Banking and Finance Law Commons^™

Managing Management Buyouts: A Us-Uk Comparative Analysis, Andrew F. Tuch

Scholarship@WashULaw

This chapter comparatively assesses U.S. and U.K. law governing management buyouts (MBOs), focusing on the duties of directors and officers in these systems. The analysis casts doubt on persistent but mistaken perceptions about U.S. and U.K. corporate fiduciary duties for self-dealing. The U.K. no-conflict rule is seen as strict, the U.S. fairness rule as flexible and pragmatic. As the analysis for MBOs demonstrates, these fiduciary rules operate similarly, tasking neutral or disinterested directors with policing self-dealing, enabling commercially sensitive responses to conflicts of interest. The analysis also reveals stronger formal private enforcement of corporate law and more robust disclosure rules …

Cleaning Corporate Governance, Jens Frankenreiter, Cathy Hwang, Yaron Nili, Eric L. Talley

Faculty Scholarship

Although empirical scholarship dominates the field of law and finance, much of it shares a common vulnerability: an abiding faith in the accuracy and integrity of a small, specialized collection of corporate governance data. In this paper, we unveil a novel collection of three decades’ worth of corporate charters for thousands of public companies, which shows that this faith is misplaced.

We make three principal contributions to the literature. First, we label our corpus for a variety of firm- and state-level governance features. Doing so reveals significant infirmities within the most well-known corporate governance datasets, including an error rate exceeding …

Fintech's Role In Exacerbating Or Reducing The Wealth Gap, Pamela Foohey, Nathalie Martin

Scholarly Works

Research shows that Black, Latinx, and other minorities pay more for credit and banking services, and that wealth accumulation differs starkly between their households and white households. The link between debt inequality and the wealth gap, however, remains less thoroughly explored, particularly in light of new credit products and debt-like banking services, such as early wage access and other fintech innovations. These innovations both hold the promise of reducing racial and ethnic disparities in lending and bring concerns that they may be exploited in ways that perpetuate inequality. They also come at a time when policy makers are considering how …

Examining Indenture Trustee Duties, Steven L. Schwarcz

Faculty Scholarship

This Chapter examines the duties of indenture trustees appointed under bond indentures. Although their post-default duties generally are subject to a prudent-person standard, indenture trustees have relatively little legal guidance concerning pre-default duties. The rise of activist investors, however, is making it increasingly critical to identify and understand how to perform those duties. This Chapter seeks to provide that understanding.

Cryptocurrency And The State: An Unholy Alliance, Lee Reiners

Faculty Scholarship

This article contextualizes the rise of cryptocurrency within the historical relationship between money and the state. It begins by asking two simple yet critical questions: What is money and where did it come from? Armed with the answers, the article proceeds by taking a fresh look at cryptocurrency through the lens of the credit theory of money. It finds that cryptocurrency, by using new technologies and incentive-based design, attempts to overcome the previous geographic limitations that hindered broad adoption of private currencies. Even with these innovations, cryptocurrency appeared unlikely to challenge the supremacy of sovereign money until Facebook announced the …

Global Stablecoins And China’S Cbdc: New Moneys With New Impacts On The Financial System?, Wei Shen, Heng Wang

Research Collection Yong Pung How School Of Law

Digital currencies are reshaping the financial, monetary, and regulatory landscape. There are at least two routes for the development of digital currencies. One is global stablecoins (e.g., Diem that is previously named Libra), issued by private players, while the other is central bank digital currency (CBDC) issued by central banks, with China’s CBDC as an example and possibly the first CBDC that will be issued by a major economy. Albeit in their rudimentary stages, global stablecoins and China’s CBDC are likely to disrupt the current financial system and challenge existing financial regulation. This article examines two crucial but under-explored questions: …

Equality And Access To Credit: A Social Contract Framework, John Linarelli

Scholarly Works

The problems governments face in regulating consumer finance fall into two categories: normative and cognitive. The normative problems have to do with the way that some governments, particularly those adhering to an American model of household finance, have financed social mobility and intergenerational welfare through debt, a tenuous and socially risky policy choice. Credit has a substantial social aspect to it in the United States, where the federal government has in some way engaged in subsidizing about 1/3 of consumer credit, particularly in the residential mortgage market, feeding into a substantial capital markets dimension through government-guaranteed securitization. Most Americans think …

Leveraging Corporate Law: A Broader Account Of Delaware’S Competition, Christopher M. Bruner

Maryland Law Review

No abstract provided.

Not Without Consent: Protecting Consent Rights Against Deliberate Breach, Karen A. Chesley

Maryland Law Review

No abstract provided.

The Federal Reserve And The 2020 Economic And Financial Crisis, Lev Menand

Faculty Scholarship

This Article provides a comprehensive legal analysis of the Federal Reserve's response to the 2020 economic and financial crisis. First, it examines the sixteen ad hoc lending facilities that the Fed established to fight the crisis and sorts them into two categories. Six advance the Fed's monetary mission and were designed to halt a run on financial institutions. Ten go beyond the Fed's traditional role and are designed to directly support financial markets and the real economy. Second, it maps these programs onto the statutory framework for money and banking. It shows that Congress's signature crisis legislation, the CARES Act, …

Fedaccounts: Digital Dollars, John Crawford, Lev Menand, Morgan Ricks

Faculty Scholarship

We are entering a new monetary era. Central banks around the world – spurred by the development of privately controlled digital currencies as well as competition from other central banks – have been studying, building, and, in some cases, issuing central bank digital currency (“CBDC”).

Although digital fiat currency is one of the hottest topics in macroeconomics and central banking today, the discussion has largely overlooked the most straightforward and appealing strategy for implementing a U.S. dollar-based CBDC: expanding access to bank accounts that the Federal Reserve already offers to a small, favored set of clients. These accounts consist of …

Why Supervise Banks? The Foundations Of The American Monetary Settlement, Lev Menand

Faculty Scholarship

Administrative agencies are generally designed to operate at arm’s length, making rules and adjudicating cases. But the banking agencies are different: they are designed to supervise. They work cooperatively with banks and their remedial powers are so extensive they rarely use them. Oversight proceeds through informal, confidential dialogue.

Today, supervision is under threat: banks oppose it, the banking agencies restrict it, and scholars misconstrue it. Recently, the critique has turned legal. Supervision’s skeptics draw on a uniform, flattened view of administrative law to argue that supervision is inconsistent with norms of due process and transparency. These arguments erode the intellectual …

Protecting Financial Stability: Lessons From The Covid-19 Pandemic, Howell E. Jackson, Steven L. Schwarcz

Faculty Scholarship

The COVID-19 pandemic has produced a public health debacle of the first order. But the virus has also propagated the kind of exogenous shock that can precipitate-and to a certain degree did precipitate-a systemic event for our financial system. This still not fully resolved systemic shock comes a little more than a decade after the last financial crisis. In the intervening years, much has been written about the global financial crisis of 2008 and its systemic dimensions. Considerable scholarly attention has focused on first devising and then critiquing the macroprudential reforms that ensued, both in the Dodd-Frank Act and the …

Regulating Financial Guarantors, Steven L. Schwarcz

Faculty Scholarship

To improve financial regulation, scholars have engaged in extensive research over the past decade to try to understand why systemically important financial firms engage in excessive risk-taking. None of that research fully explains, however, the unusually excessive risk-taking by financial guarantors such as bond insurers, protection sellers under credit-default-swap (CDS) derivatives, credit enhancers in securitization transactions, and even issuers of standby letters of credit. With tens of trillions of dollars of financial guarantees outstanding, the potential for failure is massive. This Article argues that financial guarantor risk-taking is influenced by a previously unrecognized cognitive bias, which it calls “abstraction bias.” …

Corporate Restructuring Under Relative And Absolute Priority Default Rules: A Comparative Assessment, Jonathan M. Seymour, Steven L. Schwarcz

Faculty Scholarship

The European Union recently adopted a Restructuring Directive intended to facilitate the reorganization of insolvent and other financially troubled firms. Although the central goal of the Directive parallels that of chapter 11 of U.S. bankruptcy law—to protect and maximize the value of financially distressed but economically viable enterprises by consensually reorganizing their capital structure—the Directive introduces an innovative but controversial option: that EU Member States can decree that reorganization negotiations should be subject to a relative priority default rule, in contrast to the type of absolute priority default rule used by chapter 11. EU officials argue that relative priority is …

Esg And Climate Change Blind Spots: Turning The Corner On Sec Disclosure, Cynthia A. Williams, Donna M. Nagy

Articles by Maurer Faculty

This article examines four areas in which the SEC, for more than a decade, resisted reform or impeded shareholders’ access to sought-after environmental, social, and governance (ESG) information. These areas are: (1) the SEC’s refusal to act on several rulemaking petitions submitted during the years 2009 to 2018, which called for expanded ESG disclosure; (2) the SEC’s grudging promulgation of rules concerning social disclosures as required by Congress in the Dodd-Frank Act of 2010; (3) the SEC’s 2020 revisions to SEC Rule 14a-8, which make the submission of shareholder proposals more difficult, thereby thwarting investor efforts to raise ESG concerns; …

Blockchain Neutrality, Samuel N. Weinstein

Georgia Law Review

Blockchain technology is transforming how markets work.
Blockchains eliminate the need for trusted gatekeepers like
banks to execute, verify, and record transactions. In the
financial markets, their disruptive potential threatens both
Wall Street banks and Silicon Valley venture capitalists. How
blockchain technology is regulated will determine whether it
encourages or inhibits competition. Some blockchain
applications present serious fraud and systemic risks,
complicating regulation. This Article explores the antitrust and
competition policy challenges blockchain presents and proposes
a regulatory strategy, modeled on Internet regulation and net
neutrality principles, to unlock blockchain’s competitive
potential. It contends that financial regulators should promote
blockchain …

Trump V. Mazars Usa, Llp: The Case Of The Chief Justice And The Congressional Subpoenas, Rodger D. Citron

Scholarly Works

No abstract provided.

A Regulatory Roadmap For Financial Innovation, Cristie Ford

All Faculty Publications

Private sector innovation – whether it is fintech, biotechnology, the platformisation of the economy, or other developments – is the single most profound challenge that regulators confront today. Financial innovations, which are intangible and fast-moving, are especially challenging. Financial regulators are at the operational front line of making sense of the promise and the risks associated with fintech, and helping to ensure it operates for public benefit.

Faced with such a changeable and fast-moving problem, how can regulators “future proof” themselves?

This chapter outlines a roadmap for financial regulators who confront fast-moving and profound change in their sectors. It argues …

Pension Fiduciaries And Climate Change: A Canadian Perspective, Maziar Peihani

All Faculty Publications

Climate change has emerged as a major issue of financial risk for Canadian pension funds when determining where to place investments. The author argues that while such pension funds recognize climate change as an issue that holds the potential for significant financial risk, the funds’ current approach to climate-related risks faces critical limitations. The author identifies the current practices of the five largest pension funds in Canada when faced with climate-related financial risks, then discusses the key shortcomings in current practices among the pension funds in three main areas.
First, the author examines organizational governance, which seeks to understand investment …