Banking and Finance Law Commons^™

Transparency And Contrarian Experts In Financial Regulation: A Brief Response To Professor Bradley, Daniel Schwarcz

American University Business Law Review

No abstract provided.

The Terrible TousaS: Opinions Test The Patience Of Corporate Lending Practices, Jessica D. Gabel

Faculty Publications By Year

Two diametrically opposed decisions pit creditors against debtors. The case of troubled homebuilder TOUSA has generated shockwaves through the lending industry. Set against the backdrop of the housing collapse and risky lending, the bankruptcy court’s decision left secured creditors with a mixture of shock, anger, and worry over the repercussions. In that opinion, the bankruptcy court unwound a nearly $1 billion transaction of liens and loan proceeds, on grounds that the transactions drove the debtor company into the ground. In other words, the court found that a fraudulent transfer had occurred. Not surprisingly, the lenders appealed and the next decision …

Sovereignty, Accountability, And The Wealth Fund Governance Conundrum, Anna Gelpern

Scholarly Articles in Law Reviews & Journals

Sovereign wealth funds – state-controlled transnational portfolio investment vehicles – began as an externally imposed category in search of a definition. SWFs from different countries had little in common and no particular desire to collaborate. But SWFs as a group implicated the triple challenge of securing cooperation between deficit and surplus states, designing a legal framework for global capital flows, and integrating state actors in the transnational marketplace. This Article describes how an apparently artificial grouping of investors, made salient by the historical and political circumstances of their host states in the mid-2000s, became a vehicle for addressing some of …

Overwhelming A Financial Regulatory Black Hole With Legislative Sunlight: Dodd-Frank’S Attack On Systemic Economic Destabilization Caused By An Unregulated Multi-Trillion Dollar Derivatives Market, Michael Greenberger

Faculty Scholarship

It is now accepted wisdom that it was the non-transparent, poorly capitalized and almost wholly unregulated over-the-counter (“OTC”) derivatives market that lit the fuse that exploded the highly vulnerable worldwide economy in the fall of 2008.[1] Because tens of trillions of dollars of these financial products were pegged to the economic performance of an overheated and highly inflated housing market, the sudden collapse of that market triggered under-capitalized OTC derivative guarantees of the subprime housing market; and the guarantors’ multi-trillion dollar interconnectedness with thousands of other OTC derivatives’ counterparties within that OTC market (through interest rate, currency, foreign exchange, and …

Activist Distressed Debtholders: The New Barbarians At The Gate?, Michelle M. Harner

Faculty Scholarship

The term “corporate raiders” previously struck fear in the hearts of corporate boards and management teams. It generally refers to investors who target undervalued, cash-flush or mismanaged companies and initiate a hostile takeover of the company. Corporate raiders earned their name in part because of their focus on value extraction, which could entail dismantling a company and selling off its crown jewels. Today, the term often conjures up images of Michael Milken, Henry Kravis or the movie character Gordon Gekko, but the alleged threat posed to companies by corporate raiders is less prevalent—at least with respect to the traditional use …

Global Finance, Multinationals And Human Rights: With Commentary On Backer’S Critique Of The 2008 Report By John Ruggie, Faith Stevelman

Faculty Articles

This article references the excellent article of Larry Cata Backer, as it provides an analysis of the 2008 Report's "Protect, Respect, Remedy" (PRR) framework. Ruggie's most recent efforts, reflected in the 2010 Report, are directed at operationalizing the PRR framework set forth in the 2008 Report. Both these reports have been vetted internationally amongst governments, lawyers, academics and human rights advocates. How will governments, corporations, trade associations and rights advocates conceptualize and construct the fora and modes of recourse available to persons aggrieving human rights abuses? That question is the central focus of the 2010 Report and, as such, lies …

323 Non-Managing Underwriters’ Role In Securities Offerings: Just Eye Candy?, Elena Marty-Nelson

Fordham Journal of Corporate & Financial Law

While there is considerable scholarship on the due diligence defense of lead underwriters in defective corporate securities offerings, there is surprisingly little analysis of the due diligence defense of non-managing underwriters. This article challenges the common perception that lead and non-managing underwriters necessarily “sink or swim” together for purposes of due diligence. An analysis of the statutory structure of Section 11 of the Securities Act of 1933 reveals that non-managing underwriters are not inextricably tethered to the lead. Rather, non-managing underwriters who actively question the lead’s due diligence investigation should be able to meet their own affirmative defense even when …

Restoring Transparency To Automated Authority, Frank Pasquale

Faculty Scholarship

No abstract provided.

Giving State Tax Incentives To Corporations: How Much Is Too Much?, Kathleen E. Mcdavid

South Carolina Journal of International Law and Business

No abstract provided.

Incentivizing Economic Development: An Empirical Examination Of The Use Of Grants And Loans, Robert T. Greenbaum, Daniele Bondonio

South Carolina Journal of International Law and Business

No abstract provided.

Bankruptcy’S Protection For Non-Debtors From Securities Fraud Litigation, John M. M. Wunderlich

Fordham Journal of Corporate & Financial Law

Given the recent economic climate, the judiciary faces an all too familiar challenge: navigate through the web that is bankruptcy and securities fraud. So far, bankruptcy has evolved into a tool to resolve mass tort litigation, like securities fraud. However, this Article explores bankruptcy as a tool to resolve securities litigation against non-debtors, those that never file for bankruptcy protection. The protection the Bankruptcy Code provides to non-debtors, like officers and directors, goes largely unnoticed, much to the detriment of securities fraud victims. Mindful that we now are in the midst of another financial crisis and that attention will slowly …

Pay For Banker Performance: Structuring Executive Compensation For Risk Regulation, Frederick Tung

Faculty Scholarship

Excessive risk taking by firm managers did not originate with the Financial Crisis of 2007-08. Though bankers had special incentives to take big risks in the period before the Crisis, the incentive effects of equity-based compensation have been understood for some time. Among other things, equity compensation tends to induce greater risk taking by aligning managers’ risk preferences with those of equity holders. Longstanding government guaranties of bank liabilities additionally served to intensify bankers’ risk taking incentives.

I propose to ameliorate this gambler’s incentive with a new approach to compensation at the largest banks, one that explicitly accounts for the …

Laudable Goals And Unintended Consequences: The Role And Control Of Fannie Mae And Freddie Mac, Andrea J. Boyack

American University Law Review

No abstract provided.

Mortgage Modification And Strategic Behavior: A Contrarian Interpretation Of The Countrywide Financial Corporation Settlement, Gregory S. Crespi

Faculty Journal Articles and Book Chapters

Christopher Mayer, Edward Morrison, Thomas Piskorski and Arpit Gupta of Columbia University have recently published in the Law and Finance eJournal a comprehensive study demonstrating the significant impacts on strategic default rates of the widely publicized Countrywide Financial Corporation settlement of 2008. While their study is comprehensive and carefully done, their implicit assumption that strategic defaults are something to be discouraged rather than encouraged, a position that I have criticized in my earlier work, undercuts the usefulness of their work for policy guidance. From their perspective the Countrywide settlement provides a cautionary tale about difficult trade-offs to be faced in …

Lyondell: A Note Of Approbation, William W. Bratton

NYLS Law Review

No abstract provided.

Pricing Terms In Sovereign Debt Contracts: A Greek Case Study With Implications For The European Crisis Resolution Mechanism, Mitu Gulati, Stephen J. Choi, Eric A. Posner

Faculty Scholarship

Conventional wisdom holds that boilerplate contract terms are ignored by parties, and thus are not priced into contracts. We test this view by comparing Greek sovereign bonds that have Greek choice-of-law terms and Greek sovereign bonds that have English choice-of-law terms. Because Greece can change the terms of Greek-law bonds unilaterally by changing Greek Law, and cannot change the terms of English-law bonds, Greek-law bonds should be riskier, with higher yields and lower prices. The spread between the two types of bonds should increase when the probability of Greek default increases. Recent events allow us to test this hypothesis, and …

Keynote Address: A Regulatory Framework For Managing Systemic Risk, Steven L. Schwarcz

Faculty Scholarship

This accessible analysis of systemic risk regulation was delivered as the keynote speech at an October 20, 2011 European Central Bank conference on regulation of financial services. Many regulatory responses, like the Dodd-Frank Act in the United States, consist largely of politically motivated reactions to the financial crisis, looking for villains (whether or not they exist). To be most effective, however, the regulation must be situated within a more analytical framework. In this speech, I attempt to build that framework, showing that preventive regulation is insufficient and that regulation also must be designed to limit the transmission of systemic risk …

Pay For Regulator Performance, M. Todd Henderson, Frederick Tung

Faculty Scholarship

Few doubt that executive compensation arrangements encouraged the excessive risk taking by banks that led to the recent Financial Crisis. Accordingly, academics and lawmakers have called for the reform of banker pay practices. In this Article, we argue that regulator pay is to blame as well, and that fixing it may be easier and more effective than reforming banker pay. Regulatory failures during the Financial Crisis resulted at least in part from a lack of sufficient incentives for examiners to act aggressively to prevent excessive risk. Bank regulators are rarely paid for performance, and in atypical cases involving performance bonus …

Book Review (Reviewing Leonard Orland's A Final Accounting), Adeen Postar

All Faculty Scholarship

Leonard Orland is the Oliver Ellsworth Professor of Law at the University of Connecticut. He has written a fine, if a bit unwieldy, book that traces the sad history of money and other assets deposited in supposedly sacrosanct Swiss banks by European Jews during the Nazi era to its long overdue resolution by the American justice system. The book provides background and perspective on how and why the $12.1 billion in pre-war dollars (about $250 trillion today) of financial assets of Holocaust victims disappeared into thin air in the years following World War II. These assets were given over to …

Those Who Ignore The Successes Of The Past Suffer Recurrent, Intensifying Crises, William K. Black

Faculty Works

No abstract provided.