Todd H. Baker

Let’s Stop Treating Crypto Trading as If It Were Finance

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Members of Congress and financial regulators from the Federal Reserve, U.S. Treasury, SEC, CFTC, and CFPB appear set on regulating the crypto trading system (traded coins and associated marketplaces, exchanges, brokerages, lending, staking, derivatives, intermediaries, and enablers) as part of the traditional financial services system. Policy discourse on this topic has centered around which – rather than whether – financial regulators should be in charge of crypto trading. In advancing this view, Congress and the regulators appear to be following a path laid out by crypto companies seeking legitimacy through inclusion (on their own terms), in regulated finance.

Supporters of … Read more

Fintech SPACs Have Been Swimming Naked – and the Tide Is Going Out  

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Acorns Grow Inc., the financial technology and investing startup, said last week that it was abandoning its $2.2 billion merger with SPAC Pioneer Merger Corp., putting itself on the hook for a $17.5 million termination fee. Coming almost eight months after the deal was first announced, the news surprised many in the fintech and SPAC worlds.  It shouldn’t have.

SPACs – a method of going public touted as faster, simpler, and cheaper than a traditional IPO – are proving to be a severely flawed way to finance fintechs and other technology companies. Their stock prices have almost invariably declined sharply … Read more

The Fall of Wirecard

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In the public imagination, Wirecard was Germany’s biggest tech company success story – a €24 billion high-growth payment processor doing deals across the globe and pioneering new technologies.  While naysayers complained about its opaque corporate and financial practices and raised doubts about its business model, most observers admired its nimble approach to surmounting regulatory barriers to international expansion. In a world intoxicated by companies with unlimited growth prospects, it was a winner.

The reality was much different.  Most of Wirecard’s reported business didn’t exist.  And the company hadn’t made any money in years.  How could something like this happen in … Read more

How Banks and Fintechs Can Help Small Businesses Survive COVID-19

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Small business assistance has been a central focus of the government’s response to the COVID-19 crisis, and for good reason. Small businesses underlie the vitality of our neighborhoods, spark innovation, and employ almost one-half of the U.S. workforce. In a new working paper, “How to Help Small Businesses Survive COVID-19,” available here, we explain why finding better ways to harness banks and fintechs is critical if this vital part of the economy is to emerge without too much harm on the far side of this crisis.

There is no easy way for the government to readily provide the perfect … Read more

Shareholder Primacy Isn’t the Best of All Possible Worlds

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In a recent opinion piece in the Financial Times[1], Harvard Law School Professor Jesse Fried makes a strong case that the Business Roundtable’s CEOs statement, in which they committed to “lead their companies for the benefit of all stakeholders – customers, employees, suppliers, communities and shareholders,” by itself will not affect how CEOs run their companies. This is surely correct. But he overstates his case by treating the current “shareholder primacy” system of corporate governance as both the historical norm and the ideal system.

Fried bases his argument for shareholder primacy on the binding contractual nature of corporate … Read more