The Future of Financial Institution Resolution

By Paul L. Lee May 16, 2019 by renholding

One of the principal lessons learned from the 2007-2009 financial crisis was the need for new legal regimes to facilitate the rapid and orderly resolution of systemically important financial institutions without a government bailout. In the final part of a …

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

…

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 …

Land of the Falling Poison Pill: Understanding Defensive Measures in Japan

By Alan K. Koh, Masafumi Nakahigashi and Dan W. Puchniak April 17, 2019 by renholding

The advent of the “shareholder rights plan,” more popularly known as the “poison pill,” fundamentally altered the trajectory of American corporate governance. Intended to defend vulnerable boards from corporate raiders, the poison pill was embraced by U.S. managers in the …

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 Banks with Leaders Experienced in Past Crises Fared in Global Financial Crisis

By Anwer S. Ahmed, Brant E. Christensen, Adam J. Olson and Christopher G. Yust March 21, 2019 by renholding

Regulators and policymakers have asserted that the public was “blindsided” by the “perfect storm” that caused the 2007-2009 global financial crisis (GFC, e.g., Financial Crisis Inquiry Commission [FCIC] 2011; Appelbaum 2015). Academic research has similarly found that market participants, including …

Making Consumer Finance Work

By Natasha Sarin February 20, 2019 by renholding

In early 2009, with the financial crisis still raging, progressive policymakers passed legislation upending the credit card industry. This legislation precluded card issuers from changing interest rates without sufficient warning or charging exorbitant late fees. Congresswoman Carolyn Maloney, who sponsored …

Transparency and the (E)valuation of Asset-Backed Securities

By Jed J. Neilson, Stephen G. Ryan, K. Philip Wang and Biqin Xie December 13, 2018 by renholding

In 2011, the commission appointed by Congress to investigate the causes of the financial crisis concluded that “a combination of excessive borrowing, risky investments, and lack of transparency put the financial system on a collision course with crisis” (The …

The Underappreciated Dilemmas of Overlapping Financial Regulations

By Matthew C. Turk October 25, 2018 by renholding

Calls to dismantle the legal framework that was developed in response to the financial crisis have begun to multiply and gain momentum. Pursuant to a Trump Administration executive order, the Treasury Department has released a series of reports that undertakes …

How Corporate Social Responsibility and Influential Institutional Ownership Affect Firm Value

By Bonnie G. Buchanan, Cathy Xuying Cao and Chongyang Chen September 26, 2018 by renholding

Corporate social responsibility (CSR) is defined as “actions that appear to further some social good, beyond the interests of the firm and that which is required by law” (McWilliams and Siegel, 2001). According to this definition, CSR activities not only …

Did Deregulation End the “Quiet Period” of Low-Risk Banking?

By Paul G. Mahoney September 18, 2018 by renholding

From the New Deal until the 1970s, banks were on a tight leash. Regulators controlled the rate of interest they could pay on deposits. Banks could not underwrite or deal in corporate securities. With some exceptions, they could not expand …

Was Glass-Steagall’s Demise Both Inevitable and Unimportant?

By Arthur E. Wilmarth, Jr. September 18, 2018 by renholding

The financial crisis of 2007-09 caused the Great Recession, the most severe global economic downturn since the Great Depression. The financial crisis began with the collapse of the subprime mortgage market in the U.S. and spread to financial markets around …

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 …

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 …

Corporate Governance Reform in Post-Crisis Financial Firms: Two Fundamental Tensions

By Christopher M. Bruner September 5, 2018 by renholding

The manner in which financial firms are governed directly affects the stability and sustainability of both the financial sector and the “real” economy, as the financial crisis and associated regulatory reform efforts have tragically demonstrated. However, two fundamental tensions continue …

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Columbia Law School's Blog on Corporations and the Capital Markets

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