Money Market Fund Reform: Endorsement of the Minimum Balance at Risk Proposal

On February 28, I submitted a letter on Money Market Fund Reform to the Financial Stability Oversight Council in response to their November 2012 request for comments on a number of alternative proposals.  I endorse the so-called “Minimum Balance at Risk Proposal,” in which fund sponsors would create a capital buffer by contributing or raising capital of one percent of a money market fund’s assets while fund investors would be subject to delayed redemption of three percent of their account over $100,000.  This approach could cause sponsors to internalize the costs of portfolio security selection while forcing large fund investors … Read more

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Editor's Tweet: Professor Jeffrey N. Gordon of Columbia Law School discusses Money Market Fund Reform

Call for Working Papers in Finance, Economics, Accounting, Law, and Business

On June 7, 2013, CalPERS is hosting its inaugural Sustainability & Finance Symposium in Davis, California.  The event is co-chaired by Professor Robert J. Jackson, Jr. of Columbia Law School on behalf of the Ira M. Millstein Center for Global Markets and Ownership.  The symposium is part of a larger initiative being undertaken by CalPERS to drive innovative thought leadership that will inform and advance our understanding of sustainability factors and the impact they may have on companies, markets, and investment intermediaries from the perspective of a large, global, long-term, and multi-class institutional asset owner.

The symposium is seeking … Read more

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Editor's Tweet: CalPERS Call for Working Papers in Finance, Economics, Accounting, Law and Business

Market Discipline: The Next Generation

My forthcoming article, Interbank Discipline, draws attention to the important role that banks play monitoring and disciplining other banks.  To understand the significance of interbank discipline, the Article proposes a new way of thinking about market discipline more generally.  In the first wave, advocates of market discipline viewed it as a basis for deregulation.  Why expend government resources duplicating the efforts of market participants, the rationale went, particularly considering that regulation can discourage market discipline and markets are often more effective than regulators?  The 2007-2009 financial crisis, and numerous scandals preceding it, largely brought an end to such reasoning.  … Read more

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Editor's Tweet: Professor Kathryn Judge of Columbia Law School discusses the next generation of market discipline.

The Custom-to-Failure Cycle

The article, The Custom-to-Failure Cycle, which I wrote with my research assistant Lucy Chang (Duke Law School class of 2012), examines how reliance on heuristic-based customs can lead to financial failures. In areas of complexity, people often rely on heuristics—by which we broadly mean simplifications of reality that allow people to make decisions in spite of their limited ability to process information. When this reliance becomes routine and widespread within a community, it can develop into a custom. This type of custom may not—and indeed, our article assumes, does not—become the basis for law per se. Rather, it is … Read more

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Editor's Tweet: Professor Steven Schwarcz of Duke Law discusses his recent article with Lucy Chang on the cycle leading from custom to failure.

A Comparative Analysis of Shadow Banking Reforms by the FSB, USA and EU

The year 2013 is likely to be a watershed time in the development of shadow banking oversight and regulation. Of particular note are three upcoming developments: (1) the Financial Stability Board (the FSB) has commenced public consultations on its initial proposals and final recommendations are scheduled to be released in September 2013; (2) the USA will soon begin designating its first nonbank Systemically Important Financial Institutions (SIFIs), and will clarify its plans for regulating such entities in practice; and (3) the European Systemic Risk Board is preparing to recommend shadow banking oversight changes in early 2013. It is therefore an … Read more

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Editor's Tweet: Cleary's Ed Greene and Elizabeth Broomfield discuss their comparative analysis of shadow banking reforms by the FSB, USA, and EU.

Implications for the CFPB After the D.C. Circuit’s Recess Appointments Decision

A panel of three judges in the D.C. Circuit stunned Washington on Friday by striking down President Obama’s recess appointments to the NLRB in Noel Canning v. NLRB on a basis much more sweeping than had been anticipated. The two holdings in the decision cast doubt over the longstanding practice of intrasession recess appointment, which has been used especially frequently in the last two decades.

For financial institutions, the decision is of direct interest because it calls into question President Obama’s recess appointment that same day of Richard Cordray as Director of the CFPB and, as a result, all of … Read more

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Editor's Tweet: Davis Polk's Tahyar, Yanes, and Guynn discuss the DC Circuit's recent decision in Noel Canning v. NLRB and the Implications for the CFPB.

Re-energizing the IPO Market

In the policy-oriented paper, “Re-energizing the IPO Market,”which will be published in the 2013 Brookings Press book Restructuring to Speed Economic Recovery, I summarize results from a number of my related co-authored papers and address why IPO volume, and especially small company IPO volume, has been so depressed for more than a decade.

From 1980-2000, an annual average of 310 operating companies went public in the U.S. During 2001-2011, on average only 99 operating companies went public. This decline occurred in spite of the doubling of real gross domestic product (GDP) during this 32-year period. The decline … Read more

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Editor's Tweet: Leading expert on IPOs, Professor Jay Ritter (University of Florida) provides a summary of his work on why IPO volume continues to be so low

Professor Robert J. Jackson Jr. Moderates Debate on Financial Innovation

Columbia Law School Professor Robert J. Jackson Jr. recently moderated a lively debate on financial innovation before a panel of experts including Congressman Barney Frank, The New York Times’ Andrew Ross Sorkin, Nobel Laureate Robert Solow, and Gary Gensler, chairman of the Commodity Futures Trading Commission.

The full press release can be viewed here and the entire debate can be viewed here.… Read more

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Editor's Tweet: Professor Robert J. Jackson Jr. of Columbia Law School Moderates Debate on Financial Innovation, http://wp.me/p2Xx5U-b5

Towards a Legal Theory of Finance

The paper, Towards a Legal Theory of Finance, develops the building blocks for a legal theory of finance (LTF). By placing law at the center of the analysis of financial systems LTF sheds light on the construction of financial markets, their interconnectedness and thus vulnerability to crisis, and situates power where law is elastic or suspended in the name of financial stability. LTF has four elements: It holds that modern financial markets are (1) rule-bound systems; (2) essentially hybrid; (3) beset by the law-finance paradox; (4) and in the last instance subject to discretionary rather than rule-bound actions.

Rule-bound Read more

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Editor's Tweet: Professor Katharina Pistor of Columbia Law School presents her new paper , which develops the building blocks for a legal theory of finance.