Banking and Finance Law Commons^™

Misaligned Interests In Private Equity, Jarrod Shobe

BYU Law Review

This Article examines the unique set of agency costs that arise from the separation of ownership and control in private equity funds. These funds operate without significant regulatory or legislative oversight. Instead, they are governed primarily by contractual arrangements between investors and managers that are poorly understood by legal scholars. This Article looks into the black box of these internal arrangements to provide a broad analysis of whether and how these contracts align or misalign the interests of investors and managers. It turns out that the compensation of managers, which is commonly thought to serve as the most powerful tool …

Fhfa Proposed Collection For National Survey Of Mortgage Originations, David J. Reiss

Cornell Law Faculty Working Papers

The Federal Housing Finance Agency has issued a request for comments on the National Survey of Mortgage Originations (NSMO). I write to support this proposed collection, but also to raise some concerns about its efficacy.

The NSMO is very important to the health of the mortgage market. We need only look at the Subprime Boom of the late 1990s and early 2000s to see why this is true: subprime mortgages went from “making up a tiny portion of new mortgage originations in the early 1990s” to “40 percent of newly originated securitized mortgages in 2006.” During the Boom, subprime lenders …

Crowdfunding Without The Crowd, Darian M. Ibrahim

Popular Media

No abstract provided.

The Mechanisms Of Derivatives Market Efficiency, Dan Awrey

Cornell Law Faculty Publications

These are not your parents' financial markets. A generation ago, the image of Wall Street was one of floor traders and stockbrokers, of opening bells and ticker symbols, of titans of industry and barbarians at the gate. These images reflected the prevailing view in which stock markets stood at the center of the financial universe. The high point of this equity-centric view coincided with the development of a significant body of empirical literature examining the efficient market hypothesis (EMH): the prediction that prices within an efficient stock market will fully incorporate all available information. Over time, this equity-centric view became …

Don't End Or Audit The Fed: Central Bank Independence In An Age Of Austerity, Neil H. Buchanan, Michael C. Dorf

Cornell Law Faculty Publications

The Federal Reserve (the Fed) is the central bank of the United States. Because of its power and importance in guiding the economy, the Fed's independence from direct political influence has made it a target of ideologically motivated attacks throughout its history, with an especially aggressive round of attacks coming in the wake of the 2008 financial crisis and ongoing today. We defend Fed independence. We point to the Fed's exemplary performance during and after the 2008 crisis, and we offer the example of a potential future crisis in which Congress falls to increase the debt ceiling to show how …

Big Data In Finance, University Of Michigan Law School

Event Materials

Program for the Big Data in Finance conference.

Gcc Vat: The Intra-Gulf Trade Problem, Richard Thompson Ainsworth, Musaad Alwohaibi

Faculty Scholarship

It seems reasonably clear that by January 1, 2018 events will be set in motion for the adoption of a community-wide 5% value added tax (VAT) in the six Member States of the Gulf Cooperation Council (GCC).

The GCC’s Framework VAT document is expected to be published by the end of October 2016. One of the clearest, consistently placed observations is that the Arabian VATs will be destination-based and modeled on a European credit-invoice design. Intra-Gulf business-to-business (B2B) transactions will be effectively zero-rated by the supplier, and the buyer’s VAT will be directed to the destination jurisdiction. It is not …

Audience Participation: Crowdfunding Large Scale Theatrical Productions Through Regulation A+, Christopher Johnson

Michigan Business & Entrepreneurial Law Review

Theatrical financing has been conducted in much the same way for the better part of a century. This method, however, has consistently provided only the shows with access to the deepest of pockets a path to Broadway. The advent of Internet-based crowdfunding provides producers access to a potential source of capital that was previously unavailable. Prior to the promulgation of the SEC regulations regarding Title IV of the JOBS Act, this capital could only be accessed through donation or reward based financing campaigns, but with the introduction of Regulation A+, there is finally a practical method for the widespread solicitation …

Basel Iii And The Future Of Project Finance Funding, Tianze Ma

Michigan Business & Entrepreneurial Law Review

This paper seeks to analyze the new requirements in the Basel III banking regulatory framework and explore their impact on commercial banks’ project finance portfolio. The paper begins with a general introduction of the Basel Accords, followed by an analysis of the changes in the Basel III requirements and their potential impact on project finance, in particular the effects of the liquidity coverage ratio (LCR) and the net stable funding ratio (NSFR). The paper ends with a discussion of alternative sources of project finance funding that emerged as a result of the new regulatory regime.

Crash And Learn: The Inability Of Transparency Laws To Penetrate American Monetary Policy, Benjamin W. Cramer, Martin E. Halstuk

William & Mary Bill of Rights Journal

No abstract provided.

If It Looks Like A Super Pac, Acts Like A Super Pac, And Is Restricted Like A Super Pac, Then Treat It Like A Super Pac: Why Contribution Limits On A Hybrid Pac’S Independent-Expenditure Arm Are Impermissible, Jacob N. Kipp

William & Mary Bill of Rights Journal

No abstract provided.

Legitimacy And Impartiality As Basic Principles For Sovereign Debt Restructuring, Odette Lienau

Cornell Law Faculty Publications

This essay suggests that attentiveness to the principles of legitimacy and impartiality may contribute to the instrumental success of any sovereign debt restructuring, and highlights institutional elements or practices often associated with these goals. An additional question can be raised as to whether these principles might have a further claim to special consideration, as part of emerging customary international law or general principles of law. Any determination along these lines is made difficult by the fact that legitimacy is a composite principle, constituted of multiple procedural and substantive norms, and perhaps lacks the necessary specificity to be a legal rule …

Deregulating The Inadequate Basel Accords: Future-Proofing Financial Regulations In An Age Of Global Crises, Ivan Chaykovskiy

Cardozo Journal of International and Comparative Law

The Basel Accords, despite their intent to enhance financial stability, are fundamentally flawed due to the Basel Committee on Banking Supervision's lack of formal legal enforcement authority. This limitation renders the Accords ineffective in addressing global financial crises, as their success depends on consistent implementation and compliance across jurisdictions. The note argues that the Committee must be restructured to include a broader membership and gain enforcement powers to create a more robust regulatory framework. Without such reforms, the Accords will continue to fail in preventing future financial meltdowns.

Modifying Merger Consent Decrees To Improve Merger Enforcement Policy, Steven C. Salop

Georgetown Law Faculty Publications and Other Works

This article analyzes my short proposal for reviewing and modifying merger consent decrees to permit additional relief if the provisions of the initial consent merger are found to fail to preserve or restore competition in a reasonable period of time after the merger was consummated. My proposal also would involve more frequent reviews of consummated mergers that have been cleared without challenge, particularly those that were close calls. While “Don't Look Back” might be the best anthem for artists, economic decision theory would not support that approach to merger policy.

Predicting the impact of proposed mergers and remedies on consumers …

Informational Cronyism, Donald C. Langevoort

Georgetown Law Faculty Publications and Other Works

If Maher Kara, the Citigroup analyst at the center of the Salman case now before the Supreme Court, was forbidden under SEC Rule 10b-5 from trading securities for his own account while in possession of the valuable secrets to which his job gave him access, should he instead be able to give that information to family members simply in order to enrich them? I suspect that to anyone unfamiliar with the fine line drawing of federal insider trading law, the answer is clearly no. There is probably no more common form of corruption than generously shoveling the fruits of power …

Three’S A Crowd Or A Charm? Third Party Liability For Participating In Breaches Of Fiduciary Duty, Alison Gurr

San Diego Law Review

Part I of this Article will consider the threshold question noted above: Should third parties be held liable for participating in breaches of fiduciary duty? After establishing that there are justifications for this liability, Part II will explore whether there are other existing causes of action that might address similar concerns and therefore render the introduction of TPLFD unnecessary. Part III will consider how TPLFD should be recognized in states that have not yet adopted this cause of action. It will also argue that the courts, and not the legislature, should introduce TPLFD. Finally, Part IV will set out some …

Zappers - Technological Tax Fraud In New Hampshire, Richard Thompson Ainsworth

Faculty Scholarship

No other State is as vulnerable to Zappers as is the State of New Hampshire. Zappers and related software programming, Phantom-ware, facilitate an old tax fraud – skimming cash receipts. In this instance skimming is performed with modern electronic cash registers (ECRs). Zappers are a global revenue problem, but to the best of this author’s knowledge they have not been uncovered in New Hampshire. Seen from a global perspective however, it seems unlikely that they are not here.

New Hampshire’s fiscal vulnerability to Zappers comes from its heavy reliance on precisely the industry segment that has been found to be …

Sales Suppression: The International Dimension, Richard Thompson Ainsworth

Faculty Scholarship

Sales transaction taxes are highly susceptible to technology fraud, which is an inevitable result of today’s widespread reliance on technology to document taxed transactions. Technology can be (and is) manipulated to defeat the collection of these taxes. Both the U.S. retail sales tax (RST) and the European value added tax (VAT) are vulnerable to technology-based fraud. This Article concerns sales suppression — intentionally not recording sales — in the RST, and at the final stage of the VAT, the retail stage, when tax is collected from final consumers.

The modern electronic cash register (ECR)/point of sale (POS) system is vulnerable …

Johnson V. Wells Fargo Bank Nat’L Ass’N, 132 Nev. Adv. Op. 70 (September 29, 2016), Brittni Griffith

Nevada Supreme Court Summaries

The Court considered whether the Bank Secrecy Act prevents financial institutions from disclosing all investigative information in discovery to an adverse party. The Court held that the Bank Secrecy Act only precludes the disclosure of information relating to the existence of a suspicious activity report or the procedural nature of the suspicious activity report’s generation.

Inside Safe Assets, Anna Gelpern, Erik F. Gerding

Georgetown Law Faculty Publications and Other Works

“Safe assets” is a catch-all term for financial contracts that market participants treat as if they were risk-free. These may include government debt, AAA corporate debt, bank debt, and asset-backed securities, among others. The International Monetary Fund estimated potential safe assets at more than $114 trillion worldwide in 2011, over seven times the U.S. economic output that year.

To treat any contract as if it were risk-free seems delusional after apparently super-safe public and private debt markets collapsed overnight. Nonetheless, financial crises have only raised the policy and academic profile of safe assets, invoked to explain global imbalances, shadow banking, …

The European Union’S Emerging Approach To Isds: A Review Of The Canada-Europe Ceta, Europe-Singapore Fta, And European-Vietnam Fta, Gus Van Harten

Articles & Book Chapters

The European Union’s approach to ISDS is examined based on the available textual evidence in proposed or negotiated trade agreements. The evaluation focuses on three criteria: judicial independence, procedural fairness, and balance in the allocation of rights and responsibilities. Each criteria arises from concerns about the powerful and far-reaching arbitration mechanism at the core of ISDS and its role to decide the legality of sovereign conduct and allocate public funds to foreign investors. The main conclusions are that, in pursuing a massive expansion of ISDS in new trade agreements, the European Union has taken only partial steps on the issue …

Newsroom: A Changing Landscape: Insider Trading Law 09/20/2016, Roger Williams University School Of Law

Life of the Law School (1993- )

No abstract provided.

Ten Years After Consumer Bankruptcy Reform In The United States: A Decade Of Diminishing Hope And Fairness, Robert J. Landry Iii

Catholic University Law Review

The tenth anniversary of the effective date of Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (Reform Act), the largest reform to the consumer bankruptcy in the United States in a quarter of a century, will be marked in October of 2015. Prior to, and since its passage, scores of scholars have theorized about the impact of the Reform Act. The vast majority of research since its passage shows that the Reform Act has not had a long-term impact on filing rates. With this backdrop, the paper explores how the virtues of fairness for creditors and hope for individuals …

Front Matter

Michigan Business & Entrepreneurial Law Review

No abstract provided.

Public Pensions And Fiduciary Law: A View From Equity, T. Leigh Anenson

University of Michigan Journal of Law Reform

Controversies involving fund management may be the next frontier of public pension litigation. Recent scandals involving fraud, bribery, and corruption of public pension officials and other third parties have drawn the public eye toward the management of retirement assets. Individual and entity custodians, including pension boards of trustees, are charged with making investment and other decisions relating to pension funds. Unlike private pensions, there is no federal oversight of asset managers or others in control of retirement funds. Yet these funds hold more than three trillion dollars in assets. Until now, the guardians of these monies have operated almost invisibly …

The Bridging Model: Exploring The Roles Of Trust And Enforcement In Banking, Bitcoin, And The Blockchain, Catherine Martin Christopher

Nevada Law Journal

No abstract provided.

Intrapreneurship, Darian M. Ibrahim

Washington and Lee Law Review

This Article on “intrapreneurship” has several goals. First, it points out that while much of the legal literature on innovation is concerned with startups (entrepreneurship), the innovation that takes place inside our largest corporations (intrapreneurship) is substantial, important, and understudied. Second, the Article observes that while large technology corporations that used to be startups may remain intrapreneurial in culture, intrapreneurship is less common in the aggregate than we might expect. Reasons include organizational bureaucracy, laws favoring entrepreneurship, and what Clayton Christensen (Harvard Business School) calls “the innovator’s dilemma.” The innovator’s dilemma is, put simply, that good management causes large corporations …

Fhfa Single Security/Common Securitization Platform Comment, David J. Reiss

Cornell Law Faculty Working Papers

No abstract provided.

Rights Of European Union Depositors Under Article 17 Of The Charter Of Fundamental Rights After The Cyprus Bail-Out, Paul Artemou

Pace International Law Review

Banks in the Republic of Cyprus began to deteriorate in 2010 due to risky investments with Greece. The two largest Cypriot banks, Cyprus Popular Bank (Laiki) and Bank of Cyprus (BoC), undertook losses, which made the country economically unstable. After requesting financial assistance from the Eurogroup and International Monetary Fund, there was an agreement for Cyprus to raise € 4.2 billion in return for a € 10 billion bailout. Part of the agreement in raising the funds was a levy of bank deposits towards the recapitalization needs of the two largest banks.

The Cyprus bail-in was unpopular and received much …

The Frontiers Of Peer-To-Peer Lending: Thinking About A New Regulatory Approach, William S. Warren

Duke Law & Technology Review

The growth of online alternative lending presents several advantages for both those seeking credit and those with excess capital to lend. Over the past decade, several different models of peer-to-peer lending have emerged in the US and U.K. Each of these models has developed in response to the different regulatory system it faces, which has led to the models’ different risk and reward profiles. However, the current regulatory framework for regulating peer-to-peer lending, especially in the U.S., leaves much to be desired. The inadequate regulatory regime not only hampers the potential for growth and further innovation in the industry, but …