Columbia Law School
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“[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
financial crisis
The Myth of Risk Free Markets
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
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
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
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
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
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
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
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?
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?
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
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
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
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
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
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 …
How Vulnerable Are U.S. Banks to Commercial Real Estate?
Commercial real estate (CRE) lending is a risky activity that still dominates the business model of many modestly capitalized small and medium-sized banks. Bank supervisory and regulatory reforms recently enacted have reflected some of the lessons from the Great Financial …
Are Independent Board Members Necessarily Credible?
By the late 2000s, independent directors were in the majority on the boards of almost every type of U.S. organization. While this achievement may have improved corporate governance, it was not the panacea that some had anticipated, as subsequent events …
Cleary Gottlieb on Latest Developments in European Leveraged Finance
EVOLUTION OF THE TRANSFERABILITY CLAUSE
Early 2000s
- Lenders’ freedom to transfer their participations in large leveraged loans has been gradually eroded by developments introduced through the last few credit cycles.
- By the time of the pre-crisis peak in 2007/2008, the
Did Dodd-Frank Help Reduce Systemic Risk?
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) …