Banking and Finance Law Commons^™

The Political Economy Of International Financial Regulation, Pierre-Hugues Verdier

Indiana Law Journal

No abstract provided.

The Constitutionality Of Using Eminent Domain To Condemn Underwater Mortgage Loans, Katharine Roller

Michigan Law Review

One of the most visible and devastating components of the financial crisis that began in 2007 and 2008 has been a nationwide foreclosure crisis. In the wake of ultimately ineffective attempts at federal policy intervention to address the foreclosure crisis, a private firm has proposed that counties and municipalities use their power of eminent domain to seize “underwater” mortgage loans—-mortgage loans in which the debt exceeds the value of the underlying property—-from the private securitization trusts that currently hold them. Having condemned the mortgage loans, the counties and municipalities would reduce the debt to a level below the value of …

Moment Of Clarity: A Centrist Approach To Mortgage Lending, Yusuf Yusuf

Cardozo Public Law, Policy & Ethics Journal

No abstract provided.

Information Asymmetries In Consumer Credit Markets: Evidence From Payday Lending, Paige Marta Skiba, Will Dobbie

Vanderbilt Law School Faculty Publications

Information asymmetries are prominent in theory but difficult to estimate. This paper exploits discontinuities in loan eligibility to test for moral hazard and adverse selection in the payday loan market. Regression discontinuity and regression kink approaches suggest that payday borrowers are less likely to default on larger loans. A $50 larger payday loan leads to a 17 to 33 percent drop in the probability of default. Conversely, there is economically and statistically significant adverse selection into larger payday loans when loan eligibility is held constant. Payday borrowers who choose a $50 larger loan are 16 to 47 percent more likely …

Self-Regulation Of Insider-Trading In Mutual Funds And Advisers, Tamar Frankel

Faculty Scholarship

Mutual funds are required to impose Codes of Ethics on many of their employees. Did this requirement make a difference? After all, similar Codes proliferate in many other financial and business corporations! ⁴ with fairly miserable results. In fact, the temptations facing employees and managers of many business corporations that published self-imposed Codes are relatively weaker than the temptations facing employees and managers of mutual funds. Yet as compared to mutual funds, these business companies have failed to prevent insider-trading!

I believe that regulated mutual funds are less prone to insider-trading than non-regulated funds and traders because their Codes of …

Rwanda — Cutting-Edge Vat Compliance, Richard Thompson Ainsworth, Goran Todorov

Faculty Scholarship

On August 26, 2013 the Ministerial Order on Modalities of Use of Certified Electronic Billing Machine, No. 002/23/10TC of 31/07/2013, was published in the Official Gazette of Rwanda. This Order has set loose a technology revolution in VAT compliance that promises business efficiencies, and revenue enhancements that are only imagined in more developed countries. To open the door to technology Rwanda has taken the traditional digital invoice security model, and connected it to a central security portal at the Rwanda Revenue Authority (RRA). Rwanda will now be able to securely monitor transactions in close to real-time (oversight is on-demand).

Goliath Versus Goliath In High-Stakes Mbs Litigation, Bradley T. Borden, David J. Reiss

Cornell Law Faculty Publications

The loan-origination and mortgage-securitization practices between 2000 and 2007 created the housing and mortgage-backed securities bubble that precipitated the 2008 economic crisis and ensuing recession. The mess that the loan-origination and mortgage-securitization practices caused is now playing out in courts around the world. MBS investors are suing banks, MBS sponsors and underwriters for misrepresenting the quality of loans purportedly held in MBS pools and failing to properly transfer loan documents and mortgages to the pools, as required by the MBS pooling and servicing agreements. State and federal prosecutors have also filed claims against banks, underwriters and sponsors for the roles …

There Goes The Neighborhood: Regulating Away The Community Bank - An Analysis Of The Costs Of Current Regulations On Community Banks, Alan J. Wilson

West Virginia Law Review

No abstract provided.

Front Matter

Michigan Business & Entrepreneurial Law Review

No abstract provided.

Are Cryptocurrencies Super Tax Havens?, Omri Marian

Michigan Law Review First Impressions

Virtual currencies are online payment systems that may function as real currencies but are not issued or backed by central governments. As demonstrated by recent events, virtual currencies present regulators with significant challenges. On May 23, 2013, the U.S. federal government brought an indictment against the operators of Liberty Reserve, a popular virtual currency, charging the operators with money laundering and operating an unlicensed money-transmitting business. The same month, the Government Accountability Office ("GAO") made public a report exploring the potential tax-compliance risks associated with virtual currencies and economies. Legislators have also taken particular interest in one type of virtual …

Goliath Versus Goliath In High-Stakes Msb Litigation, Bradley T. Borden, David J. Reiss

Faculty Scholarship

No abstract provided.

Dice – Digital Invoice Customs Exchange, Richard Thompson Ainsworth, Goran Todorov

Faculty Scholarship

A digital invoice customs exchange (DICE) is a technology-intensive tax compliance regimen for VAT/GST that utilizes invoice encryption to safeguard transactional data exchanged between seller and buyer in both domestic and import/export contexts while simultaneously notifying concerned jurisdictions of the transaction details.

DICE facilitates real-time VAT/GST enforcement as well as real-time commercial contract verification. It is a commercial invoice validation system that prevents tax evasion, most notably missing trader fraud and the non-declared import of trade-able services. DICE mimics the most effective administrative enforcement effort ever undertaken by the US IRS – the requirement to disclose the social security numbers …

Vat — East African Community: The Tradable Services Problem World-Class Solution, Richard Thompson Ainsworth, Goran Todorov

Faculty Scholarship

The value added taxes (VATs) of the East African Community (EAC) are open to manipulation and are leaking revenue from tradable services transactions. The EAC’s response has been to adopt a unique Reverse VAT mechanism. Something more is needed – a Digital Invoice Customs Exchange. Together these adjustments will provide a world-class solution to a world-wide problem. The EAC appears to be moving in this direction.

The vulnerability of the EAC VATs to tradable services is not surprising. The EAC borrowed VAT designs from the major VAT models, the EU VAT and the New Zealand Goods and Services Tax (NZ …

Tackling Vat Fraud: Thirteen Ways Forward, Richard Thompson Ainsworth

Faculty Scholarship

In a May 31, 2006 Communication to the Council, the European Parliament, and the European Economic and Social Committee, the European Commission indicated a need to develop a coordinated strategy to improve the fight against fiscal fraud [COM (2006) 254 final]. Although the Communication considers fiscal fraud broadly (VAT, excise duties and direct taxes) the most pressing need seems to be for a VAT strategy that will effectively deal with carousel fraud.

This paper considers thirteen proposals that deal with missing trader intra-community fraud (MTIC):

(1) Common VAT (origin system) (2) Vanistendael’s foreign tax offices proposal (3) CVAT (Compensating VAT) …

American Vat – The Carousel Fraud Threat: Will The Eu Show The Us The "Way Forward", Richard Thompson Ainsworth

Faculty Scholarship

On Thursday, March 29, 2007 the European Commission, Directorate-General for Taxation and Customs Union, will host a one-day Conference on Fiscal Fraud – Tackling VAT Fraud: Possible Ways Forward. The conference is based on the Communication of May 31, 2006 explaining the need to develop a coordinated strategy to improve the fight against fiscal fraud. This paper indicates that the EU examination of carousel fraud points the way forward for advocates of a US VAT as well.

About 40% of EU VAT fraud appears to be 'missing trader intra-community' (MTIC) or carousel fraud. The best estimates of EU losses to …

Brooklyn Law School Professors Discuss ‘Show Me The Note!’ Defense In Foreclosures, Bradley T. Borden, David J. Reiss

Cornell Law Faculty Publications

This is a Q&A relating to an article, "Show Me The Note," available at https://scholarship.law.cornell.edu/facpub/1798/.

"Show Me The Note" refers to a defense that seeks to forestall or prevent foreclosure by requiring the foreclosing party to produce the mortgage and the associated promissory note as proof of its right to initiate foreclosure.

Costing A Pretty Penny: Online Penny Auctions Revive The Pestilence Of Unregulated Lotteries, David R. Konkel

Seattle University Law Review

Penny auctions, an online phenomenon imported from Europe, operate by the hundreds in the United States without meaningful oversight from consumer protection agencies. In a penny auction, consumers compete for items one penny at a time. To date, no significant inquiry, either academic or practical, into the legitimacy of the penny auction has occurred. Although marketed as auctions, online penny auctions may actually qualify as lotteries. Unlike the multifarious and confusing definitions of gambling, the long-accepted definition of a lottery consists of three elements: prize, consideration, and chance. If a penny auction satisfies this definition then, under well-established case law …

Is Financial Instability A Tax Problem With A Tax Solution?, Hilary Allen

Scholarly Articles in Law Reviews & Journals

Financial regulation and taxation are two fields of law that are notoriously complex and specialized. Given this circumstance, it is perhaps not surprising that financial regulators often pay little attention to tax, and focus instead on their own sphere of influence. Unfortunately, financial regulators ignore tax incentives at the peril of financial stability.

A Diamond Scheme Is Forever Lost: The Kimberley Process's Deteriorating Tripartite Structure And Its Consequences For The Scheme's Survival, Andrew H. Winetroub

Indiana Journal of Global Legal Studies

Oversight of the multi-billion dollar global diamond trade involves state actors, multinational corporations, and sophisticated civil society groups operating under the umbrella of the Kimberley Process. This unique tripartite governance structure created an opportunity for the parties to develop a system in which conflict diamonds could not enter the stream of commerce, transparency would be institutionalized, and governments and industry participants would be held to account. Yet, the successes of the Kimberley Process are increasingly jeopardized by an overly statist approach that has led to subjugation of the participating nongovernmental organizations. This note argues that for the Kimberley Process to …

Social Movements As Constituent Power: The Italian Struggle For The Commons, Saki Bailey, Ugo Mattei

Indiana Journal of Global Legal Studies

The Italian commons (beni comuni) movement is a powerful example of the way in which social movements are emerging as the new pouvoir constituant serving not only to enforce the protections and guarantees of national constitutions but also, in the context of the declining power of the nation-state, as a counter hegemonic force against the neoliberal economic constitutionalism of the international economic institutions. The common goods social movement in Italy was born out of the concerted action of a number of civil society groups combatting neoliberal privatizations. This commons movement, as will be argued in this paper, is an instance …

Mers Remains Afloat In A Sea Of Foreclosures, Shelby D. Green

Elisabeth Haub School of Law Faculty Publications

Despite the simple premise of the MERS System, opponents--or those simply trying to invalidate or forestall enforcement of their mortgages--have leveled various challenges to MERS's practices and even its basic business model. Taking an aerial view of the challenges, it is possible to discern a certain pattern as one challenge seemed to morph into the next (often following rejection of the earlier one in the courts). Some borrowers have asserted that MERS lacked legal standing to foreclose because it was a mere nominee and not the owner of the note. Even if MERS's legal standing was upheld, borrowers pointed to …

Transitive Counterparty Risk And Financial Contracts, Manuel A. Utset

Scholarly Publications

No abstract provided.

The Uneasy Case For Deferring Banker Pay, Eric D. Chason

Faculty Publications

No abstract provided.

Reverse Regulatory Arbitrage: An Auction Approach To Regulatory Assignments, M Todd Henderson, Fred Tung

Faculty Scholarship

In the years before the Financial Crisis, banks got to pick their regulators, engaging in a form of regulatory arbitrage that we now know was a race to the bottom. We propose to turn the tables on the banks by allowing regulators, specifically, bank examiners, to choose the banks they regulate. We call this “reverse regulatory arbitrage,” and we think it can help improve regulatory outcomes. Building on our prior work that proposes to pay bank examiners for performance — by giving them financial incentives to avoid bank failures — we argue that bank supervisory assignments should be set through …

Corporate Culture And Erm, Michelle M. Harner

Faculty Scholarship

The attitudes and actions of those viewed as leaders within a company (commonly referred to as “tone at the top”) help to define corporate culture and are critical to implementing a successful enterprise risk management (ERM) program. This paper explores the challenges and benefits of creating a risk-aware corporate culture, including the potential legal implications for boards of directors.

Vogtländische Straβen-,Tief- Und Rohrleitungsbau Gmbh Rodewisch (Vstr) V. Finanzamt Plauen – Vat Triangulation V. Drop Shipments, Richard Thompson Ainsworth

Faculty Scholarship

In ECJ Case 587/10 (Vogtländische Straβen-,Tief- und Rohrleitungsbau GmbH Rodewisch (VSTR) v. Finanzamt Plauen) an American firm, Atlantic International Trading Company (AIT) is a middleman in an otherwise all-European VAT triangulation. AIT appears to have approached its compliance obligations as if it was a middleman in an American drop shipment.

However, drop shipments are treated very differently from VAT triangulations.

Commercially these transactions are very similar. They are composed of two back-to-back sales, A/B followed by B/C, with a single delivery from A directly to C. This article compares the tax treatment of drop shipments under the RST with triangulation …

Leveling The International Playing Field With The Marketplace Fairness Act, Richard Thompson Ainsworth, Boryana Madzharova

Faculty Scholarship

Quill v. North Dakota unbalanced the American retail market with its preference for out-of-state over in-state sellers. The preference under Quill is that sellers without physical presence in a state cannot be compelled to collect the sales tax. If the buyer does not voluntarily remit the complementary use tax, the purchase is effectively tax-free. As a result, Quill is seen as facilitating tax avoidance and driving business to sellers who have no in-state nexus, notably e-businesses. Revenue losses are estimated in excess of $10 billion per year.

The reach of the Quill decision is international. Preferred sellers can reside just …

Show Me The Note!, Bradley T. Borden, David J. Reiss, W. Keaupuni Akina

Cornell Law Faculty Publications

News outlets and foreclosure defense blogs have focused attention on the defense commonly referred to as "show me the note." This defense seeks to forestall or prevent foreclosure by requiring the foreclosing party to produce the mortgage and the associated promissory note as proof of its right to initiate foreclosure.

The defense arose in two recent state supreme-court cases and is also being raised in lower courts throughout the country. It is not only important to individuals facing foreclosure but also for the mortgage industry and investors in mortgage-backed securities. In the aggregate, the body of law that develops as …

Show Me The Note!, William K. Akina, Bradley T. Borden, David J. Reiss

Faculty Scholarship

No abstract provided.

Cloudy Weather, With Occasional Sunshine: Consumer Loans, The Legislature, And The Supreme Court Of Japan, Shigenori Matsui

Washington International Law Journal

The Supreme Court of Japan, despite its well-known passive and conservative stance towards constitutional adjudication, occasionally shows quite a creative and liberal attitude. Recently, the Supreme Court of Japan has shown this attitude in its development of pro-consumer jurisprudence involving consumer loan cases. This development is still more noteworthy because the Supreme Court of Japan ignored the legislature’s intent to overturn its previous judgments and practically wiped out a statutory provision enacted by the legislature. As a result of this development, millions of consumers could demand refunds from consumer loan companies, and consumer loan companies went into serious financial troubles, …