Wednesday, July 28, 2021

Open Faculty Position in Financial Law: Surrey Law School

Dear BLPB Readers:

Surrey Law School is recruiting a tenure-track or tenure-equivalent position in Financial Law (Lecturer or Senior Lecturer). They have an energetic and highly international faculty, and the University of Surrey campus is ideally situated in the leafy English countryside a mere 25 miles from central London (30 min by train). The School comprises three main research clusters: The Surrey Centre for Law and Philosophy, the Surrey Centre for International and Environmental Law and the Law and Technology Hub. This new position in Financial Law is part of an investment in strengthening our Law & Technology Pathway LLB degree, and our FinTech & Policy MSc programme run with Surrey Business School, among other strategic initiatives. The School is in a period of growth and the hiring committee is interested in considering applications also from US-trained lawyers and legal academics. For more information about the position and to apply, please see link below. (Note the application deadline of September 6th.)

July 28, 2021 in Colleen Baker | Permalink | Comments (0)

Wednesday, July 21, 2021

Call for Papers - Fourth Conference on Law & Macroeconomics

 Fourth Conference on Law and Macroeconomics, 2021

The role of law as an instrument of macroeconomic policy through the Covid-19 pandemic, including as a means to provide social protection, has opened up new and exciting research opportunities. As we edge towards recovery, what is the role of law in creating a macroeconomy appropriate for a post-pandemic world?

We welcome submissions for an online virtual conference on October 27 and 28, 2021 that will continue to explore connections between law and macroeconomics. Papers may address the role of law, regulation, and institutions in:

  1. Monetary policy, both conventional and unconventional, including how it is impacted by payments systems, e.g., new platforms and technologies, as well as the effects and risks of the unwinding of QE;
  2. Financial regulatory policy, both domestic and international, including its effect on the economy, its role in crisis containment and resolution, access to capital, and other aspects of financial inclusion;
  3. Fiscal policy, especially its role in mitigating the effects and frequency of economic downturns, including the respective roles of federal, state, and local governments. We are particularly interested in papers that explore the combination of expansionary fiscal policy and loose monetary policy;
  4. Moderating recessions with other policy levers, including bankruptcy, contract, and property law; environmental, utility, and labor regulation; and investment and capital controls;
  5. ESG – which coalitions decide how to implement it, and what will it mean for investment?
  6. Law and data – whose data is it anyway?
  7. Sovereign debt, debt relief and forgiveness, and the possible consequences;
  8. Is the legal profession able to deliver for people in the twenty-first century economy?
  9. Legal strategies for reducing inequality, including policies affecting labor, competition, access to housing, healthcare, and other public services, as well as personal, corporate and public debt relief.

The submission deadline is September 15, 2021.  Conference website is here and complete call for papers here: Download Fourth Conference on Law & Macroeconomics

July 21, 2021 in Call for Papers, Colleen Baker | Permalink | Comments (0)

Wednesday, July 14, 2021

Professor Baker's Entrepreneurial Regulatory Legal Strategy: The Case of Cannabis

I'm excited to share with BLPB readers that my article, Entrepreneurial Regulatory Legal Strategy: The Case of Cannabis, published in the American Business Law Journal, is now available.  It is one of a series of articles related to a 2020 Symposium on Legal, Ethical, and Compliance Issues in Emerging Markets: Cannabis in the States, sponsored by the Spears School of Business Center for Legal Studies & Business Ethics at Oklahoma State University and the American Business Law Journal.   

Here's its abstract:

This article develops the concepts of regulatory legal strategy, a resource-based view of government agencies, and regulatory entrepreneurship. These ideas are explored through a case study of the limited (if any) access that legal cannabis-related businesses have to the banking system due to the clash between federal law and laws in those states that have legalized some uses of cannabis. This article argues that regulators’ entrepreneurial regulatory legal strategies can have a material impact on regulated entities and give them a competitive advantage. To demonstrate, this article claims that regulators’ adoption of permissive regulatory legal strategies has facilitated access of some cannabis-related businesses to the banking system. Conversely, if regulators adopted obstructive regulatory strategies, this would act as a constraint on such access in the future, even if Congress resolves the federalism issue largely responsible for the current limitations these businesses face.

I encourage readers to also check out the additional articles in this special volume, which include:

Kimberly A Houser & Janine Hiller's Medical Marijuana Registries: A Painful Choice?

Stephanie Geiger-Oneto & Robert Sprague's Cannabis Regulatory Confusion and Its Impact on Consumer Adoption

Aubree L. Walton, Kaimee Kellis, William E. Tankersley & Rikinkumar S. Patel's Cultivating Evidence-Based Pathways for Cannabis Product Development: Implications for Consumer Protection

Mark J. Cowan, Taxing Cannabis on the Reservation

 

July 14, 2021 in Colleen Baker | Permalink | Comments (0)

Wednesday, June 30, 2021

Call for Papers - AALS Section on Transactional Law and Skills

CALL FOR PAPERS

AALS SECTION ON TRANSACTIONAL LAW AND SKILLS

Transactional Lawyering at the Intersection of Business and Societal Well-Being

2022 AALS Annual Meeting

The AALS Section on Transactional Law and Skills is pleased to announce a call for papers for its program, “Transactional Lawyering at the Intersection of Business and Societal Well-Being,” at the 2022 annual meeting of the AALS. This program will explore how ESG and broader societal considerations are increasingly influencing the flow of capital in the global marketplace, corporate governance planning, merger and acquisition activity and structures, as well as other transactional topics. The events of 2020, for example, have shifted the focus of business entity governance, equality and access in securities markets, and transactional planning and deal structures in significant and lasting ways – questioning whether current structures and systems are working well for all stakeholders and society more broadly. COVID-19 and social movements have broadened ESG efforts to include previously overlooked issues such as human resource policies (e.g., sick leave, parental leave), workplace health and safety, supply chain management, continuity and emergency planning, and diversity and inclusion hiring practices and training. In addition, proposals are being considered (and some adopted) to require gender diversity on boards of directors as well as additional disclosures related to human capital. This program will look at how transactional lawyering in a variety of contexts can address/respond to recent calls for increased consideration and balancing of ESG issues and impact topics.

The annual meeting will be held virtually from January 5-9, 2022, with the Section on Transactional Law and Skills panel scheduled for Friday, January 7, from 11 a.m.-12:15 p.m. (EST). In addition to the paper presentation, the program will feature a panel focusing on how to incorporate these topics and issues across the transactional curriculum, including in clinics and other experiential courses, as well as in doctrinal courses.

Complete call is here: Download AALS Section on Transactional Law & Skills CFP

June 30, 2021 in Colleen Baker, Conferences | Permalink | Comments (0)

Saturday, June 26, 2021

Call for Papers - AALS Section on Financial Institutions and Consumer Financial Services

The AALS Section on Financial Institutions and Consumer Financial Services invites submissions of no more than five pages for its session at the 2022 annual meeting of the AALS.  Next year’s annual meeting will be held virtually from January 5-9, 2022, with the date and time of the Section’s session yet to be announced.  The submission can be the abstract and/or introduction from a longer paper, and it should relate to the following session description:

Climate Finance and Banking Regulation: Beyond Disclosure? 

 In the United States, banking regulation has been slower than other forms of financial regulation (and slower than its European counterparts) to address climate-related financial risks.  This panel explores the proper role of banking regulation in addressing the physical and transition risks from climate change.  Possible measures include:  standardized, mandatory climate risk disclosures by banks; supervisory assessments of climate-related financial risk; capital and liquidity regulation; climate risk scenario tests; determination of the appropriate role of banks in mitigating climate risk; financial stability oversight of climate risk; and action (through the Community Reinvestment Act and otherwise) to deter harms to disadvantaged communities and communities of color from climate change.

Please email your anonymized materials by Friday, July 16, 2021, to Joe Graham, jgraham@bu.edu.  Please also indicate, in addition to the proposal submission of up to five pages:  (a) whether you are tenured, pre-tenure, or other; (b) whether you are in your first five years as a law professor (including any years spent as a fellow or visiting assistant professor); (c) how far along the full article is and when you expect to complete the discussion draft; and (d) optionally, how you would contribute to diverse perspectives in our field or on the panel.

The Section will announce the author(s) selected to present by no later than early September, 2021.

On behalf of the Section on Financial Institutions and Consumer Financial Protection

Chair:  Patricia A. McCoy (Boston College)

Chair-Elect:  Paolo Saguato (George Mason University)

Executive Committee Members:

Hilary Allen (American University)

Abbye Atkinson (University of California, Berkeley)

Felix Chang (University of Cincinnati)

Gina-Gail S. Fletcher (Duke University) 

Pamela Foohey (Indiana University)

Kathryn Judge (Columbia University)

Michael Malloy (University of the Pacific)

Christopher Odinet (University of Iowa)

Jennifer Taub (Western New England University)

Rory Van Loo (Boston University)

David Zaring (The Wharton School)

 

June 26, 2021 in Colleen Baker, Financial Markets | Permalink | Comments (0)

Professors Peari and Geva's International Negotiable Instruments

Friend of the BLPB, Professor Sagi Peari, recently shared the great news about the publication of his second book with Oxford University Press, International Negotiable Instruments (w/Professor Benjamin Geva).  A huge congratulations to the profs on this impressive accomplishment on such an important topic!  Here's the book abstract:

For centuries, negotiable instruments have played a vital role in the smooth operation of domestic and international commerce. The payment mechanisms have been subject to rapid technological progress and law has needed to adapt and respond to ensure that the legal framework remains relevant and effective. This book provides a comprehensive and thorough analysis of the question of applicable law to negotiable instruments. Specifically, the authors challenge the conventional view according to which the fundamentals of negotiable instruments law are excluded from the scope and insights of general contract and property law doctrines and as such not subject to the general conflict of laws rules governing them. The authors make concrete suggestions for reform and contemplate on the nature of the conflict of laws rules that can also be applied in the digital age of communication.

June 26, 2021 in Colleen Baker, Financial Markets | Permalink | Comments (0)

Wednesday, June 16, 2021

Menand's Why Supervise Banks? The Foundations of the American Monetary Settlement

Lev Menand, Academic Fellow and Lecturer in Law at Columbia Law School, has recently published Why Supervise Banks? The Foundations of the American Monetary Settlement, 74 Vanderbilt Law Review 951 (2021).  Menand has actually worked in the Federal Reserve Bank of New York's Bank Supervision Group.  I'm excited to read this article as banking law scholars are increasingly focused on the area of bank supervision and I've no doubt it makes a significant contribution to the literature.     Here's the article's abstract:

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 and political foundations of supervision. They also obscure its distinguished past and deny its continued necessity.

This Article rescues supervision and recovers its historical pedigree. It argues that our current understanding of supervision is both historically and conceptually blinkered. Understanding supervision requires understanding the theory of banking motivating it and revealing the broader institutional order that depends on it. This Article terms that order the “American Monetary Settlement” (“AMS”). The AMS is designed to solve an extremely difficult governance problem—creating an elastic money supply. It uses specially chartered banks to create money and supervisors to act as outsourcers, overseeing the managers who operate banks.

Supervision is now under increasing pressure due to fundamental changes in the political economy of finance. Beginning in the 1950s, the government started to allow nonbanks to expand the money supply, devaluing the banking franchise. Then, the government weakened the link between supervision and money creation by permitting banks to engage in unrelated business activities. This transformation undermined the normative foundations of supervisory governance, fueling today’s desupervisory movement. Desupervision, in turn, cedes public power to private actors and risks endemic economic instability.

June 16, 2021 in Colleen Baker, Financial Markets | Permalink | Comments (0)

Wednesday, June 9, 2021

Second Circuit Issues Opinion in Federal Fintech Charter Case

On June 3rd, the United States Court of Appeals for the Second Circuit (Court) decided Lacewell v. Office of the Comptroller of the Currency (here).  I’d previously blogged about the “Dueling Law Professor Amicus Curiae Briefs” (here and here, see Appendix A of the Opinion for a listing of these briefs) in this heavily watched federal fintech charter case about whether the Office of the Comptroller of the Currency (OCC) has the authority to issue special-purpose national bank (SPNB) charters for fintech firms “engaged in the ‘business of banking,’ including those that do not accept deposits.”  I promised to update BLPB readers when the Court rendered its decision.

In a nutshell, the Court reversed the district court's amended judgement and remanded “with instructions to enter a judgement of dismissal without prejudice.”  The Court explained that DFS [the New York State Department of Financial Services, of which plaintiff Lacewell is Superintendent] lacked “standing because it failed to allege that the OCC’s decision caused it to suffer an actual or imminent injury in fact and...that DFS’s claims are constitutionally unripe for substantially the same reason.”  Given these considerations, the Court stated that it did not have the jurisdiction to “address the district court’s holding, on the merits, that the ‘business of banking’ under the NBA [National Bank Act] unambiguously requires the receipt of deposits, nor whether that holding warrants setting aside Section 5.20(e)(1)(i) [OCC regulation permitting issuance of SPNB charters] nationwide with respect to non-depository fintechs applying for SPNB charters.”  It added that “we express no view on the district court’s determinations regarding these issues.” 

Of course, what constitutes the business of banking – whether deposit taking is required by the NBA to be a chartered bank – is the critical issue.  Stay tuned!  In the meantime, law firm analyses are available (for example, here and here) for readers interested in a more extensive discussion of this decision!          

June 9, 2021 in Colleen Baker, Financial Markets | Permalink | Comments (0)

Wednesday, June 2, 2021

Open Faculty Position: Fields Chair in Ethics and Corporate Responsibility at Texas State University

Dear BLPB Readers:

Texas State University invites applications for a full-time, endowed tenured faculty position at the rank of professor. We seek outstanding candidates from all areas of business with a distinctive expertise and focus on business ethics and corporate responsibility. The appointee is expected to have a nationally recognized research record, pursue continuing research and scholarship, and provide disciplinary expertise, innovation, and leadership. The McCoy College is interested in recruiting an individual who can embrace and enhance the vision of a diverse, collegial, and productive academic environment.

Responsibilities:
• Develop a nationally and internationally recognized research program, including extramural grant funded research, that addresses business challenges through the prism of ethics and corporate responsibility.
• Conduct and collaborate on high quality research leading to publications in top-tier journals.
• Develop and teach courses at the undergraduate and graduate levels, including online offerings, that highlight the ethical and social dimensions of business management.
• Enhance the integration of business ethics, sustainability, and corporate social responsibility into the College’s curricular and co-curricular learning experiences.
• Provide thought leadership and share insights through scholarly engagement with diverse groups including faculty, students, and external communities.
• Serve as an excellent faculty role model who inspires, encourages, and mentors colleagues and students.
• Contribute to college and university initiatives by sharing disciplinary expertise.

The complete job posting is here.

June 2, 2021 in Colleen Baker, Jobs | Permalink | Comments (0)

Short Paper: Clearinghouse Shareholders and "No Creditor Worse Off Than in Liquidation" Claims

I thought I'd essentially copy the idea behind co-blogger Joshua Fershee's post from yesterday (thanks, Josh!) and share with readers that my new short article, Clearinghouse Shareholders and "No Creditor Worse Off Than in Liquidation" Claims is now available!  Similarly, my article is a combination of a prior post and my presentation at the fourth annual Business Law Prof Blog Symposium.  Here's its abstract:

Clearinghouses are the centerpiece of global policymakers’ 2009
framework of reforms in the over-the-counter derivative markets in
response to the 2007–08 financial crisis. Dodd-Frank’s Title VII
implemented these reforms in the U.S. More than ten years have now
passed since the establishment of this framework. Yet much work
continues on outstanding issues surrounding the recovery and
resolution of a distressed or insolvent clearinghouse. This Article
examines one of these issues: the possibility of clearinghouse
shareholders raising no creditor worse off than in liquidation claims
in resolution. It argues that such claims are nonsensical and should
be unavailable to clearinghouse shareholders. This would decrease
moral hazard in and promote the rationalization of the global
clearing ecosystem for derivatives.

I also want to encourage BLPB readers to review the perceptive commentary by Professor Thomas E. Plank on my article (here). Finally, I'd like to thank the Transactions law review student editors for their excellent work! 

June 2, 2021 in Colleen Baker, Financial Markets | Permalink | Comments (0)

Wednesday, May 26, 2021

Professor Wilmarth's Wirecard and Greensill Scandals Confirm Dangers of Mixing Banking and Commerce

If you missed this past Monday's Regulating Megabanks: A Conference in Honor of Art Wilmarth, don't worry, it was recorded! I'll keep BLPB readers posted about when the recorded webinar is available online [now available -see link at bottom of post!].  In the meantime, Professor Wilmarth has just posted a new working paper, Wirecard and Greensill Scandals Confirm Dangers of Mixing Banking and Commerce, to keep you busy until then!  Here's the abstract:

The pandemic crisis has accelerated the entry of financial technology (“fintech”) firms into the banking industry. Some of the new fintech banks are owned or controlled by commercial enterprises. Affiliations between commercial firms and fintech banks raise fresh concerns about the dangers of mixing banking and commerce. Recent scandals surrounding the failures of Wirecard and Greensill Capital (Greensill) reveal the potential magnitude of those perils.

The Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) have encouraged commercial enterprises to acquire fintech banks. The FDIC has authorized commercial firms to acquire FDIC-insured industrial banks in reliance on a controversial loophole in the Bank Holding Company Act (BHC Act). The OCC is seeking to charter nondepository fintech national banks, which commercial firms could own under a separate exemption in the BHC Act. The FDIC’s and OCC’s initiatives undermine – and could potentially destroy – the BHC Act’s longstanding policy of separating banking and commerce.

The disasters at Wirecard and Greensill demonstrate the importance of maintaining a strict separation between banking and commerce. Regulators in Germany and other countries allowed banks controlled by Wirecard and Greensill to engage in risky and abusive transactions that benefited their parent companies and other related parties, including commercial firms connected to their major investors. Wirecard Bank provided financial support to its parent company and CEO, and it also made fraudulent transfers of funds to insiders and their controlled entities. Greensill Bank made preferential and unsound loans that benefited its parent company and leading investors. Greensill Bank securitized many of its reckless loans, and Greensill Capital sold the resulting asset-backed securities as “safe” and “liquid” investments to misinformed investors.

Regulators failed to take timely enforcement actions against Wirecard and Greensill because they did not exercise consolidated supervisory authority over the complex international structures created by both firms. In addition, Wirecard and Greensill built extensive networks of influence that produced significant political favors and regulatory forbearance in Germany and the U.K. The collapse of Wirecard and Greensill embarrassed government agencies and inflicted massive losses on investors, creditors, and other stakeholders.

The failures of Wirecard and Greensill provide clear warnings about the dangers of allowing fintechs to offer banking services while evading prudential regulatory requirements and supervisory standards that apply to traditional banks and their corporate owners. Regulators and policymakers should not allow fintechs’ claims of “innovation” to serve as a rationale for regulatory arbitrage and as camouflage for fraud. Both disasters show that high-tech firms engaged in banking and commercial activities are likely to create the same unacceptable hazards as previous banking-and-commercial conglomerates, including toxic conflicts of interest, reckless lending, dangerous concentrations of economic power and political influence, supervisory blind spots, and systemic threats to economic and financial stability.

Revised as of 5/28/2021: the recorded webinar of Regulating Megabanks a Conference in Honor of Art Wilmarth is now available on Youtube.

 

May 26, 2021 in Colleen Baker, Financial Markets | Permalink | Comments (0)

Wednesday, May 19, 2021

May 24th - Regulating Megabanks: A Conference in Honor of Art Wilmarth

Dear BLPB readers:

Here's an event you won't want to miss!  Check out the phenomenal speaker lineup

Regulating Megabanks: A Conference in Honor of Arthur Wilmarth

May 24 @ 8:50 am - 5:30 pm

Join the University of Colorado Law School and the University of Colorado Law Review for a daylong online symposium regarding the regulation of large financial conglomerates.  This symposium honors Professor Arthur Wilmarth of the George Washington University Law School, who has devoted his entire scholarly career to this topic and whose book Taming the Megabanks was just published by Oxford University Press.

The public may access the webinar at the following link: https://cu.law/lawreview

 

May 19, 2021 in Colleen Baker, Financial Markets | Permalink | Comments (2)

Wednesday, May 5, 2021

Professors Conti-Brown, Listokin, and Parrillo's Towards An Administrative Law of Central Banking

Last week, I blogged about my new article, The Federal Reserve As Collateral's Last Resort, in the Notre Dame Law Review.  I mentioned that this shorter work is a first step in a larger normative project on central bank collateral frameworks.  As I progress with this research, I'm adding new articles to my reading list for this new article.  Peter Conti-Brown, Yair Listokin, & Nicholas R. Parrillo recently posted their new work, Towards An Administrative Law of Central Banking, published in the Yale Journal on Regulation.  It immediately made the list!  Here's the Abstract:

A world in turmoil caused by COVID-19 has revealed again what has long been true: the Federal Reserve is arguably the most powerful administrative agency in government, but neither administrative-law scholars nor the Fed itself treat it that way. In this Article, we present the first effort to map the contours of what administrative law should mean for the Fed, with particular attention to the processes the Fed should follow in determining and announcing legal interpretations and major policy changes. First, we synthesize literature from administrative law and social science to show the advantages that an agency like the Fed can glean from greater openness and transparency in its interpretations of law and in its long-term policymaking processes. These advantages fall into two categories: (1) sending more credible signals of future action and thereby shaping the behavior of regulated parties and other constituents, and (2) increasing the diversity of incoming information on which to base decisions, thereby improving their factual and predictive accuracy. Second, we apply this framework to two key areas—monetary policy and emergency lending—to show how the Fed can improve its policy signaling and input diversity in the areas of its authority that are most expansive. The result is a positive account of what the Fed already does as an administrative agency and a normative account of what it should do in order to preserve necessary policy flexibility without sacrificing the public demands for policy clarity and rigor.

May 5, 2021 in Colleen Baker, Financial Markets | Permalink | Comments (0)

Wednesday, April 28, 2021

Professor Baker's The Federal Reserve As Collateral's Last Resort

I’m delighted to share with BLPB readers that my new Essay, The Federal Reserve As Collateral’s Last Resort, 96 Notre Dame L. Rev. 1381 (2021) is now available (here).  Its focus is central bank collateral frameworks, a critical and timely topic that has thus far received scant attention from legal scholars.  I recently blogged about Professor Skinner’s Central Bank Activism.  Regardless of one’s perspective on this issue, it’s crucial to realize that a central bank’s collateral framework is the mechanism that promotes or limits such activism.  The institutional features of these frameworks are a combination of legislation and central bank policy, with the latter arguably being the most important influence on the Fed’s framework.   

As the first paragraph of my Essay explains “Central bank money or liquidity is at the heart of modern economies.  It is issued against collateral designated as eligible by, and on terms defined by, central bank collateral frameworks…what is often underappreciated is that the ultimate practical difference between an illiquid and insolvent firm is whether a firm has assets a central bank, such as the Federal Reserve, will accept as collateral for lending or for purchase, and at what valuation.  What ultimately constitutes “good” or central bank “eligible” collateral, how best to assess its value, and whose perspective on these questions matters most are critical issues at the heart of central bank collateral frameworks.” (footnotes in Essay omitted throughout this post). 

In the financial crisis of 2007-09, the Fed rescued both Bear Stearns and American International Group, but not Lehman Brothers.  Fed officials explained that Lehman did not have collateral sufficient to secure its lending assistanceSome economists have disagreed with this assessment.  Yet regardless of who is right about this issue, “the respective histories of these firms attest to the centrality of collateral and central bank collateral frameworks in modern credit markets.”

Central bank collateral frameworks also impact “the production, liquidity and pricing of assets that markets use as collateral…[and] market discipline and enable indirect bailouts of firms and governments.”  In other words, central bank collateral frameworks can potentially incentivize the production of junk assets. 

Much of my research has focused on clearinghouses.  If the Fed were to provide funding assistance under Dodd-Frank’s Title VIII to a distressed, designated clearinghouse, an important consideration would be the collateral securing such funding.  The loan might be “fully collateralized,” but the type of collateral actually securing the loan and its valuation would bear upon whether the assistance amounted to emergency liquidity provision or a bailout.  As I note in The Federal Reserve As Last Resort, it's curious that while Dodd-Frank added collateral related provisions to the Fed's longstanding Section 13(3) emergency authority, it included no such provisions with the Fed's new liquidity authority in Title VIII for designated financial market utilities such as clearinghouses. 

As the importance of the shadow banking system has increased, so too has the role of collateral in financial markets.  The Fed provided extensive assistance to the shadow banking system in the financial crisis of 2007-09 and in the ongoing COVID-19 pandemic.  Although economists and legal scholars have written about the shadow banking system and the Fed’s emergency liquidity facilities, there has been little focus on central bank collateral frameworks.  More work is needed in this area.  Manmohan Singh’s Collateral Markets and Financial Plumbing and Kjell G. Nyborg’s Collateral Frameworks: The Open Secret of Central Banks are important (and some of the only) contributions in this general area.   

In sum, my Essay is meant to be a “first step in a broader normative project analyzing the proper balance between legislation and central bank policy—between architecture and implementation—in shaping the Federal Reserve’s collateral framework to best promote market discipline and to minimize credit allocation.  Its modest aim is twofold. First, it provides the first analysis of central bank collateral frameworks in the legal scholarship. Second, it analyzes the equilibrium between legislation and central bank policy in the Federal Reserve’s collateral framework in the context of its section 13(3) emergency liquidity authority, lending authority for designated financial market utilities, and swap lines with foreign central banks, and general implications of these arrangements.”        

My article, The Federal Reserve’s Use of International Swap Lines, was the first law review piece to analyze the Fed’s central bank swap lines.  It started with the following quote from an article by John Dizard in the Financial Times: “Always define every issue as just a technical problem.”  Central bank swap lines are anything but a mere technical issue.  Similarly, BLPB readers should understand that the collateral framework of the Fed and other central banks is much more than just a technical central banking problem.  It is a topic that should be of interest to all.

Finally, I’d like to thank NYU School of Law's Classical Liberal Institute and the Notre Dame Law Review for the opportunity to participate in their workshop on The Public Valuation of Private Assets (additional articles here).  And I’d also like to thank Zachary Pohlman, Editor-in-Chief, Lauren Hanna, Symposium Editor, and all of the other members of the Notre Dame Law Review who edited my Essay for their superb work!

April 28, 2021 in Colleen Baker, Financial Markets | Permalink | Comments (0)

Wednesday, April 21, 2021

Using Negotiation Exercises in an Asynchronous Business Law Course

I’m finishing my second semester of teaching Legal Environment of Business, an introductory undergraduate business law course, asynchronously.  One of the challenges of an asynchronous course is creating a sense of community among students.  I’ve previously blogged about using negotiation exercises in my business law courses (here and here).  In this post, I want to share with readers how I’ve continued to use such materials in my asynchronous courses to promote experiential learning and to create a sense of community.

Canvas is the learning management system for my courses.  My asynchronous courses are organized into weekly modules.  Students can find all materials for a specific week (assigned readings, videos, assignments etc.) in that week’s module.  The feedback I’ve received indicates that students find this an easy to follow format.  So, for any week in which there is a negotiation exercise, the students’ role assignments, the negotiation materials, and the assignment itself will be posted in that week’s module.  For each exercise, I use Canvas groups to randomly organize students into negotiation teams.  Use of Canvas groups also facilitate students’ ability to contact each other, coordinate their negotiation, and complete their assignment.  I group students into a different team for each negotiation.  Students can negotiate by Zoom or in person.  I recommend that a date be set by which students must have a date/time arranged for the negotiation and the completion of the assignment.  In the related assignment, students are generally asked to reflect upon the negotiation and to apply the related chapter materials to the negotiation context.  Readers are welcome to reach out to me for additional logistical details/advice/assignment information.  In the remainder of this post, I’ll mention a bit about each negotiation exercise that I’ve used in my asynchronous courses this semester.

House on Elm Street.  I use this negotiation with the chapter on business ethics.  It’s a great exercise and its free (thank you, Professor George Siedel)!  It not only raises ethical issues, but it also powerfully demonstrates the importance of creative thinking and of understanding your negotiation counterparty’s underlying interests.

Waltham Construction Supply Corp. v. Foster Fuels, Inc. In this negotiation, Waltham trucking alleges that antifreeze purchased from Foster Fuels had a corrosive impact on its trucks.  I use this negotiation with the chapter covering alternative dispute resolution because the materials themselves include both a bilateral negotiation and a video mediation of the case.  Students can watch the video after the exercise to learn about mediation.  Another great thing about this exercise is that once the video is purchased from Harvard’s Program on Negotiation (PON), you can use the accompanying negotiation materials without paying additional fees.

DirtyStuff II.  In this negotiation, a variety of stakeholders are negotiating the text for an administrative agency rule set for proposal about the regulation of an industrial by-product.  Naturally, I use this six-student negotiation in covering administrative law.  I think it’s a great way to promote students’ understanding of the administrative rulemaking process.

Super Slipster.  I love this negotiation because it reminds me of using backyard water slides when I was a kid!  From a quick Google search, I see that these slides are way fancier now than back then (well, I guess it has been a few years…)!  Fortunately, I don’t recall anyone becoming seriously injured from such products.  Unfortunately, Adam Sidwell suffers serious injuries after using the Super Slipster, making this negotiation exercise a perfect accompaniment in covering tort law/products liability.

Finally, Harborco, a six-player negotiation about the building of a new port, is one of PON’s most popular exercises and generally a student favorite.  It’s a great capstone exercise (I use it at the end of the course) and way to have students apply contract law in an experiential context.

April 21, 2021 in Business School, Colleen Baker, Negotiation, Teaching | Permalink | Comments (0)

Wednesday, April 14, 2021

This Friday: Wharton Financial Regulation Conference

Dear BLPB Readers:

Wharton Professors David Zaring and Peter Conti-Brown share that:

We're delighted to host the annual Wharton Financial Regulation Conference this coming Friday, April 16, from 10 am to 5pm. All are welcome to come--we don't expect record crowds, so we will use a Zoom room. Our keynote speaker will be Greg Ip from the Wall Street Journal. Attached is the program. Zoom link is here. Papers are here
 
We're especially keen to see our junior colleagues--anyone pre-market or pre-tenure--and will ensure that their questions and participation receive priority, so please circulate to your own colleagues. 
 
I'm looking so forward to this event!!  Hope to "see" many of you there!  Here's the agenda: Download Agenda-Wharton-Finreg-2021-April 13

April 14, 2021 in Colleen Baker | Permalink | Comments (0)

Wednesday, March 24, 2021

Professor Hill's Cannabis Banking: What Marijuana Can Learn from Hemp

I always learn a ton in reading Professor Julie Andersen Hill's banking articles.  A TON!  Hence, I'm excited to see that she recently posted her new piece, Cannabis Banking: What Marijuana Can Learn from Hemp (forthcoming 2021, Boston University Law Review).  This is her second article on cannabis banking, the first being an excellent symposium piece, Banks, Marijuana, and Federalism.  As both houses of Congress have recently reintroduced the SAFE Banking Act, these articles couldn't be more timely.  Here's the abstract for Cannabis Banking:

Marijuana-related businesses have banking problems. Many banks explain that because marijuana is illegal under federal law, they will not serve the industry. Even when marijuana-related businesses can open bank accounts, they still have trouble accepting credit cards and getting loans. Some hope to fix marijuana’s banking problems with changes to federal law. Proposals range from broad reforms removing marijuana from the list of controlled substances to narrower legislation prohibiting banking regulators from punishing banks that serve the marijuana industry. But would these proposals solve marijuana’s banking problems?

In 2018, Congress legalized another variant of the Cannabis plant species—hemp. Prior to legalization, hemp-related businesses, like marijuana-related businesses, struggled with banking. Some hoped legalization would solve hemp’s banking problems. It did not. By analyzing the hemp banking experience, this Article provides three insights. First, legalization does not necessarily lead to inexpensive, widespread banking services. Second, regulatory uncertainty hampers access to banking services. When banks were unsure what state and federal law required of hemp businesses and were unclear about bank regulators’ compliance expectations for hemp-related accounts, they were less likely to serve the hemp industry. Regulatory structures that allow banks to easily identify who can operate cannabis businesses and verify whether the business is compliant with the law are more conducive to banking. Finally, even with clear law and favorable regulatory structures, the emerging cannabis industry still presents credit, market, and other risks that make some banks hesitant to lend.

 

March 24, 2021 in Colleen Baker, Financial Markets | Permalink | Comments (0)

Wednesday, March 10, 2021

Gensler and Michalski's The Million Dollar Diversity Docket

"I'm no civ-pro geek," I confessed today at a research presentation by OU College of Law colleagues Professors Steven Gensler and Roger Michalski on their recent article, The Million Dollar Diversity Docket. But I also shared having been immediately intrigued by their paper after reading its abstract.  And I am even more so now after today's presentation.  Diversity of citizenship jurisdiction is, of course, a tremendously important subject for both business lawyers and business litigation. So, even if like me, civil procedure generally isn't your thing, check out their fascinating project!  Here's the article's Abstract: 

What would happen if Congress raised the jurisdictional amount in the diversity jurisdiction statute? Given that it has been almost 25 years since the last increase, we are probably overdue for another one. But to what amount? And with what effect? What would happen if Congress raised the jurisdictional amount from the current $75,000 to $250,000 or, say, $1 million?

Using a novel hand-coded data set of pleadings in 2900 cases, we show that the jurisdictional amount is not a neutral throttle. Instead, different areas of law, different parts of the country, and different litigants are more affected by changes in the jurisdictional amount than others. Our findings thus provide new guidance for Congress to consider when evaluating proposed changes to the amount threshold.

We build from our data to explore different ways Congress could use the amount in controversy lever to adjust the diversity docket, ranging from traditional techniques like incremental inflation-adjustments to radical experiments with lotteries or replacing the amount in controversy minimum with a maximum. Our analysis of the options highlights the normative choices Congress makes when deciding which cases to bless and curse with a federal forum. Thus, our study also provides a new window into the longstanding debates about the existence and reach of diversity jurisdiction. We hope our empirical work will inform these debates and enable a new wave of scholarship on the basic functions and functioning of the federal diversity docket.

March 10, 2021 in Colleen Baker, Legislation, Litigation | Permalink | Comments (0)

Wednesday, March 3, 2021

Macey on Fair Credit Markets: Using Household Balance Sheets to Promote Consumer Welfare

I recently had the good fortune to hear Professor Jonathan R. Macey speak about his insightful and timely new article, Fair Credit Markets: Using Household Balance Sheets to Promote Consumer Welfare (forthcoming, Texas Law Review).  I wanted to highlight it to readers and share the Abstract:

Access to credit can provide a path out of poverty. Improvidently granted, however, credit also can lead to financial ruin for the borrower. Strangely, the various regulatory approaches to consumer lending do not effectively distinguish between these two effects of the lending process. This Article develops a framework, based on the household balance sheet, that distinguishes between lending that is welfare enhancing for the borrower and lending that is potentially (indeed likely) ruinous, and argues that the two types of lending should be regulated in vastly different ways.

From a balance sheet perspective, various kinds of personal loans impact borrowers in vastly different ways. Specifically, there is a difference among loans based on whether the loan proceeds are being used: (a) to make an investment (where the borrower hopes to earn a spread between the cost of the borrowing and the returns on the investment); (b) to fund capital expenditures (homes, cars, etc.); or (c) to fund current consumption (medical care, food, etc.). From a balance sheet perspective, this third type of lending is distinct. Such loans reduce wealth and are correlated with significant physical and mental health problems. In contrast, loans used to acquire capital assets (i.e. houses) are positively correlated with such socioeconomic indicators.

Payday loans are the paradigmatic example of the use of credit to fund current consumption. Loans to fund current consumption reduce the wealth of the borrower because they create a liability on the “personal balance sheet” of the borrower, without creating any corresponding asset. The general category of loans to fund current consumption includes both loans used to fund unforeseen contingencies like emergency medical care or emergency car repairs, and those used to make routine purchases. Consistent with the stated justification for creating these lending facilities, which is to serve households and communities, the emergency lending facilities of the U.S. Federal Reserve should be made accessible to individuals facing emergency liquidity needs.

Loans that are taken out for current consumption but are not used for emergencies also should be afforded special regulatory treatment. Lenders who make non-emergency loans for current consumption should owe fiduciary duties to their borrowers. Compliance with such duties would require not only much greater disclosure than is currently required. It also would impose a duty of suitability on lenders, which would require lenders to provide borrowers with the loan most appropriate for their needs, among other protections discussed here. These heightened duties also should be extended to borrowers when they take out a loan that increases the debt on a borrower’s balance sheet by more than 25 percent.

 

March 3, 2021 in Colleen Baker, Financial Markets | Permalink | Comments (0)

Wednesday, February 24, 2021

Klausner, Ohlrogge & Ruan's "A Sober Look at SPACs"

Truth be told, I don't know a whole lot about SPACs.  HOWEVER, I've been encountering this topic frequently these days, whether I'm following clearing and settlement news such as Ex-Cosmo editor teams up with ice hockey owner in Spac deal or doing my daily glance at the FT and reading about Why London should resist the Spac craze.  Wanting to be more in the know, I've just added Michael Klausner, Michael Ohlrogge & Emily Ruan's "A Sober Look at SPACs" to my reading list.  Here's the abstract:

A Special Purpose Acquisition Company (“SPAC”) is a publicly listed firm with a two-year lifespan during which it is expected to find a private company with which to merge and thereby bring public. SPACs have been touted as a cheaper way to go public than an IPO. This paper analyzes the structure of SPACs and the costs built into their structure. We find that costs built into the SPAC structure are subtle, opaque, and far higher than has been previously recognized. Although SPACs raise $10 per share from investors in their IPOs, by the time the median SPAC merges with a target, it holds just $6.67 in cash for each outstanding share. We find, first, that for a large majority of SPACs, post-merger share prices fall, and second, that these price drops are highly correlated with the extent of dilution, or cash shortfall, in a SPAC. This implies that SPAC investors are bearing the cost of the dilution built into the SPAC structure, and in effect subsidizing the companies they bring public. We question whether this is a sustainable situation. We nonetheless propose regulatory measures that would eliminate preferences SPACs enjoy and make them more transparent, and we suggest alternative means by which companies can go public that retain the benefits of SPACs without the costs.       

February 24, 2021 in Colleen Baker, Financial Markets | Permalink | Comments (0)