Banking and Finance Law Commons^™

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

UF 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 …

Fathoming Potential In China—How Ship Lease Financing Arrangements And Free Trade Zones May Open Markets To Non-Bank Investent, Rick Beaumont

American University Business Law Review

No abstract provided.

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 …

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.

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. …

The Foreign Account Tax Compliance Act: The Solution Or The Problem?, Sophie S. Chou

CMC Senior Theses

Tax evasion has been happening for decades, but after the highly publicized cases with two foreign banks, LGT and UBS, the United States (US) is cracking down on tax evaders. The latest addition to the Internal Revenue Service (IRS)’s repertoire of enforcement tools is the Foreign Account Tax Compliance Act, otherwise known as FATCA. The Act was enacted to incentivize tax information release by foreign financial institutions (FFIs) who would otherwise face a 30% withholding tax on any US source income. The question was whether or not the design of the Act and its implementation successfully met this goal.

This …

Foreword: Perspectives On Mortgage Lending Regulation, Julia Patterson Forrester Rogers

SMU Law Review

In her short foreword to a symposium issue, the author discusses the Dodd-Frank Wall Street Reform and Consumer Protection Act enacted by Congress in 2010. She then introduces the symposium papers by professors Kathleen Engel, Christopher Odinet, and Steven Schwarcz, which examine the new regulatory framework created by Dodd-Frank from different points of view and consider other types of mortgage lending regulation, including regulation at the state and local levels and proposals for macroprudential regulation. Lastly, the author concludes that mortgage lending regulation promises to continue to be an important topic of discussion, because the bursting of a housing bubble …

The Unfinished Business Of Dodd-Frank: Reforming The Mortgage Contract, Christopher K. Odinet

SMU Law Review

The standard residential mortgage contract is due for a reappraisal in light of today’s mortgage lending and regulatory environment. The goals of Dodd-Frank and the CFPB have been geared toward creating better stability in the residential mortgage market, in part, by mandating more robust underwriting. This is achieved chiefly through the ability-to-repay rules and the “qualified mortgage” safe harbor, which call for very conservative underwriting criteria to be applied to new mortgage loans. And lenders are whole-heartedly embracing these criteria in their loan originations—in the fourth quarter of 2015 over 98% of all new residential loans were qualified mortgages, thus …

The Fictitious Payee After Teva V. Bmo: Has The Pendulum Swung Back Far Enough?, Benjamin Geva

Articles & Book Chapters

Under Section 20(5) of the Bills of Exchange Act (‘‘BEA s. 20(5)”) where on a bill of exchange ‘‘the payee is a fictitious or non-existing person, the bill may be treated as payable to bearer.” A bill of exchange includes a cheque. Where BEA s. 20(5) applies to a cheque, its effect is to reallocate forged endorsement losses from banks involved in the collection and payment of the cheque to the drawer. Quite recently, in commenting on Raza Kayani LLP v. Toronto-Dominion Bank, I highlighted the ongoing confusion in the judicial interpretation of BEA s. 20(5) (‘‘Kayani Comment”). That comment …

Targeted Subordination Of Official Sector Debt, Lee C. Buchheit, Mitu Gulati

Faculty Scholarship

If Greece’s debt is unsustainable, and most observers (including the IMF) seem to think it is, the country’s only source of funding will continue to be official sector bailout loans. Languishing for a decade or more as a ward of the official sector is undesirable from all perspectives. The Greeks bridle under what they see as foreign imposed austerity; the taxpayers who fund the official sector loans to Greece balk at the prospect of shoveling good money after bad. The question then is how to facilitate Greece’s ability to tap the private capital markets at tolerable interest rates. The IMF’s …

Understanding The Global In Global Finance And Regulation, Lawrence G. Baxter

Faculty Scholarship

No abstract provided.

Securitization And Post-Crisis Financial Regulation, Steven L. Schwarcz

Faculty Scholarship

There are few types of securities as internationally traded as those issued in securitization (also spelled securitisation) transactions. The post-financial crisis regulatory responses to securitization in the United States and Europe are, at least in part, political and ad hoc. To achieve a more systematic regulatory framework, this article examines how existing regulation should be supplemented by identifying the market failures that apply distinctively to securitization and analyzing how those market failures could be corrected. Among other things, the article argues that Europe’s regulatory framework for simple, transparent, and standardised (“STS”) securitizations goes a long way towards addressing complexity as …

Pricing Contract Terms In A Crisis: Venezuelan Bonds In 2016, Elena Carletti, Paolo Colla, Mitu Gulati, Steven Ongena

Faculty Scholarship

As of this writing in June 2016, the markets are predicting Venezuela to be on the brink of default. On June 1, 2016, the 6 month CDS contract traded at about 7000bps which translates into a likelihood of default of over 90%. Our interest in the Venezuelan crisis is that its outstanding sovereign bonds have a unique set of contractual features that, in combination with its near-default status, have created a natural experiment. This experiment has the potential to shed light on one of the long standing questions that sits at the intersection of the fields of law and finance, …

A Sovereign’S Cost Of Capital: Go Foreign Or Stay Local, Michael Bradley, Irving Arturo De Lira Salvatierra, Mitu Gulati

Faculty Scholarship

A critical question faced by any sovereign seeking to raise funds in the bond market is whether to issue the debt under foreign or local parameters. This choice determines other key characteristics of any bond issue such as which banks, lawyers, and investors will be involved. Most important though, this decision involves a tradeoff between the sovereign retaining discretion in managing the issue and relinquishing control of the issue to third parties to prevent the sovereign from expropriating wealth from bondholders in the future. Based on a sample of 17,349 issuances by 117 sovereigns between 1990 and 2015, we investigate …

Keynote Address, Regulating Corporate Governance In The Public Interest: The Case Of Systemic Risk, Steven L. Schwarcz

Faculty Scholarship

There’s long been a debate whether corporate governance law should require some duty to the public. The accepted wisdom is not to require such a duty—that corporate profit maximization provides jobs and other public benefits that exceed any harm. This is especially true, the argument goes, because imposing specific regulatory requirements and making certain actions illegal or tortious can mitigate the harm without unduly impairing corporate wealth production. Whether that is true in other contexts, this paper—delivered as the keynote address at the June 2016 National Business Law Scholars Conference at The University of Chicago Law School—questions if it’s true …

"Special," Vestigial, Or Visionary? What Bank Regulation Tells Us About The Corporation - And Vice Versa, Robert C. Hockett, Saule T. Omarova

Cornell Law Faculty Publications

A remarkable yet seldom noted set of parallels exists between modern U.S. bank regulation, on the one hand, and what used to be garden-variety American corporate law, on the other hand. For example, just as bank charters are matters not of right but of conditional privilege even today, so were all corporate charters not long ago. Just as chartered banks are authorized to engage only in limited, enumerated activities even to- day, so were all corporations restricted not long ago. And just as banks are subject to strict capital regulation even today, so were all corporations not long ago.

In …

The Challenge Of Legitimacy In Sovereign Debt Restructuring, Odette Lienau

Cornell Law Faculty Publications

Since the emergence of the post-World War II international economic system, policymakers have lamented the absence of a global sovereign debt restructuring mechanism. This disappointment has only intensified in recent years, as the failure to provide prompt, comprehensive, and lasting debt relief becomes even more apparent. As a result, scholars and key international actors have argued for the development of a more coherent global approach to debt workouts. But to date this discussion lacks a sustained focus on questions of legitimacy—a fact that is exceptionally puzzling in light of the voluminous scholarship on the legitimacy deficits of international economic institutions …

Pension De-Risking, Brendan Maher

Faculty Articles and Papers

The United States is facing a retirement crisis, in significant part because defined benefit pension plans have been replaced by defined contribution retirement plans that, whatever their theoretical merit, have left significant numbers of workers unprepared for retirement. A troubling example of the continuing movement away from defined benefit plans is a new phenomenon euphemistically called “pension de-risking.” Recent years have been marked by high-profile companies engaging in various actions designed to reduce the company’s exposure to pension funding risk (hence the term “pension de-risking”). Some de-risking strategies convert a federally-guaranteed pension into a more risky private annuity. Other approaches …

The Dialectics Of Bank Capital: Regulation And Regulatory Capital Arbitrage, Erik F. Gerding

Publications

This article outlines the reasons that banks and other financial institutions engage in regulatory capital arbitrage and the techniques they use to do so. Regulatory capital arbitrage describes transactions and structures that firms use to lower the effective regulatory “tax rate” of regulatory capital requirements. To the extent that these regulations force financial institutions to internalize the externalities created by their potential insolvency (including systemic risk externalities), the incentives to engage in regulatory capital arbitrage will persist. Financial institutions employ a range of complex transactions and structures, including securitization, to engage in regulatory capital arbitrage.

The article briefly sketches how …

Diversifying To Mitigate Risk: Can Dodd–Frank Section 342 Help Stabilize The Financial Sector?, Steven A. Ramirez, Kristin N. Johnson, Cary Martin Shelby

Faculty Publications & Other Works

No abstract provided.