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Articles 1 - 22 of 22
Full-Text Articles in Law and Economics
The Alarming Legality Of Security Manipulation Through Shareholder Proposals, Artem M. Joukov, Samantha M. Caspar
The Alarming Legality Of Security Manipulation Through Shareholder Proposals, Artem M. Joukov, Samantha M. Caspar
Seattle University Law Review
Shareholder proposals attract attention from scholars in finance and economics because they present an opportunity to study both quasidemocratic decision-making at the corporate level and the impact of this decision-making on firm outcomes. These studies capture the effect of various proposals but rarely address whether regulations should allow many of them in the first place due to the possibility of stock price manipulation. Recent changes to shareholder proposal rules, adopted in September 2020, sought to address the potential for exploitation that some proposals create (but ultimately failed to do so). This Article shows the potential for apparently legal stock price …
Financial Hospitals: Defending The Fed’S Role As A Market Maker Of Last Resort, José Gabilondo
Financial Hospitals: Defending The Fed’S Role As A Market Maker Of Last Resort, José Gabilondo
José Gabilondo
During the last financial crisis, what should the Federal Reserve (the Fed) have done when lenders stopped making loans, even to borrowers with sterling credit and strong collateral? Because the central bank is the last resort for funding, the conventional answer had been to lend freely at a penalty rate against good collateral, as Walter Bagehot suggested in 1873 about the Bank of England. Acting thus as a lender of last resort, the central bank will keep solvent banks liquid but let insolvent banks go out of business, as they should. The Fed tried this, but when the conventional wisdom …
Limits Of Disclosure, Steven M. Davidoff, Claire A. Hill
Limits Of Disclosure, Steven M. Davidoff, Claire A. Hill
Steven Davidoff Solomon
One big focus of attention, criticism, and proposals for reform in the aftermath of the 2008 financial crisis has been securities disclosure. Many commentators have emphasized the complexity of the securities being sold, arguing that no one could understand the disclosure. Some observers have noted that disclosures were sometimes false or incomplete. What follows these issues, to some commentators, is that, whatever other lessons we may learn from the crisis, we need to improve disclosure. How should it be improved? Commentators often lament the frailties of human understanding, notably including those of everyday retail investors—people who do not understand or …
Enhancing The Transparency Dialogue In The “Santiago Principles” For Sovereign Wealth Funds, Adam D. Dixon
Enhancing The Transparency Dialogue In The “Santiago Principles” For Sovereign Wealth Funds, Adam D. Dixon
Seattle University Law Review
The financial crisis ultimately caused Western governments to welcome sovereign wealth fund (SWF) investment as a way to put a floor under collapsing markets and to provide a set of voluntary principles that would underwrite SWFs’ claim to legitimacy in the international community. In the autumn of 2007, then U.S. Treasury Secretary Henry Paulson, in conjunction with the International Monetary Fund, convened the International Working Group of SWFs (IWG) to draft a set of generally accepted principles and practices. These principles are referred to as the “Santiago Principles.” The implicit objective of these twenty-four voluntary principles is to promote greater …
Culture Wars: Rate Manipulation, Institutional Corruption, And The Lost Normative Foundations Of Market Conduct Regulation, Justin O'Brien
Culture Wars: Rate Manipulation, Institutional Corruption, And The Lost Normative Foundations Of Market Conduct Regulation, Justin O'Brien
Seattle University Law Review
The global investigations into the manipulation of the London Interbank Offered Rate (Libor) have raised significant questions about how conflicts of interest are managed for regulated entities contributing to benchmarks. An alternative framework, which brings the management of the rate process under direct regulatory supervision, is under consideration, coordinated by the International Organization of Securities Commissions taskforce. The articulation of global principles builds on a review commissioned by the British government that suggests rates calculated by submission can be reformed. This paper argues that this approach is predestined to fail, precisely because it ignores the lessons of history. In revisiting …
The Timing And Source Of Regulation, Frank Partnoy
The Timing And Source Of Regulation, Frank Partnoy
Seattle University Law Review
The distinction between specific concrete rules and general abstract principles has engaged legal theorists for decades. This rules–principles distinction has also become increasingly important in corporate and securities law, as well as financial market regulation. This Article adds two important variables to the rules–principles debate: timing and source. Although these two variables are relevant to legal theory generally, the specific goal here is not to address and engage the rules versus principles literature directly. Rather, the goal here is to ask whether the debate about financial market regulation might benefit from a more transparent analysis of temporal and legal source …
Deferred Prosecutions In The Corporate Sector: Lessons From Libor, Justin O'Brien, Olivia Dixon
Deferred Prosecutions In The Corporate Sector: Lessons From Libor, Justin O'Brien, Olivia Dixon
Seattle University Law Review
Since 2008, the global economic downturn has significantly in-creased operating pressures on major corporations. Additionally, there has been a corresponding increase in corporate tolerance for corruption, which has coincided with a marked preference by regulators in settling, rather than litigating, enforcement actions. This Article argues that the expansion of prosecutorial authority without appropriate accountability restraints is a major tactical and strategic error. It evaluates whether the mechanism can be made subject to effective oversight. It argues that the current frame-work in the United States is highly problematic, leading to settlements that generate newspaper headlines but not necessarily cultural change. It …
The Effect Of The Jobs Act On Underwriting Spreads, Usha Rodrigues
The Effect Of The Jobs Act On Underwriting Spreads, Usha Rodrigues
Scholarly Works
U.S. underwriting fees, or spreads, have somewhat inexplicably clustered around 7% for years, a phenomenon that some have suggested evidences implicit collusion. The goal of Title I the JOBS Act of 2012 was to make going public easier for smaller firms; certain provisions specifically should make the underwriters’ task less risky, and thus less expensive. Presuming these provisions are effective, then one would predict that underwriting spreads would decrease as the costs to the underwriter for a public offering declined. Admittedly the prior presumption is a big one: it may be that the JOBS Act reforms were largely ineffective, and …
Toward A More Resilient Financial System?, Joanna Gray
Toward A More Resilient Financial System?, Joanna Gray
Seattle University Law Review
The concept of “resilience” in the context of financial systems calls for closer analysis, as most of the current efforts to reshape financial systems seek to render them more resilient. Resilience has become a necessary complement to the paradigm shift taking place in global financial regulation toward “macroprudential” regulation—a term used to describe a new viewing platform and decisionmaking plane for financial regulation. From this new perspective, regulators can address the state of the financial system as a whole, as well as its component parts. This Article seeks to illustrate how legal and regulatory measures that foster resilience have become …
Financial Hospitals: Defending The Fed’S Role As A Market Maker Of Last Resort, José Gabilondo
Financial Hospitals: Defending The Fed’S Role As A Market Maker Of Last Resort, José Gabilondo
Seattle University Law Review
During the last financial crisis, what should the Federal Reserve (the Fed) have done when lenders stopped making loans, even to borrowers with sterling credit and strong collateral? Because the central bank is the last resort for funding, the conventional answer had been to lend freely at a penalty rate against good collateral, as Walter Bagehot suggested in 1873 about the Bank of England. Acting thus as a lender of last resort, the central bank will keep solvent banks liquid but let insolvent banks go out of business, as they should. The Fed tried this, but when the conventional wisdom …
The Long Road Back: Business Roundtable And The Future Of Sec Rulemaking, Jill E. Fisch
The Long Road Back: Business Roundtable And The Future Of Sec Rulemaking, Jill E. Fisch
Seattle University Law Review
The Securities and Exchange Commission (SEC or Commission) has faced a number of challenges in the last few years. Judge Rakoff’s decision in Citigroup, the Madoff scandal, and the Business Roundtable decision are just a few of the developments that have dealt lasting damage to the SEC’s reputation. Critics have scrutinized the agency’s decisionmaking on multiple fronts—from its enforcement policy to the quality of its rulemaking—and the SEC has largely come up short in the analysis. The once-revered top cop of the securities markets has taken a hit, and it is unclear whether it can recover. The Business Roundtable decision …
The Future Of Shareholder Democracy In The Shadow Of The Financial Crisis, Alan Dignam
The Future Of Shareholder Democracy In The Shadow Of The Financial Crisis, Alan Dignam
Seattle University Law Review
This Article argues that the U.K. regulatory response to the financial crisis, in the form of “stewardship” and shareholder engagement, is an error built on a misunderstanding of the key active role shareholders played in the enormous corporate governance failure represented by the banking crisis. Shareholders’ passivity, rather than activity, has characterized the reform perception of the shareholder role in corporate governance. This characterization led to the conclusion that if only they were more active they would be more responsible “stewards” of the corporation. If, as this Article argues, shareholder activity was part of the problem in the banks, then …
Limits Of Disclosure, Steven M. Davidoff, Claire A. Hill
Limits Of Disclosure, Steven M. Davidoff, Claire A. Hill
Seattle University Law Review
One big focus of attention, criticism, and proposals for reform in the aftermath of the 2008 financial crisis has been securities disclosure. Many commentators have emphasized the complexity of the securities being sold, arguing that no one could understand the disclosure. Some observers have noted that disclosures were sometimes false or incomplete. What follows these issues, to some commentators, is that, whatever other lessons we may learn from the crisis, we need to improve disclosure. How should it be improved? Commentators often lament the frailties of human understanding, notably including those of everyday retail investors—people who do not understand or …
The Market For Corporate Control: New Insights From The Financial Crisis In Ireland, Blanaid Clarke
The Market For Corporate Control: New Insights From The Financial Crisis In Ireland, Blanaid Clarke
Seattle University Law Review
In an ever-changing legal and economic environment, it is incumbent on us to subject all such premises to scrutiny in order to consider their continued application. This Article considers the effect of the MCC on the management of Irish credit institutions in the run-up to the financial crisis. Part II sets the background by explaining how the MCC has become an integral part of takeover regulation in Europe. The weaknesses in the efficient market hypothesis, which underlie the MCC and are summarized in Part III, appear not to have undermined the theory’s credibility in the minds of public policy makers …
Banking And Competition In Exceptional Times, Brett Christophers
Banking And Competition In Exceptional Times, Brett Christophers
Seattle University Law Review
This Article has two main aims: to provide a critical consideration of this contemporary antitrust “revival” from an explicitly political–economic perspective and to point toward some theoretical resources that might facilitate such an assessment.Part II looks backward at the evolution and application of competition law in the banking sector over the relatively longue durée. In this Part, I invoke the concept of “exception” to understand how antitrust policy has developed, and my chief interlocutors are the perhaps unlikely figures of Giorgio Agamben and Karl Marx. Part III looks forward and considers the central question around which the recent resurgence of …
Conceptions Of Corporate Purpose In Post-Crisis Financial Firms, Christopher M. Bruner
Conceptions Of Corporate Purpose In Post-Crisis Financial Firms, Christopher M. Bruner
Seattle University Law Review
American “populism” has had a major impact on the development of U.S. corporate governance throughout its history. Specifically, appeals to the perceived interests of average working people have exerted enormous social and political influence over prevailing conceptions of corporate purpose—that is, the aims toward which society expects corporate decision-making to be directed. In this Article, I assess the impact of American populism upon prevailing conceptions of corporate purpose, contrasting its unique expression in the context of financial firms with that arising in other contexts. I then examine its impact upon corporate governance reforms enacted in the wake of the financial …
Shareholders And Social Welfare, William W. Bratton, Michael L. Wachter
Shareholders And Social Welfare, William W. Bratton, Michael L. Wachter
Seattle University Law Review
This Article addresses the questions of whether and how shareholders matter for social welfare, finding that different and contrasting answers have prevailed during different periods of recent history. Observers in the mid-twentieth century believed that the socioeconomic characteristics of real-world shareholders were highly pertinent to social welfare inquiries. But those observers went on to conclude that there followed no justification for catering to shareholder interest, for shareholders occupied elite social strata. The answer changed during the twentieth century’s closing decades, when observers came to accord the shareholder interest a key structural role in the enhancement of economic efficiency even as …
Central Bank-Led Capitalism?, Andrew Bowman Et Al.
Central Bank-Led Capitalism?, Andrew Bowman Et Al.
Seattle University Law Review
Since the first acute episode of financial crisis in autumn 2008, the world has manifestly changed in dramatic ways that reinforce skepticism and challenge the old assumptions of political economy. Hence this Article about central banks, whose pivotal role in post-crisis capitalism has not been adequately politically or theoretically addressed in any existing literature and can now be opened up by a conjunctural analysis that recognises uncertainty and mutability. There are several reasons why this is an intellectually and politically interesting task. Central banks have become an object of controversy and public attention after being pivotally involved in crisis management, …
Making Money: Leverage And Private Sector Money Creation, Margaret M. Blair
Making Money: Leverage And Private Sector Money Creation, Margaret M. Blair
Seattle University Law Review
Contrary to the beliefs of most macroeconomists, the financial sector in the United States has grown too large in the last few decades as a consequence of financial innovation that has encouraged the use of too much “leverage” (financing with debt) by financial institutions (as well as by consumers and other borrowers). In Part II, I connect the dots between excessive leverage, risk, and financial market volatility. In Part III, I explore the role that the “shadow-banking sector” has had in driving leverage. In Part IV, I explain why leverage at the level of financial institutions matters for the macroeconomy. …
The Governance And Disclosure Of The Firm As An Enterprise Entity, Yuri Biondi
The Governance And Disclosure Of The Firm As An Enterprise Entity, Yuri Biondi
Seattle University Law Review
During recent decades, the rapid pace of financial markets involving new modes of management, governance, and regulation has framed business firms. This corporate drift toward financialization is summarized under the “shareholder value” label. What do financial markets do? Unequivocally, they organize trading on shares that are securities: tradable financial entitlements established by law, which formalize expectations, and claims of financial rents paid by the issuing company. Actually, how continued quotation on share exchanges came to be the barometer of economic or social welfare is a different matter. The latter adoption has required quite a great leap from “the euthanasia of …
Rationales And Designs To Implement An Institutional Big Bang In The Governance Of Global Finance, Emilios Avgouleas
Rationales And Designs To Implement An Institutional Big Bang In The Governance Of Global Finance, Emilios Avgouleas
Seattle University Law Review
The colossal challenges facing international finance pertain to both its governance system and its dual utility and speculative functions, which have become ever more intertwined with the advent of financial innovation. In the aftermath of the Global Financial Crisis (GFC), a number of significant reforms are under way to address the second issue, including additional capital and liquidity requirements for banks, measures to battle interconnectedness in the financial sector, new resolution regimes that would allow banks to fail more easily, and stricter frameworks for bank supervision and monitoring of systemic risk. Yet limited progress has been made with respect to …
Are Short Sellers Really The Enemy Of Efficient Securities Markets Or Are They Just Public Patsies?, Abel C. Ramirez Jr.
Are Short Sellers Really The Enemy Of Efficient Securities Markets Or Are They Just Public Patsies?, Abel C. Ramirez Jr.
Abel C Ramirez Jr.
When the 2008 global financial crisis caused the stock market to drastically decline, short selling generated intense political and economic scrutiny that negatively characterized the practice as a predatory scheme. When the 2008 global financial crisis caused the stock market to drastically decline, short selling generated intense political and economic scrutiny that negatively characterized the practice as a predatory scheme. As a legitimate investment strategy, short selling is a method by which investors can capitalize on over-valued stocks that decline – this is NOT the same as “contributing” to the stock’s decline, which short selling’s detractors might believe.