Banking and Finance Law Commons^™

Underwriting Sustainable Homeownership: The Federal Housing Administration And The Low Down Payment Loan, David Reiss

Georgia Law Review

The United States Federal Housing Administration (FHA) has been a versatile tool of government since it was created during the Great Depression. The FHA was created in large part to inject liquidity into a moribund mortgage market. It succeeded wonderfully, with rapid growth during the late 1930s. The federal government repositioned it a number of times over the following decades to achieve a variety of additional social goals. These goals included supporting civilian mobilization during World War II; helping veterans returning from that war; stabilizing urban housing markets during the 1960s; and expanding minority homeownership rates during the 1990s. It …

Corporate Control And Idiosyncratic Vision, Zohar Goshen, Assaf Hamdani

Faculty Scholarship

This Article offers a novel theory of corporate control. It does so by shedding new light on corporate-ownership structures and challenging the prevailing model of controlling shareholders as essentially opportunistic actors who seek to reap private benefits at the expense of minority shareholders. Our core claim is that entrepreneurs value corporate control because it allows them to pursue their vision (i.e., any business strategy that the entrepreneur genuinely believes will produce an above-market rate of return) in the manner they see fit. We call the subjective value an entrepreneur attaches to her vision the entrepreneur’s idiosyncratic vision. Our framework identifies …

Economic Crisis And The Integration Of Law And Finance: The Impact Of Volatility Spikes, Edward G. Fox, Merritt B. Fox, Ronald J. Gilson

Faculty Scholarship

The 2008 financial crisis raised puzzles important for understanding how the capital market prices common stocks and in turn, for the intersection between law and finance. During the crisis, there was a dramatic fivefold spike, across all industries, in "idiosyncratic risk" – the volatility of individual-firm share prices after adjustment for movements in the market as a whole.

This phenomenon is not limited to the most recent financial crisis.This Article uses an empirical review to show that a dramatic spike in idiosyncratic risk has occurred with every major downturn from the 1920s through the recent financial crisis. It canvasses three …

The First Year: The Role Of A Modern Lender Of Last Resort, Kathryn Judge

Faculty Scholarship

Insufficient liquidity can trigger fire sales and wreak havoc on a financial system. To address these challenges, the Federal Reserve (the Fed) and other central banks have long had the authority to provide financial institutions liquidity when market-based sources run dry. Yet, liquidity injections sometimes fail to quell market dysfunction. When liquidity shortages persist, they are often symptoms of deeper problems plaguing the financial system.

This Essay shows that continually pumping new liquidity into a financial system in the midst of a persistent liquidity shortage may increase the fragility of the system and, on its own, is unlikely to resolve …

Short-Termism And Long-Termism, Michal Barzuza, Eric L. Talley

Faculty Scholarship

A significant debate in corporate law and finance concerns the role of activist investors (especially hedge funds) in corporate governance. Activists, it is often alleged, imprudently privilege short term earnings over superior (but less liquid) long term investments. Activists counter that they target managers who unjustifiably cling to questionable strategies. While this debate is hardly new, it has grown increasingly fractious of late. We analyze the activism debate within a theoretical securities-market setting. In our framework – which draws from an emerging literature in empirical and experimental finance – managers are differentially overconfident (causing them to favor long-term projects), while …

The Appearance And The Reality Of Quid Pro Quo Corruption: An Empirical Investigation, Christopher Robertson, D. Alex Winkelman, Kelly Bergstrand, Darren Modzelewski

Faculty Scholarship

The Supreme Court says that campaign finance regulations are unconstitutional unless they target "quid pro quo" corruption or its appearance. To test those appearances, we fielded two studies. First, in a highly realistic simulation, three grand juries deliberated on charges that a campaign spender bribed a Congressperson. Second, 1271 representative online respondents considered whether to convict, with five variables manipulated randomly. In both studies, jurors found quid pro quo corruption for behaviors they believed to be common. This research suggests that Supreme Court decisions were wrongly decided and that Congress and the states have greater authority to regulate campaign finance. …

Private Dollars For Public Litigation: An Introduction, Anthony J. Sebok

Articles

The article argues that litigation investment—where third-party funders provide capital for lawsuits in exchange for a share of potential recoveries—should be extended to public litigation. It contends that the economic rationale for litigation investment applies equally to public entities, such as state Attorneys General, as it does to private litigants. The author highlights the funding gap in public litigation, particularly in large-scale cases against well-resourced defendants, and suggests that litigation investment could address this gap more effectively than contingent fee arrangements with private attorneys.

Panel 3: Litigation Funding As A Tool For Collective Actions And Arbitrations, Anthony J. Sebok

Articles

The article explores innovative models of litigation funding, particularly third-party financing, and their implications for access to justice and legal efficiency. It examines how different jurisdictions, such as Quebec and Australia, have implemented funding mechanisms to address gaps in legal representation and the challenges of aggregating claims. The analysis highlights the potential benefits of these models, including increased access to justice and economic efficiency, while also addressing concerns about legitimacy, corruption, and systemic biases.

Class Warfare: The Disappearance Of Low-Income Litigants From The Civil Docket, Myriam Gilles

Articles

In recent years, much attention has been paid to the startling disparities in income and wealth in contemporary U.S. society. The enormous concentration of economic power in the top 1% is the culmination of decades of significant income and wealth gains for the top, combined with stagnant or decreasing growth for the majority - a trend that continues apace. But nowhere is the gap more glaring than in the civil docket, where class actions brought by or on behalf of low-income consumers and employees are on the verge of disappearing.

To be sure, the decline in class actions is only …

Why China Established The Asia Infrastructure Investment Bank, Daniel C.K. Chow

Vanderbilt Journal of Transnational Law

On January 16, 2016, China officially opened the Asia Infrastructure Investment Bank (AIIB) for business, representing what might be a seismic shift in economic power from the United States to China. The AIIB creates a challenge to the U.S.-dominated World Bank and International Monetary Fund (IMF), two venerable international financial institutions created at the end of World War II. The World Bank lends money to developing countries to promote economic development, but these loans come with conditions called the Washington Consensus--a set of policies designed to promote the use of private markets, protect the environment, protect human and workers' rights, …

Panel 2: Types Of Litigation Funding, Geoffrey P. Miller, Maya Steinitz, Joshua Schwadron, Bradley Wendel, Michael Faure, Jef De Mot, Travis Lenkner

Faculty Scholarship

This is a transcript from the second panel of the 2015 NYU School of Law conference: Litigation Funding: The Basics and Beyond.

Panel Two

The second panel will build on the basics. Participants will explain and discuss different subcategories of funding, each of which may raise different conceptual, practical and/or regulatory concerns.

Panelists:

• Geoffrey Miller, New York University School of Law (Moderator)
• Maya Steinitz, University of Iowa College of Law
• Joshua Schwadron, Founder and CEO, Mighty
• Bradley Wendel, Cornell Law School
• Michael G. Faure, Maastricht University & Rotterdam University, the Netherlands
• Jef De Mot, Ghent University
• Travis Lenkner, Gerchen Keller …

Recent Developments In Bankruptcy Regulation: Mortgage Servicing Rules, The Fdcpa, And The Cfpb, Frederick Tung, Alane A. Becket, Sarah Bolling Mancini, Nick Wooten

Faculty Scholarship

MS. DEPPERT: Welcome back. Before we begin, I'd like to take this opportunity to introduce you to our second panel of the day, our Consumer Panel, which will discuss Recent Developments in Bankruptcy Regulation, including mortgage servicing rules, the Fair Debt Collection Practices Act (the "FDCPA"), and the Consumer Financial Protection Bureau (the "CFPB"). This afternoon we are privileged to have the following distinguished panelists join us. First we have Alane Becket, Managing Partner at Becket & Lee LLP, in Malvern, Pennsylvania, a law firm representing primarily consumer lenders in bankruptcy proceedings. Ms. Becket was elected to the Board of …

“Ev’Ry American Experiment Sets A Precedent”: Why One Florida State Court’S Bitcoin Opinion Is Everyone’S Business, Allison Caffarone, Meg Holzer

Scholarly Works

Part I of this article seeks to explain in largely non-technical terms the design of the Bitcoin network. Part II explains the guidance and administrative rulings provided by the United States Department of the Treasury's Financial Crimes Enforcement Network in relation to the issues in the Espinoza case. Additionally, Part II surveys different approaches taken by state legislatures and regulators in seeking to address decentralized virtual currencies, including bitcoin. Careful attention is paid to how the terms "monetary value" and "virtual currency" are defined, and how those definitions have been interpreted. Part II further explores the differences in the way …

A Story Of Three Bank-Regulatory Legal Systems: Contract, Financial Management Regulation, And Fiduciary Law, Tamar Frankel

Faculty Scholarship

How should banks be regulated to avoid their failure? Banks must control the risks they take with depositors' money. If depositors lose their trust in their banks, and demand their money, the banks will fail. This article describes three legal bank regulatory systems: Contract with depositors (U.S.); a mix of contract and trust law, but going towards trust (Japan), and a full trust-fiduciary law regulating banks (Israel). The article concludes that bank regulation, which limits the banks' risks and conflicts of interest, helps create trustworthy banks that serve their country best.

Contemplating The Gap-Filling Role Of Social Intrapreneurship, Tamara Belinfanti

Articles & Chapters

Social intrapreneurs occupy an intersectional space within the large corporate form at the crossroads of innovation, profit, and social good. They are often described as "disruptive" because they devise new ways to tackle problems, usually social in nature, in a manner that disrupts traditional operating models or long-standing assumptions. Although much has been written about social intrapreneurs in managerial literature, legal literature has been silent. This Article reverses that trend and develops a theory of social intrapreneurship from a corporate law perspective. Specifically, this Article posits that social intrapreneurship in terms of praxis, characteristics, and process can be conceptualized as …

When All Else Fails: The Evolution Of Customer Asset Protections After Brokerage Bankruptcy, Ronald H. Filler

Articles & Chapters

No abstract provided.

Incentivizing The Protection Of Personally Identifying Consumer Data After The Home Depot Breach, Ryan F. Manion

Indiana Law Journal

The breach of payment card systems at the Home Depot in 2014 resulted in the theft of a wealth of information. This Note will examine the facts and legal consequences of the Home Depot breach under three separate frameworks. First, this Note will examine the Home Depot’s responsibilities arising under existing data breach notification statutes. Second, this Note examines the Home Depot’s potential liability if the recent bill introduced by Senator Leahy of Vermont proposing a federal data breach notification framework becomes law; ultimately, however, this Note finds that state notification statutes fail to adequately protect consumers, and Senator Leahy’s …

The International Banking Act Of 1978: Federal Regulation Of Foreign Banks In The United States, Patrick F. Mcmahon

Georgia Journal of International & Comparative Law

No abstract provided.

The Failure Of Anti-Money Laundering Regulation: Where Is The Cost-Benefit Analysis?, Lanier Saperstein, Geoffrey Sant, Michelle Ng

Notre Dame Law Review Reflection

Regulators have been punishing the banks not because of any actual money laundering, but rather because the banks did not meet the regulators’ own subjective vision of the ideal anti–money laundering or counter–terrorist financing program. However, no one has attempted to show that the supposedly ideal vision of an anti–money laundering or counter–terrorist financing program would actually be more effective than the programs the banks have in place.

Even if the regulators’ ideal vision of an anti–money laundering and counter–terrorist financing program would in fact be more effective than what exists now, it is unclear if the benefits of such …

The Global Architecture Of Financial Regulatory Taxes, Carlo Garbarino, Giulio Allevato

Michigan Journal of International Law

This Article endeavors to broaden the analysis of available policy tools to address the problems created by financial crises and discusses how, in addition to direct regulation, certain tax measures having a regulatory nature may operate to address the so-called “negative externalities” often associated with those crises. There is a negative externality when an economic agent making a decision does not pay the full cost of the decision’s consequences. In such cases, the cost to society as a whole is greater than the cost borne by the individuals creating the economic impact. In practice, negative externalities result in market inefficiencies …

The New Road To Serfdom: The Curse Of Bigness And The Failure Of Antitrust, Carl T. Bogus

University of Michigan Journal of Law Reform

This Article argues for a paradigm shift in modern antitrust policy. Rather than being concerned exclusively with consumer welfare, antitrust law should also be concerned with consolidated corporate power. Regulators and courts should consider the social and political, as well as the economic, consequences of corporate mergers. The vision that antitrust must be a key tool for limiting consolidated corporate power has a venerable legacy, extending back to the origins of antitrust law in early seventeenth century England, running throughout American history, and influencing the enactment of U.S. antitrust laws. However, the Chicago School’s view that antitrust law should be …

Political Uncertainty And The Market For Ipos, Jay B. Kesten, Murat C. Mungan

Faculty Scholarship

This Article presents a simple theory and model of the effects of political uncertainty on the market for IPOs. Our model generates four central predictions: (i) increased political uncertainty reduces the frequency of IPOs; (ii) firms that choose to conduct an IPO during periods of political uncertainty are, on average, of higher quality and generate greater return on investment in the secondary market; (iii) political uncertainty increases the cost of capital for IPO firms; but (iv) underpricing is less pronounced during periods of heightened political uncertainty. We demonstrate that each of these predictions is consistent with available empirical evidence.

Our …

Equity Crowdfunding: A Market For Lemons?, Darian M. Ibrahim

Faculty Publications

No abstract provided.

Count The Limbs: Designing Robust Aggregation Clauses In Sovereign Bonds, Anna Gelpern, Ben Heller, Brad Setser

Georgetown Law Faculty Publications and Other Works

On August 29, 2014, the International Capital Market Association (ICMA) published new recommended terms for sovereign bond contracts governed by English law. One of the new terms would allow a super majority of creditors to approve a debtor’s restructuring proposal in one vote across multiple bond series. The vote could bind all bond holders, even if a series voted unanimously against restructuring, so long as enough holders in the other series voted for it. An apparently technical change, awkwardly named “single-limb aggregated collective action clauses (CACs)” promised to eliminate free-riders for the first time in the history of sovereign bond …

The Evolution Of Giving: Considerations For Regulation Of Cryptocurrency Donation Deductions, Ashley Pittman

Duke Law & Technology Review

This Issue Brief looks at the rapidly growing area of cryptocurrency donations to nonprofit organizations. Given the recent IRS guidance issued on taxation of Bitcoin, specifically its decision to treat cryptocurrencies as property, questions now arise as to how charitable contributions of the coins will be valued for tax deductions. Though Bitcoin resembles most other capital gain property, its volatility, general decline in value, anonymity, and potential for abuse require specific guidance on valuation and substantiation so as to handle its unique nature and prevent larger deductions for charitable contributions than those to which taxpayers are entitled.

It's Time For A Public Option In Banking, Mehrsa Baradaran

Popular Media

Associate Professor Mehrsa Baradaran published this article in The Harvard Law Record on November 16, 2015. It discusses how post offices can provide ordinary citizens with banking services.

Too Much Collateral Damage; Fatca: The Well-Intentioned, Yet Misguided And Unconstitutional, Tax Law, Zac Delap

Journal of the National Association of Administrative Law Judiciary

This paper will examine FATCA in five parts: beginning with an introduction in Part I, Part II will provide the pertinent background that gave rise to the law, Part III will present the essential elements of FATCA, Part IV will offer pertinent liberty and constitutional arguments against FATCA, and Part V will analyze each argument's possibility of succeeding.

How The Us Post Office Can Save America—And Itself, Matt Phillips

Popular Media

Professor Mehrsa Baradaran is interviewed by Quartz on her thoughts about postal banking.

Of More Than Usual Interest: The Taxing Problem Of Debt Principal, Charlene D. Luke

Seattle University Law Review

Leverage is an essential but often troubling component of the U.S. market. The financial crisis highlighted the risks and complexity of a leverage web that includes flesh-and-blood people from all walks of life and paper people from all corners of the business and investment world. In the tax area, the potentially problematic incentive effects of interest deductibility have long engaged a wide array of tax commentators and policymakers. While interest deductibility rightly receives widespread scrutiny, a more comprehensive approach to leverage is needed. This Article focuses on the surprisingly complicated tax treatment of cash (and cash equivalent) borrowings. This Article …

International Tax Considerations: Inbound & Outbound, Seth Green, Monica Zubler

William & Mary Annual Tax Conference

No abstract provided.