On December 27, the Consumer Financial Protection Bureau (“CFPB” or “Bureau”) released its biennial report on the consumer credit card market (“2017 Report” or “Report”), which summarizes its views on the state of the consumer credit card market over the past two years. The Report is particularly noteworthy because it provides the first insight into the post-Cordray CFPB’s views on the state of the consumer credit card market.
Corporate inversions have captured the imagination of the public and the popular press as well as that of the academic community. The idea is that a little paperwork can convert a U.S. corporation (which pays tax on its worldwide income) into a foreign corporation (which pays tax only on its U.S. source income), and the consensus is that the exploitation of this loophole by multinational corporations is abusive and unfair. Responding to these concerns, Congress and the Treasury Department have attempted to make it more difficult for U.S. multinationals to obtain tax advantages by inverting.
Numerous commentators have argued that … Read more
An often-over-looked aspect of regulation is how agencies are organized. Regulatory agencies for many industries, including banking, pharmaceuticals, mining, and agriculture, rely on a mix of centralized decision-making and delegated monitoring. For instance, in the case of banking, federal agencies design regulations in Washington, D.C. but monitor banks at the local level by utilizing semi-autonomous field offices.
A major advantage of this dispersed presence is that it allows local examiners and supervisors to interact with regulated firms more frequently and to collect “soft information” about firms’ performance that is often imperfectly captured through accounting-based reporting measures. The approach may, however, … Read more
For more than a century, the United States has had a worldwide tax system whereby U.S. taxpayers were subject to federal taxation on all of their income “from whatever source derived.” In what would be a sharp break from longstanding practice, The Tax Cuts and Jobs Act, H.R. 1, would shift the United States from a worldwide to a largely territorial tax system by exempting the foreign source income of U.S. corporations from federal taxation. That change, which has been estimated to reduce U.S. tax revenues by more than $200 billion over 10 years, would more closely align the … Read more
In the movie Office Space, the (pretty) good guys hatch a plan to divert to themselves fractions of cents that their employer, Initech, has apparently been overcharging its customers by rounding billings upward. Had any customer discovered the scam, he might have filed a class action. But chances are customers agreed to arbitrate disputes and waived any right to join a class action when they signed a purchase order or clicked agree. So Initech can settle privately with any customer who complains – maybe even under a nondisclosure agreement – and need not change its billing system.
On October 24, … Read more
Not many people would have predicted that the third quarter of 2017 – a period that ended six months after Britain gave formal notice of its intention to leave the European Union – would see more private equity investments in the UK than at any time since the financial crisis. Nevertheless, as widely reported this week, figures published by Unquote” and SL Capital indicate that €13.7 billion (£12.1bn, or $15.9bn) was invested in UK buyout deals between July and September 2017, the highest quarterly total since 2008.
Whether this news represents a sustained resurgence of UK deals after a disappointing … Read more
In a world of “alternative facts” and political rhetoric crafted to mislead, it is easy to forget that idealized visions can at times illuminate more than they obfuscate. In a book review recently published in Harvard Law Review and available here, I attempt to separate fact from fiction in the debate about how best to regulate short-term debt. Although coming down in favor of pragmatism in financial policymaking, the review recognizes the ways that imaginative alternatives can reveal often-obscured choices and help lay the foundation for a better path forward.
The thought-provoking book that motivates the review is The … Read more
This alert discusses the U.S. Commodity Futures Trading Commission’s (“CFTC”) and European Commission’s (“EC”, together with the CFTC, the “Commissions”) announcements on October 13, 2017 regarding the international harmonization on two key derivatives regulatory requirements. The Commissions first announced that they had separately adopted comparability and equivalence determinations related to their respective uncleared swap margin regulations (“Uncleared Margin Determinations”). The Commissions then announced that they had reached a common plan to recognize each other’s authorized derivatives trading venues as comparable and equivalent (“Common Plan on Trading Venues”).… Read more
Blockchain is the technology that underpins digital currencies such as Bitcoin – but it has far wider applications and is being used in a growing number of areas. The blockchain has the potential drastically to alter the global financial system. Trade finance is one of the areas likely to benefit from the technology first by becoming cheaper, faster and more accessible. However, developers and market participants should be mindful to consider the sanctions implications given the extraordinary reach of sanctions and the magnitude of the penalties for breach.
What is blockchain?
- Blockchain records data. It’s a digital ledger of transactions,
The UK Financial Conduct Authority (the “FCA”) has published changes to the Conduct of Business sourcebook (“COBS”) to boost the transparency of the IPO process and tackle conflicts of interest that may arise from the interaction between an issuer and analysts of the syndicate banks. The changes, published in the FCA’s Policy Statement PS17/23 (the “Policy Statement”) on 26 October 2017, broadly crystallise the FCA’s proposals that were outlined in its consultation paper launched on 1 March 2017 (see our client update, “UK Regulator Proposes Changes to IPO Process”, dated 16 March 2017). The primary goal of the … Read more
The Uniform Law Commission (“ULC”) is an organization focused on developing and preparing “non-partisan, well-conceived, and well-drafted” state legislation in areas of state law where there is a perceived need for uniformity. In practice, once the ULC releases proposed state legislation in any particular area (such as abandoned property or arbitration), it is not unusual for multiple states to adopt the ULC legislation. That is why we must pay attention when the ULC releases a proposed law regulating virtual, digital, or crypto currencies.
On October 9, 2017, the ULC released the final version of its Uniform Regulation of Virtual-Currency … Read more
House Republicans unveiled a sweeping tax reform bill on Thursday, November 2 that proposed to lower the corporate tax rate and allow companies to immediately deduct the full cost of business assets in the year companies build or acquire them.
The bill also takes aim at some of the key tax subsidies that the wind industry uses. In particular, the bill proposes to cut about a third of the value of the production tax credits for wind projects that begin construction after the bill is enacted. The bill could also potentially overturn some important aspects of current Internal Revenue Service … Read more
Scholars are attempting to fully understand all the causes of the 2007-09 U.S. financial crisis, hoping their efforts will ensure that something like this will not happen again. Nonetheless, in this research, weaknesses in mortgage servicing regulation have been largely ignored. Servicers collect payments from homeowners, keep records of mortgage balances, pool the payments and remit them to investors, and manage escrow accounts. In a world where mortgage assets are securitized, mortgage servicing is essential to the functioning of the financial system. Investors in mortgage-backed securities routinely expect that the servicer of the underlying loans will keep accurate records, and … Read more
During the 2008 financial crisis, the U.S. government viewed the survival of large consolidated banks as inextricably linked to the welfare of the overall economy, prompting such institutions to be labeled too-big-to-fail (TBTF) and granted government assistance. The primary and preferred means of bank resolution by federal regulators was, however, mergers and acquisitions (M&A). The basic idea was that through a merger a healthy bank would acquire a failing bank, saving the economy from the full cost of the distressed bank’s collapse. This private-sector solution was preferred because the government did not have to use public funds to bail out … Read more
On Friday, October 6, the Treasury Department issued a report to the President on streamlining and reforming U.S. capital market regulation. The report covers recommendations on nine topics across the U.S. financial regulatory system. One of the topics – Access to Capital – includes many recommendations of interest to participants in public and private company capital markets. Without dwelling on why Treasury would issue such a report on the Friday before a holiday weekend, let’s dive into the substance of this section of the report.
The report starts with frequently cited statistics chronicling the decline in the number of listed … Read more
The financial crisis of 2007-2009 caused the most severe global economic downturn since the Great Depression. The recent crisis has generated renewed interest in the Glass-Steagall Banking Act of 1933, which Congress adopted in response to the collapse of the U.S. banking system and the freezing of U.S. capital markets during the Great Depression. Glass-Steagall was designed to stabilize the U.S. financial system by separating commercial banks from the capital markets and by prohibiting nonbanks from accepting deposits.
Since the financial crisis, scholars have debated the question of whether the removal of Glass-Steagall’s structural barriers during the 1980s and 1990s … Read more
As cryptocurrencies such as Bitcoin and Ethereum become more prevalent in investment circles and acceptable for commercial transactions, the United States Internal Revenue Service (“IRS”) has said little other than to label “virtual currencies” as property and state that transactions involving virtual currencies may be subject to taxation under generally applicable law. However, on September 7, the United States Congressional Blockchain Caucus (the “Caucus”) introduced the Cryptocurrency Tax Fairness Act (the “Act”), which would exempt certain cryptocurrency transactions and create a cryptocurrency-specific information reporting requirement.
The Cryptocurrency Tax Fairness Act
Under the … Read more
For most of the 20th Century, Eastman Kodak Company (often referred to simply as Kodak) was one of the most recognizable brands in the world. Founded in 1888, Kodak dominated the film and camera markets — in 1976, Kodak had 90% of the film market and 85% of the camera market in the United States. The phrase “a Kodak moment” — describing an event in one’s life that needed to be captured on film for posterity — became a common part of the American lexicon.
However, by the mid-2000s, Kodak was reeling. Although it had built a significant … Read more
The Dodd-Frank Act’s worthy objectives were to improve the safety, resilience, efficiency, and transparency of our financial system. Yet the law has drastically diminished the credit available to low-income Americans – the very people it was supposed to help. Equally important, community banks, which service disproportionately large shares of agricultural, residential mortgage, and small business loans, have been particularly adversely affected by Dodd-Frank. Specifically, since Dodd-Frank, there are 2,400 fewer small banks and community bank small business lending has dropped 21 percent. The CHOICE Act, recently passed by the U.S. House of Representatives, attempts to address many of these shortcomings.… Read more
On July 27 of this year, Andrew Bailey, chief executive of the UK Financial Conduct Authority (FCA), delivered a speech in which he questioned the sustainability of the London Interbank Offered Rate (LIBOR) in its current form. The FCA has regulated LIBOR since April 2013 and while significant improvements have been made to LIBOR during that time, the continuing decline in liquidity in interbank unsecured funding markets has undermined confidence in the reliability of LIBOR. The message, in essence, is that the underlying market is not robust enough to allow the determination of LIBOR to be based on actual transactions. … Read more