The Harvard Business Law Review is pleased to provide a preview of its inaugural issue. To be published in the Spring of 2011, the issue will feature articles on the Dodd-Frank Wall Street Reform and Consumer Protection Act. By focusing on specific aspects of the law, each of the following scholars will help illuminate the merits and missteps of this century’s most sweeping financial reform.
John C. Coffee, Jr.
Adolf A. Berle Professor of Law
Columbia Law School
Professor Coffee will consider the latest evidence on how and why credit ratings became inflated before the financial crisis. Arguing that conflicts of interest cannot be purged on a piecemeal basis, Professor Coffee will present a fundamental choice between (1) implementing a “subscriber pays” model that compels rating agencies to compete for the favor of investors, not issuers, and (2) seeking to de-emphasize or eliminate the role of credit ratings to reduce the licensing power of rating agencies. Professor Coffee’s article will ultimately suggest how best to encourage the development of a modified system, in light of Dodd-Frank developments, by proposing a vision under which the investor would choose and the issue/deal arranger would pay for the initial rating within structured finance transactions.
Richard W. Painter
S. Walter Richey Professor of Corporate Law
University of Minnesota Law School
Professor Painter’s HBLR article will address the extraterritoriality provisions of Dodd-Frank. These provisions were enacted to give the SEC additional powers in response to Morrison v. National Australia Bank, 130 U.S. 2869 (2010). Professor Painter will discuss the possible benefits to US investors associated with these provisions, as well as the potential conflicts and SEC overreaching that may arise when these SEC enforcement powers overlap with the enforcement powers of foreign regulators.
P. Morgan Ricks
Visiting Assistant Professor of Law
Harvard Law School
Professor Ricks’ article will examine the Dodd-Frank Act’s changes to the government’s emergency powers and assess the likely efficacy of the government’s remaining tools in the event of a future systemic crisis. He will argue that the Dodd-Frank Act leaves the financial system vulnerable to systemic collapse by relying on regulators to calibrate risk constraints with limited liquidity support and guarantee powers. The article will also analyze alternative approaches to systemic stability—targeting the inherent instability of the money markets.
Lynn A. Stout
Paul Hastings Professor of Corporate and Securities Law
UCLA School of Law
Professor Stout will address speculative OTC derivatives trading and its role in the 2008 financial crisis. In her HBLR article, Professor Stout will argue that speculative OTC derivatives trading only became a problem after the 2000 Congress passed a statute modifying the common law rule that treated off-exchange speculative derivatives as unenforceable gambling contracts. Professor Stout’s article will examine the subsequent dramatic increase of speculative OTC derivatives trading – and systemic risk – that occurred after this statute was enacted.
Associate Professor of Law
Cornell University Law School
Professor Whitehead’s article will analyze whether certain provisions of Dodd-Frank will have the effect of increasing overall financial risk-taking and risk to the financial system. To do this, Professor Whitehead will address some of the “fault lines” in Dodd-Frank—particularly, its failure to take into account how the financial markets will change as a result of the legislation and how these changes will impact systemic risk and risk management. For example, he will examine the possibility that the Volcker Rule will shift activities into less regulated institutions which may endanger the financial system.
Ms. Tayhar and Ms. Nazareth will discuss the uncertainty surrounding the application of Federal disclosure law to information collected by two new regulatory bodies created by the Dodd Frank Act—the Financial Stability Oversight Council (the “FSOC”) and the Office of Financial Research (the “OFR”). Ms. Tayhar and Ms. Nazareth first outline the unprecedented breath in information gathering powers that Dodd-Frank accords these two institutions. They then illustrate why the current exceptions to the Freedom of Information Act (FOIA) and the protections of Federal privilege law provide inadequate guidance as to what types of information will be beyond the reach of interested parties; they believe that this uncertainty will be the subject of significant litigation. Finally, they offer their recommendations as to how either Congress or several administrative agencies might provide guidance as to how FOIA should apply to information gathered by the FSOC and the OFR to create an optimal level of disclosure.