December 24, 2010
Mixed Results in Government Energy Policy
The EPA announced that it is "going green" with new greenhouse gas regulations proposals (see here), while the military is being touted by Thomas Friedman in the New York Times as the new movers and shakers in green energy. Unfortunately, it appears that the military has had some troubles with their wartime fuel contracts. None of this is easy, though, and some progress is good progress. At least, that's my holiday outlook.
December 23, 2010
Just in Case You're StressedFirst, the BLPB tie-in: (1) Business law is practiced by business lawyers; (2) business lawyers get stressed; and (3) Zen meditation can be an effective form of stress management. Second, the shameless self-promotion: I've collaborated with the photographer Tim Averre to publish a photobook setting forth some of the wisdom of my Zen instructor, Craig Horton of the Cleveland Buddhist Temple. You can preview the first 15 pages below. If you want to purchase a copy, we are making them available at cost. Third, breathe.
December 22, 2010
Is Google Too Big?
The Dealbook presents round 2 on the question of whether Google is a monopoly here. I'm convinced Google is enormous, but I'm not convinced that is inherently a problem.
There are some good arguments on both sides, but reading some of the arguments against Google's practices, bring to mind Mel Brooks' version of King Louis XVI: "It's good to be the king."
December 21, 2010
First Things First
Yesterday, I started teaching a new course I designed called "Regulation of International Markets." One of the more provocative student observations during the first class queried, "Where does the money come from when somebody buys low and sells high?"
That's always a good question, but, in these trying times, it's particularly poignant. New Yorker magazine recently ran a piece asking why we need Wall Street. After years of a single regulator's rule, Britain is pondering a decentralized structure. Some foreign markets have simply transferred disciplinary authority from stock exchanges to the government.
Which reminds me again of how bland were the US regulatory reforms of 2010. Perhaps it's time for a broader mindset?
December 20, 2010
SEC's Announces First Non-Prosecution Agreement for Cooperative Company
The SEC today announced that it was pursuing charges against Carter's former Executive Vice President Joseph M. Elles "for engaging in financial fraud and insider trading," which the SEC claims "caused an understatement of Carter's expenses and a material overstatement of its net income in several financial reporting periods." The SEC decided not to prosecute the company because of
the relatively isolated nature of the unlawful conduct, Carter's prompt and complete self-reporting of the misconduct to the SEC, its exemplary and extensive cooperation in the investigation, including undertaking a thorough and comprehensive internal investigation, and Carter's extensive and substantial remedial actions.
The PDF of the non-prosecution agreement can be found here.
The SEC announced its new policy to encourage company cooperation in January 2010 (release here). The anticipated gains from the new policy were "expected to result in invaluable and early assistance in identifying the scope, participants, victims and ill-gotten gains associated with fraudulent schemes."
It's taken almost a year for the first non-prosecution agreement, so it's not clear to me that the policy was a "game-changer" as the SEC had hoped. It still seems like a good way to encourage companies to help in the process, although it is my impression that a similar informal policy was already in place. Perhaps that's why not much seems to have changed.
December 19, 2010
Schwarcz on Marginalizing Risk
Steven L. Schwarcz has posted a paper on SSRN entitled "Marginalizing Risk." Here's the abstract:
A major focus of finance is reducing risk on investments, in order to reduce a borrower’s costs of funds. From any given investor’s standpoint, risk dispersion appears as an important way to reduce investment risk; but sometimes risk dispersion can cause investors and other market participants to underestimate and under-protect against risk. Risk can even be so widely dispersed that rational market participants individually lack the incentive to monitor it. This article examines the market failures resulting from risk dispersion that can cause market participants to under-protect against risk. The article also analyzes the extent to which government regulation may be necessary or appropriate to limit these market failures. Finally, the article examines how such regulation should be designed, including the extent to which it should limit risk dispersion in the first instance.