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The Deregulation Debate: The Challenge of Using Static Rules to Govern a Dynamic System

By Kathryn Judge September 18, 2018 by renholding

In their lively disagreement about the role of deregulation in contributing to the 2007-2009 financial crisis, professors Arthur Wilmarth and Paul Mahoney inadvertently illuminate why the processes through which finance is regulated are so ill-suited to that purpose. Finance is …

How Private Equity Enhances the Market for Corporate Control and Capitalism

By Edward Peter Stringham and Jack Vogel September 13, 2018 by renholding

In this age of firebrand political rhetoric and sniping from the right and the left, Wall Street has taken more than its fair share of criticism. One of the most significantly misplaced criticisms, however, derives from a gross misunderstanding of …

Disclosure Regulation in the Commercial Banking Industry: Lessons from the National Banking Era

By João Granja September 12, 2018 by renholding

In the aftermath of the 2007—2009 financial crisis, policymakers around the globe responded to calls for greater transparency in the financial system by adopting new rules and institutions that required more and better information disclosure by financial institutions. For example, …

Lehman Brothers: How Good Policy Can Make Bad Law

By Kathryn Judge September 11, 2018 by renholding

As we approach the 10-year anniversary of the failure of Lehman Brothers, the news is again awash in a debate about whether policymakers could have saved the investment bank. That the issue remains so deeply contested reflects how fundamentally flawed …

A Retrospective on the Demise of Long-Term Capital Management

By Paul L. Lee September 10, 2018 by renholding

The 10th anniversary of the harrowing financial events of September 2008 is nearly upon us. The anniversary will undoubtedly be marked by various retrospectives analyzing those events. For a longer-term perspective, though, it may be helpful to consider another anniversary …

Why Firms Disclose a Supplemental CEO-to-Median Worker Pay Ratio

By Sun Moon Jung, Natalie Kyung Won Kim, Han Seong Ryu and Jae Yong Shin September 5, 2018 by renholding

Pay disparity between executives and employees has been criticized as evidence of corporate greed. It can also create perceptions of unfairness and dissatisfaction among employees, weakening their commitment and performance. To provide more information about pay disparity, the U.S. Congress …

Measuring Regulation Based on Industry Response

By Michael Simkovic August 9, 2018 by renholding

Despite the central role of government regulation in academic inquiry and policy evaluation, there is no universally accepted way to measure how changes in regulatory complexity and intensity affect private industry at different times. This lack of a standard methodological …

The Consequences of Strong v. Weak Clawback Provisions

By Michael H.R. Erkens and Ying Gan July 18, 2018 by renholding

Clawback provisions authorize firms to recoup compensation from executives upon the occurrence of financial restatements or executive misbehavior. The first clawback provision in U.S. federal law was Section 304 of the Sarbanes-Oxley Act of 2002 (SOX 304). SOX 304 requires …

How External Whistleblower Rewards Affect Internal Reporting

By Masaki Iwasaki July 6, 2018 by renholding

Does paying employees for blowing the whistle on corporate crime to regulators discourage internal reporting and undermine corporate governance? The answer is not as simple as it might seem. My research shows that, as the amount of reward increases, the …

SEC’s Jackson Calls for Curbing Executives’ Ability to Cash Out on Buybacks

By Robert J. Jackson, Jr. June 12, 2018 by renholding

Thank you so much, Neera [Tanden], for that very kind introduction. I’ve long admired all that you and everyone here at the Center for American Progress do to promote a progressive economic agenda. And I share your commitment to making

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Debevoise & Plimpton Discusses Changes to the Volcker Rule

By Gregory J. Lyons, David L. Portilla, Satish Kini, Jen Barrows, N. Angelica Freeland and Chen Xu June 6, 2018 by renholding

On May 30, the Federal Reserve Board proposed revisions (the “Proposal”) to the regulations implementing section 13 of the Bank Holding Company Act (referred to as the “Volcker Rule”) and asked questions on potential additional changes. Below are our preliminary …

Cleary Gottlieb Discusses New Law Revising Dodd-Frank Act

By Derek M. Bush, Hugh C. Conroy Jr., Allison H. Breault, Zachary L. Baum and Rebecca F. Green May 30, 2018 by renholding

The Economic Growth, Regulatory Relief, and Consumer Protection Act (the “Act”), which became law on May 24, contains the first major package of revisions to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The Act …

Did Dodd-Frank Help Reduce Systemic Risk?

By Qiubin Huang March 30, 2018 by renholding

In response to the 2008 financial crisis, the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) was enacted on July 21, 2010 to overhaul the U.S. financial regulatory system. Dodd-Frank contains 390 rulemaking requirements, of which 274 (70.3 percent) …

Whistleblower Provisions of Dodd-Frank Deter Aggressive Financial Reporting

By Christine I. Wiedman and Chunmei Zhu March 5, 2018 by renholding

In 2011, the Securities and Exchange Commission (SEC) introduced a Whistleblower (WB) program as part of the Dodd-Frank Act to protect investors through greater deterrence of securities law violations and more effective enforcement. The program offers financial incentives to provide …

K&L Gates Discusses the Dodd-Frank Reform Endgame

By Daniel F. C. Crowley, Bruce J. Heiman, William A. Kirk, Karishma Shah Page, Eric A. Love and Dean A. Brazier February 7, 2018 by charlesbluesky

Early 2018 will likely see the most significant progress on reforming the Dodd-Frank Act (“DFA”) since its passage in 2010 thanks to four key efforts: the Financial CHOICE Act and activity in the House Financial Services Committee, an appropriations effort, …

Financial Reporting Choices of Large Private Firms

By Jennifer J. Gaver, Paul Mason and Steven Utke January 17, 2018 by renholding

In recent years, there has been an increase in the number of firms opting to either forgo the public equity market or exit the market in favor of private financing.[1] Increasingly, financing for private firms comes from private funds, …

Does Local Supervision Affect Banks’ Risk Taking?

By Yadav Gopalan, Ankit Kalda and Asaf Manela December 7, 2017 by renholding

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 …

Too Big to Fail: Measures, Remedies, and Consequences for Efficiency and Stability

By James R. Barth and Clas Wihlborg November 22, 2017 by renholding

Bank failure was almost unthinkable in Europe long before “too big to fail” became a byword for U.S. regulatory policy on big banks. But the 2007−2009 global financial crisis, which for some countries grew to a full-blown crisis, made the …

Do Corporate Whistleblower Laws Deter Accounting Fraud?

By Heemin Lee November 17, 2017 by renholding

Whistleblowers play a significant role in detecting corporate fraud. For example, recent high-profile financial frauds such as the Enron scandal and Bernard Madoff’s Ponzi scheme were brought to light by whistleblowers. To encourage more whistleblowers to come forward, the Securities …

The Case Against Activity-Based Financial Regulation

By Jeremy Kress November 16, 2017 by renholding

An October 2017 Treasury Department report on the asset management and insurance industries includes an important—and fundamentally flawed—recommendation that could change the way U.S. regulators monitor risk in the financial system. The Treasury report recommends that regulators focus on identifying …

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