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Why We Need a Guarantor of Last Resort

By Kathryn Judge May 15, 2019 by renholding

More than a decade has passed since the worst of the 2007-2009 financial crisis. In that time, we have learned that some of the gravest consequences of the crisis were not the economic fallout, but the political backlash it triggered. …

Guarantor of Last Resort: Is There a Better Alternative?

By Morgan Ricks May 15, 2019 by renholding

Larry Summers, who was one of President Obama’s key economic advisors when the Dodd-Frank Act of 2010 was enacted, recently decried what he called “excessive populism” in portions of that legislation. This might seem surprising; Dodd-Frank’s technocracy-on-steroids approach (848 pages! …

Emergency Guarantee Authority: Not Letting a Crisis Go to Waste

By Graham Steele May 15, 2019 by renholding

Calming the panic in short-term funding markets was a significant part of the response to the 2008 financial crisis. While the TARP bailout programs received the most attention during the crisis, TARP never exceeded one-fifth of the government’s overall financial …

Emergency Guarantee Authority: A FEMA for Finance

By Stephen G. Cecchetti and Kermit L. Schoenholtz May 15, 2019 by renholding

“[I]t is a question of when, not if, a large-scale attack succeeds.” DTCC and Oliver Wyman, Large-scale Cyber-attacks on the Financial System, March 2018.

“The government cannot credibly commit to a no-bailout policy.” Kathryn Judge, “Guarantor of

…

Will Putting Title III of Helms-Burton Into Effect Open the Litigation Floodgates?

By Peter Fox May 14, 2019 by renholding

On April 17, 2019, U.S. Secretary of State Mike Pompeo announced that President Trump would not suspend for any additional periods of time Title III of the Cuban Liberty and Democratic Solidarity Act – better known as “Helms-Burton.”[1] Title …

Regulating the Development of Driverless Finance

By Hilary J. Allen May 13, 2019 by renholding

Before permitting driverless cars to operate on the open road without a licensed driver, lawmakers and innovators are working to ensure the safety not only of the passengers in those cars, but also of third parties – particularly other drivers …

The Myth of Risk Free Markets

By Yesha Yadav May 9, 2019 by renholding

Economies and markets operate on the assumption that U.S. debt securities (“Treasuries”) are risk-free. This means that the United States is expected to pay its debts. Also, Treasuries are supposed to trade easily and efficiently in secondary markets. Unsurprisingly, the …

Initial Crypto-asset Offerings, Tokenization, and Corporate Governance

By Stéphane Blemus and Dominique Guégan May 1, 2019 by renholding

Blockchain and other types of distributed ledger technology pose various new legal and economic questions for companies. Are crypto-asset holders a new kind of corporate stakeholder? If so, are they like shareholders or bondholders, and how can they participate in …

Debevoise Discusses Federal Reserve Proposal to Clarify and Revise Control Framework

By Satish M. Kini, Gregory J. Lyons, David L. Portilla, Will C. Giles, Alison M. Hashmall and David G. Sewell April 29, 2019 by renholding

On April 23, the Federal Reserve Board (the “FRB”) proposed a new, comprehensive framework for determining “control” under the Bank Holding Company Act (“BHC Act”) and Home Owners’ Loan Act (“HOLA”). We provide a high-level overview of the proposal below. …

Davis Polk Discusses France’s New Legal Framework for Digital Assets

By Christophe Perchet, Juliette Loget, Jean-Christophe Devouge, Stéphane Daniel and Daniel Arroche April 25, 2019 by renholding

After becoming one of the first countries to authorize the registration and transfer of unlisted securities using blockchain technology, France has adopted an innovative legal framework governing initial coin offerings (“ICOs”) and digital assets services providers (“DASPs”) with the aim …

Cleary Gottlieb Discusses Fed’s Proposed Resolution-Planning Rules Overhaul

By Michael Krimminger, Lisa Schweitzer, Knox McIlwain, Sarah Stanton and Lauren Gilbert April 23, 2019 by renholding

On April 8, 2019, the Federal Reserve proposed a broad overhaul of the 2011 regulations governing resolution planning (the “Proposal”)^[1], which would significantly reduce the frequency of submissions and simplify requirements for many resolution plans. The …

Opening the Black Box of Companies’ Capital Investment Process

By Gilles Hilary, Mark (Shuai) Ma and Wenjia Yan April 16, 2019 by renholding

In spite of intensive academic research on capital expenditure efficiency, how firms make investment decisions remains largely a black box. We analyze that process by dividing it into two stages: budgeting of capital expenditures (CapEx) and execution of the budget. …

The Future of Data Driven Finance: Financial Regulation, Data Regulation, and RegTech

By Dirk A. Zetzsche, Douglas W. Arner, Ross P. Buckley and Rolf H. Weber April 15, 2019 by renholding

Fifty years ago, banking was a relationship business. Bank managers collected information about depositors and borrowers from all sorts of sources, formal and informal. In recent decades, credit decisions have become far more data-driven, with companies like Amazon and the …

Arnold & Porter Discusses Bill on Banking Services for Marijuana-Related Firms

By Michael Mancusi, Christopher Allen, Evelina Norwinski, Amber Hay and Kevin Toomey April 15, 2019 by renholding

Depository institutions have been understandably reluctant to provide banking services to cannabis-related businesses in light of the significant (and costly) regulatory and compliance expectations that apply under the Bank Secrecy Act (BSA) and other anti-money laundering (AML) laws and regulations.…

The Social Functions of the Stock Market: A Primer

By Merritt B. Fox April 12, 2019 by renholding

A stock market is a key feature found in any economy with a substantial private sector. For example, in the United States, we see the New York Stock Exchange and Nasdaq, in the U.K, the London Stock Exchange, and in …

Debt Overhang, Rollover Risk, and Corporate Investment: Evidence from the European Crisis

By Sebnem Kalemli-Ozcan, Luc Laeven and David Moreno April 11, 2019 by renholding

Investment expenditure in Europe collapsed in the aftermath of the 2008 global financial crisis. This collapse followed a boom during which the corporate sector borrowed heavily (Gopinath, Kalemli-Ozcan, Karabarbounis, Villegas-Sanchez, 2017). Figures 1 and 2 illustrate the extent of the …

How U.S. Tax Inversions Affect Shareholder Wealth

By Elaine Laing, Constantin Gurdgiev, Robert B. Durand and Boris Boermans April 10, 2019 by renholding

The United States had one of the world’s highest tax rates – around 35 percent – prior to the Tax Cuts and Jobs Act of 2017 (TCJA 2017, and especially the Global Intangible Low-Taxed Income (GILTI) rules in new tax …

What Do Mutual Fund Investors Really Care About?

By Itzhak Ben-David, Jiacui Li, Andrea Rossi and Yang Song April 5, 2019 by renholding

Do investors behave rationally? Many researchers examine actively managed mutual funds to answer this question. The advantage of doing so setting is that we can observe the past performance of fund managers as well as the capital allocation decisions of …

How an Issuer’s Multiple Credit Ratings Can Affect Its IPO

By Marc Goergen, Dimitrios Gounopoulos and Panagiotis Koutroumpis April 4, 2019 by renholding

While the list of prospective issuers with credit ratings is lengthy, literature is sparse on how ratings from multiple credit rating agencies (CRAs) affect the performance of a company’s initial public offering (IPO). Our research is motivated by the lack …

The New Business Rule and Compensation for Lost Profits

By Victor P. Goldberg March 28, 2019 by renholding

Not so long ago, most American jurisdictions followed the “new business rule.” If a business did not have a history of profitable operations, it would have been denied recovery for lost profits. That has changed. The prevailing wisdom nowadays replaced …

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