Finance & Economics

Libra: The Regulatory Challenges Facebook Ignored

By Georges Ugeux July 11, 2019 by renholding

The announcement on June 18 by Facebook of what it calls “a simple global currency and financial infrastructure that empowers billions of people” was sure to receive immediate attention. Facebook founder and CEO Mark Zuckerberg is now on a global …

Why the New Tax Law Offers a Questionable Incentive to Incorporate

By Michael Knoll June 20, 2019 by renholding

This spring, both Apollo and Blackstone announced that they would be converting from publicly traded partnerships to subchapter C corporations.   In changing their legal forms of organization, they will join two other prominent private equity firms, Ares and KKR, which …

How Taxing Short-Term Share Profits Can Foster Innovation

By Eric He, Martin Jacob, Rahul Vashishtha and Mohan Venkatachalam June 19, 2019 by renholding

If short-termism shackles innovation, how do we break the chains? Our evidence suggests that increasing capital gains taxes for investors on short-term share appreciation is one possible solution.

Research shows that myopic focus on short-term earnings hurts investments in research …

ISS Discusses Why EVA Is a Better Measure of Investment Value Than EBITDA

By Bennett Stewart June 18, 2019 by renholding

There’s no doubting the popularity of EBITDA—earnings before interest taxes depreciation and amortization—as a measure of investment value. Analysts like EBITDA because it removes the vagaries of depreciation and taxes and is unaffected by company leverage ratios. EBITDA is certainly …

Arnold & Porter Discusses the End of LIBOR

By Gregory Harrington and Arturo Caraballo June 17, 2019 by renholding

As alerted in our previous Advisories, LIBOR, the “world’s most important number,” is being phased out. Created almost 50 years ago on August 15, 1969—opening day of the Woodstock music festival—LIBOR began as a floating, market-determined interest rate for syndicated …

Why We Shouldn’t Regulate Reputation Risk at Banks

By Julie Andersen Hill June 13, 2019 by renholding

What do payday lenders, firearms retailers, porn stars, churches, coal mines, and condom companies have in common? All have complained that regulators pressured financial institutions to close their accounts over reputation-risk concerns.  In a my article (available here), forthcoming …

Network-Sensitive Financial Regulation

By Luca Enriques, Alessandro Romano and Thom Wetzer June 10, 2019 by renholding

Shocks to only part of the financial system, such as the collapse of the subprime mortgage market in 2007, can spread and intensify through the complex interconnections among financial and non-financial institutions to become systemic threats. The consequences can be …

The Imperative for Blockchain Accounting

By Dov Fischer June 7, 2019 by renholding

For hundreds of years, the basic flowchart of accounting information has been the same.  A firm records its own transactions, maintains a record of those transactions, and reports those transactions (Soll, 2014, xiv).  Trends in technology make it inevitable that …

Venture Bearding

By Benjamin P. Edwards and Ann C. McGinley June 6, 2019 by renholding

For founders of companies, appealing to funders can be everything – and that often means projecting a masculine image.  In a recent article, we coined the term “venture bearding” to describe this phenomenon, a tactic that can make the difference …

Debevoise Discusses Guidance on Applying Bank Secrecy Act Framework to Convertible Virtual Currency

By Satish M. Kini and Byungkwon Lim June 5, 2019 by renholding

The Financial Crimes Enforcement Network (“FinCEN”) issued interpretive guidance on May 9, 2019 explaining how the agency intends to apply its existing regulatory framework to companies offering common types of convertible virtual currency (“CVC”) products and services (the “CVC Guidance”).…

Regulatory Arbitrage, Unclear Terminologies: A Challenge to Global Cryptoasset Regulations

By Apolline Blandin, Michel Rauchs and Hatim Hussain May 29, 2019 by renholding

Few innovations in finance have emerged in recent years that are as controversial or present as many challenges to regulators and policymakers as cryptoassets. A key question for regulators and market participants is the extent to which the difference between …

Emergency Guarantee Authority: The Pros and Cons

By Reynolds Holding May 15, 2019 by renholding

Today, we present a debate among preeminent scholars about Columbia Law School Professor Kathryn Judge’s proposal for an emergency guarantee authority that could help contain the fallout from another financial crisis. The first piece is Professor Judge’s summary of her …

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 …