities …

Next-Generation Securitization: Nfts, Tokenization, And The Monetization Of ‘Things’, Steven L. Schwarcz

Faculty Scholarship

For decades, businesses have used securitization to monetize assets by selling to investors interests in the assets’ future value. Traditionally, securitization has monetized so-called financial assets, which generate cash flow to pay the investors. That payment source, coupled with the ability of investors to resell their interests, can create a highly liquid and attractive investment. Even so, securities laws generally restrict these investments to sophisticated and institutional investors.

In recent years, securitization has spawned a new generation of transactions that monetize nonfinancial assets and other rights that do not ordinarily generate cash flow, such as art, collectible cars, access to …

Consumer Uncertainty In Trademark Law: An Experimental Investigation, Barton Beebe, Roy Germano, Christopher Jon Sprigman, Joel H. Steckel

Emory Law Journal

Nearly every important issue in trademark litigation turns on the question of what consumers in the marketplace believe to be true. To address this question, litigants frequently present consumer survey evidence, which can play a decisive role in driving the outcomes of trademark disputes. But trademark survey evidence has often proven to be highly controversial, not least because it has sometimes been perceived as open to expert manipulation. In this Article, we identify and present empirical evidence of a fundamental problem with trademark survey evidence: while the leading survey formats in trademark law test for whether consumers hold a particular …

Money Creation And Bank Clearing, Nadav Orian Peer

Fordham Journal of Corporate & Financial Law

Like many other countries, the U.S. money supply consists primarily of deposits created by private commercial banks. How we understand bank money creation matters enormously. We are currently witnessing a debate between two competing understandings. On the one hand, a long-standing conventional view argues that bank money creation originates in individual market transactions. Based on this understanding, the conventional view narrowly limits the scope of banking regulation to market failure correction. On the other hand, authors in a new legal literature emphasize the public aspects of bank money creation, characterizing it as a “public franchise,” a “public-private partnership,” and part …

Exploring Financial Data Protection And Civil Liberties In An Evolved Digital Age, Amanda Lindner

Fordham Journal of Corporate & Financial Law

There is no comprehensive financial privacy law that can protect consumers from a company’s collection sharing and selling of consumer data. The most recent federal financial privacy law, the Gramm-Leach-Bliley Act (“GLBA”), was enacted by Congress over 20 years ago. Vast technological and financial changes have occurred since 1999, and financial privacy law is due for an upgrade.

As a result, loopholes exist where companies can share financial data without being subject to laws or regulations. Additionally, federal financial privacy related laws provide little to no recourse for consumers to self-remediate with litigation, also known as a private right of …

Gamestopped: How Robinhood’S Gamestop Trading Halt Reveals The Complexities Of Retail Investor Protection, Neal F. Newman

Fordham Journal of Corporate & Financial Law

Should brokers have the unfettered right to restrict investor trading? GameStop, a brick-and-mortar video game retailer, had been experiencing declining revenues since 2016. However, GameStop saw its share price climb almost 1000 percent in the span of a one- week period from January 21, 2021 to January 27, 2021 due to retail investors buying significant amounts of GameStop shares during that period. Melvin Capital, a hedge fund, ended up losing billions as they were betting that GameStop shares would lose value instead of increase—a practice referred to as short selling. On January 28, 2021, brokers inexplicably halted trading on GameStop …

Without Reservation: Ensuring Uniform Treatment In Bankruptcy While Keeping In Mind The Interests Of Native American Individuals And Tribes, Connor D. Hicks

Fordham Journal of Corporate & Financial Law

The Bankruptcy Code (“Code”) exists as a mechanism for good faith debtors to discharge debts and seek a “fresh start” in life and finance. 11 U.S.C. § 106(a) ensures that not only are all debtors treated uniformly, but that all creditors, including governmental creditors which may otherwise enjoy immunity from suit, are equally subject to the jurisdiction of Bankruptcy courts and bound to the provisions of the Code.

However, a recent circuit split has demonstrated one niche yet significant instance in which a debtor may not receive the same treatment as their counterparts. While § 106 contains an express waiver …

The Battle With Big Tech: Analyzing Antitrust Enforcement And Proposed Reforms, Youngjae Lee, Morgan Hagenbuch

Fordham Journal of Corporate & Financial Law

No abstract provided.

Blacking Out Congressional Insider Trading: Overlaying A Corporate Mechanism Upon Members Of Congress And Their Staff To Curtail Illegal Profiting, Nicholas Gervasi

Fordham Journal of Corporate & Financial Law

Congressional insider trading involves members of Congress or their staff trading on material, nonpublic information attained while executing their official responsibilities. This type of private profit-making, while in a government role, casts doubt on the efficacy and impartiality of lawmakers to regulate companies they hold shares of. Egregious acts of illegal profiting from insider trading based on information entrusted to the government escape prosecution and liability due to fundamental gaps in the common law and the Congress specific statutes lack enforcement. Recent calls on Congress by the public and multiple bipartisan proposed bills in both chambers have begun to address …

The Solution To Shadow Trading Is Not Found In Current Insider Trading Law: A Proposed Amendment To Rule 10b5-2, Jamel Gross-Cassel

Fordham Journal of Corporate & Financial Law

Shadow trading is a lucrative way to exploit a loophole in insider trading law. Insiders abuse this loophole to make six-figure profits and escape liability when done at the right companies. Those who shadow trade use material, nonpublic information to trade not in the securities of their own company, which would be illegal, but in the securities of a closely related company where the information is just as impactful. Efforts to close this loophole rely on the individual insider trading policies of the involved companies. These policies vary in language, making liability for shadow trading dependent on specific language or …

From Tether To Terra: The Current Stablecoin Ecosystem And The Failure Of Regulators, Mary E. Burke

Fordham Journal of Corporate & Financial Law

The Tether controversy and Terra crash have placed stablecoins in the regulatory spotlight. Stablecoins are often portrayed as posing systemic risks to financial markets, with some pundits labelling them “the villain of the finance world.” Global regulatory bodies, namely the International Monetary Fund (IMF) and the Bank of International Settlement (BIS), and political leaders, including the Biden Administration, have all called for stablecoin regulation. These officials allege that stablecoins’ structure, combined with their exponential growth, pose a unique risk to global markets. Before the May 2022 Terra crash, government reports superficially treated stablecoins by exclusively focusing on asset-backed coins. Post …

Dollars That Devalue Are Unconstitutional, Christopher Guzelian

St. Mary's Law Journal

This Article demonstrates the United States dollar has been unconstitutional since at least the Civil War. Congresses and central bankers often weaken its value. In a previous article, the Author demonstrated that the largely valueless dollar causes human poverty and environmental damage. If Congress restores the dollar’s constitutionality by returning to a silver dollar coin standard of adequate value (at least 371.25 grains of fine silver per dollar), human economies and the environment will become more sustainable.

Nestlé V. Doe: A Death Knell To Corporate Human Rights Accountability?, Phillip Ayers

Seattle University Law Review

The Supreme Court in Nestlé v. Doe held that foreign plaintiffs who claimed to be victims of overseas tortious conduct by corporate defendants had no jurisdiction to sue in federal courts using the Alien Tort Statute. This Comment looks at the history of the Alien Tort Statute, from its inspiration, long dormancy, and recent reinvigoration beginning in the 1980s. The Comment then explores the background of Nestlé and its issues with child slavery in its cocoa supply chain. From there, the Comment analyzes the Nestlé v. Doe decision, and posits an alternative outcome. Finally, this Comment looks for a new …

Tax-Free And The Offshore Imaginary, Allison Anna Tait

Law Faculty Publications

Much of the legal geography of wealth and wealth inequality—the cartography of capitol distribution and financial concern—is easily expressed in coordinates that define neighborhoods and visible in structured spaces of both confinement and opportunity. There are elite zip codes, million-dollar blocks, and pockets of poverty across the landscape. Some geographic localizations of family money tend, however, more toward the offsite, the clandestine, and most particularly the offshore. For high-wealth families and individuals—and the financial institutions that cater to them—the dream of finding offshore islands and locating off-map comes with many benefits since remote siting promises not just the spatial privacy …

Wireless Investors & Apathy Obsolescence, Sergio Alberto Gramitto Ricci, Christina M. Sautter

Faculty Journal Articles and Book Chapters

This Article discusses how a subgenre of retail investors makes investors’ apathy obsolete. In prior work, we dub this genre of retail investors “wireless investors” for their reliance on technology and online communications. By applying game theory, this Article discusses how wireless investors’ global-scale online communications allow them to circulate information and coordinate, obliterating collective action problems.

Total Return Meltdown: The Case For Treating Total Return Swaps As Disguised Secured Transactions, Colin P. Marks

Faculty Works

Archegos Capital Management, at its height, had $35 billion in assets. But in the spring of 2021, in part through its use of total return swaps, Archegos sparked a $30 billion dollar sell-off that left many of the world's largest banks footing the bill. Mitsubishi UFJ Group estimated a loss of $300 million; UBS, Switzerland's biggest bank, lost $861 million; Morgan Stanley lost $911 million; Japan's Nomura lost $2.85 billion; but the biggest hit came to Credit Suisse Group AG which lost $5.5 billion. Archegos, itself lost $20 billion over two days. The unique characteristics of total return swaps and …

Constraining Corporate Law Principles In Affiliate World, Anita K. Krug

Emory Law Journal

No abstract provided.

Don't Foreclose On Me: Adr's Role In Regulating The Foreclosure Power Of Homeowners Association In The Aftermath Of Covid-19, Jessica Lalehzar

Cardozo Journal of Conflict Resolution

No abstract provided.

Corporate Governance And Gender Equality: A Study Of Comply-Or-Explain Disclosure Regulation, Aaron A. Dhir, Sarah Kaplan, Maria Arabella Robles

Seattle University Law Review

In 2020, the Nasdaq Stock Market filed a proposal with the U.S. Securities and Exchange Commission seeking permission to adopt a board diversity-related disclosure requirement for its listed companies. In 2021, the SEC approved the proposal, thus entrenching Nasdaq’s position as the most significant stock exchange to date to mandate listing rules that reflect the intention of diversifying corporate boardrooms. Nasdaq’s movement into the diversity space is not the first attempt to address homogeneous boards in the U.S. In 2009, the SEC adopted a rule requiring publicly traded firms to report on whether they consider diversity in identifying director nominees. …

Judicial Ethics And The Eradication Of Racism, Dontay Proctor-Mills

Seattle University Law Review

In 2020, the Washington Supreme Court entrusted the legal community with working to eradicate racism from its legal system. Soon after, Washington’s Commission on Judicial Conduct (hereinafter the Commission) received a complaint about a bus ad for North Seattle College featuring King County Superior Court Judge David Keenan. Along with a photo of Judge Keenan’s face, the ad included the following language: “A Superior Court Judge, David Keenan got into law in part to advocate for marginalized communities. David’s changing the world. He started at North.” The Commission admonished Judge Keenan for violating the Code of Judicial Conduct, in part …

Table Of Contents, Seattle University Law Review

Seattle University Law Review

Table of Contents

Why Corporate Boards Should Include Lgbtq+ People, Jeremy Mcclane, Darren Rosenblum

Seattle University Law Review

Corporate boardrooms sit at the heart of most of society’s most consequential decisions but fall far short of the diversity of our society. The current movement toward board diversification aims to remedy the underrepresentation of marginalized groups on corporate boards. More recently, some efforts have included LGBTQ+ people, even though the basis for their inclusion on corporate boards remains largely unstated. This Article examines both the normative and instrumental bases for LGBTQ+ inclusion in board diversity initiatives, articulating unspoken assumptions and linking LGBTQ+ people to the broader inclusion effort. In so doing, it begins to surface the unique issues LGBTQ+ …