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Colleen Baker

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PhD (Wharton) Professor Baker is an expert in banking and financial institutions law and regulation, with extensive knowledge of over-the-counter derivatives, clearing, the Dodd-Frank Act, and bankruptcy, in addition to being a mediator and arbitrator.

Previously, she spent time at the U. of Illinois Urbana-Champaign College of Business, the U. of Notre Dame Law School, and Villanova University Law School. She has consulted for the Federal Reserve Bank of Chicago, and for The Volcker Alliance.  Prior to academia, Professor Baker worked as a legal professional and as an information technology associate. She is a member of the State Bars of NY and TX. Read More

Yesterday, the CFTC and the Bank of England signed a Memorandum of Understanding on the Cooperation and the Exchange of Information Related to the Supervision of Cross-Border Clearing Organizations. Heath Tarbert, the Chairman of the CFTC, and Jon Cunliffe, deputy governor for financial stability at the Bank of England, also authored an opinion piece published in Risk.  It notes that the UK is “the single largest investor in the US,” and that the US “is the largest investor in the UK.”  The two jurisdictions account for about 80% of the global market activity for interest rate derivatives. 

The global clearing mandates that followed the financial crisis of 2007-09 have increased the importance of cross-border financial market infrastructures such as clearinghouses and also the potential for these infrastructures to propagate risks throughout global financial markets.  The opinion notes that “The long-lasting significance of these reforms was seen when the Covid-19 pandemic sent shockwaves through the world’s financial markets earlier this year.  The largest dollar moves in history were recorded for the S&P 500, Dow Industrial Average and Nasdaq-100.  The FTSE All-Share index fell more than 10% on March 12.  Despite this market turmoil and a transition to a work-from-home…

I recently had the pleasure of hearing my OU colleague Professor Megan Shaner present her interesting and timely new article, Back to the Future? Reclaiming Shareholder Democracy Through Virtual Annual Meetings (with Professor Yaron Nili).  What an important topic, especially in these unusual times!  An abstract is below:

From demanding greater executive accountability to lobbying for social and environmental policies, shareholders today influence how managers run American corporations. In theory, shareholders exert that influence through the annual meeting: a forum where any shareholder, large or small, can speak their mind, engage with the corporation’s directors and managers, and influence each other. But today’s annual meetings, where a widely diffused group of owners often vote by proxy, are largely pro forma: only handful of shareholders attend the meeting and voting results are largely determined prior to the meeting. In many cases, this leaves Main Street investors’ voice unspoken for.

But modern technology has the potential to resurrect the annual meeting as the deliberative convocation and touchstone of shareholder democracy it once was. COVID-19 has forced most American corporations to hold their annual meetings virtually. Virtual meetings allow shareholders to attend meetings at a low cost, holding the promise…

I just did a quick read through ISDA’s new whitepaper, Collaboration and Standardization Opportunities in Derivatives and SFT Markets.  “SFT” stands for securities financing transactions.  I encourage anyone studying these markets to at least review its Executive Summary.  As it states “This paper explains and illustrates how and why two large, important and interconnected markets – derivatives and securities financing transactions (SFTs) – could collaborate to achieve greater standardization and improved efficiency.” (p. 3)    

It’s divided into two parts: 1) an overview of the relevant markets (repo, stock loan, and derivatives), their interconnectedness, and possibilities for and benefits of greater transactional efficiencies, and 2) a proposal for implementing these objectives.  

Much of the paper focuses on market interconnections, which strongly argue for the possibility of improved transactional efficiencies.  I kept thinking about interconnections from a systemic risk/financial stability perspective, and how (if at all) promoting greater transactional efficiencies (which, at least at first glance, seems like a good idea) might impact such considerations. 

I encourage more of us in the banking and financial institutions area to give additional thought to systemic risk and financial stability issues related to securities lending, including due to its interconnections with derivatives…

BLPB Readers,

Exciting news!  On the morning of October 14, 2020, the Systemic Risk Council is offering a webinar on Ensuring Financial Stability: Relaunching the Reform Debate After Pandemic Dislocation.  The Agenda looks fantastic! A brief summary of the program is below:

The stimulus response to the global pandemic has surfaced new debates and highlighted lingering questions about the role of central banks, accountability, reform, and the roles of levered markets and shadow banking.  This Systemic Risk Council program brings together leading voices to explore how the financial industry, regulators, and policy makers can address key issues around bank stability, resolution, and the mounting leverage in the global economic system.

This Friday, Professor Art Wilmarth’s new book, Taming the Megabanks: Why We Need a New Glass-Steagall Act (Cambridge University Press), will be released.  Wilmarth recently published an overview of his work on Duke Law School’s FinReg Blog, a paragraph of which is below: 

Taming the Megabanks contends that we must adopt a new Glass-Steagall Act to separate banks from securities markets. A new Glass-Steagall Act would restore financial stability and ensure that our financial system serves Main Street business firms and consumers instead of Wall Street speculators. Universal banks would be broken up and would no longer dominate our financial system. Shadow banks would shrink substantially because they could no longer fund their activities by offering short-term financial instruments that function as substitutes for deposits. A more decentralized and competitive financial system would provide better services to commerce, industry, and society. 

I’m really looking forward to receiving my copy, purchased for a very reasonable $34.95!  I’ve read many of Wilmarth’s articles, and I’ve always learned a lot from each one.  A LOT!

FINRA recently filed a rule proposal with the SEC to alter, yet again, it’s rules for facilitating the deletion of customer complaint information from the Central Registration Depository database.  The proposal will likely do some good, but doesn’t seem to meaningfully increase the likelihood that this adversarial process will reliably surface relevant information.  Still, FINRA contends that the changes aim to “place an arbitrator or panel in a better position to determine whether to recommend expungement of customer dispute information, and thereby help ensure the accuracy of the customer dispute information contained in the CRD system and displayed through BrokerCheck.”  The raft of proposed changes effectively concede that for years the current system has not ensured that arbitrators were well-situated to decide these expungement claims.

For the most part, the proposal codifies existing guidance, adds some time limits, and aims to address other known issues.  For example, a broker would not be able to request expungement if “more than six years have elapsed since the date that the customer complaint was initially reported to the CRD system” or more than two years after the close of an arbitration filing.  The proposal also bars “straight-in” expungement requests against customers–something that only…

Cheryl Wade and Janis Sarra have a new book out entitled, Predatory Lending and the Destruction of the African-American Dream.  It’s available to order now.  My copy is on the way and I’m looking forward to getting into it.  The authors describe the book this way:

Since the Great Recession of 2008, the racial wealth gap between black and white Americans has continued to widen. In Predatory Lending and the Destruction of the African-American Dream, Janis Sarra and Cheryl Wade detail the reasons for this failure by analyzing the economic exploitation of African Americans, with a focus on predatory practices in the home mortgage context. They also examine the failure of reform and litigation efforts ostensibly aimed at addressing this form of racial discrimination. This research, augmented by first-hand narratives, provides invaluable insight into the racial wealth gap by vividly illustrating the predation that targets African-American consumers and examining the intentionally obfuscating settlement terms of cases brought by the U.S. Department of Justice, states attorneys, and municipalities. The authors conclude by offering structural, systemic changes to address predatory practices. This important work should be read by anyone seeking to understand racial inequality in the United States.

Predatory lending in the…

This news story in the Cowboy State Daily, Kraken: World’s First Digital Bank to Open in Wyoming, came to my attention this afternoon.  Wyoming granted Kraken a Special Purpose Depository Institutions Charter, a type of state bank charter enacted into Wyoming law in 2019.  The Kraken blog notes that “From paying bills and receiving salaries in cryptocurrency to incorporating digital assets into investment and trading portfolios, Kraken Financial will enable Kraken clients in the U.S. to bank seamlessly between digital assets and national currencies.”  Its “vision is to become the world’s trusted bridge between the crypto economy of the future and today’s existing financial ecosystem.”      

Not surprisingly, the banking law academic in me has lots of questions, and I’ll look forward to sharing some with BLPB readers when I’ve had more time to learn about this development.   

As a side note, in July 2020, the Office of the Comptroller of Currency (OCC) announced that “federally chartered banks and thrifts may provide custody services for crypto assets.”  The OCC charters national banks, and individual states grant state bank charters.     

Dear BLPB readers:

The AALS Section on Financial Institutions and Consumer Financial Protection invites submissions of no more than five pages for the 2021 annual meeting. Selected speakers would present on Tuesday, January 5, from 1:15 to 2:30 pm ET.  The submission can be the abstract and/or introduction from a longer paper, and it should relate to the following session description:

After the 2008 financial crisis, Congress overhauled financial regulation. The Dodd-Frank Act of 2010 created a new consumer protection agency, limited bank investment, imposed new capital and liquidity requirements, created an umbrella financial council, and reworked derivatives oversight, among many significant pieces. This session will explore ideas about what the next sweeping financial legislation should entail.

Please send your anonymized materials by September 15, 2020, to Joseph Graham, jgraham@bu.edu. Please also indicate (a) whether you are tenured, pre-tenure, or other; (b) how far along the full article is, and (c) optionally, any other information that might benefit the committee in selecting a diverse panel of speakers.

On behalf of the Section on Financial Institutions and Consumer Financial Protection

Chair: Rory Van Loo (Boston University)

Chair-Elect: Pat McCoy (Boston College)

Executive Committee Members:

Hilary Allen (American University)

Felix Chang (University…

Earlier today, The Institute for the Fiduciary Standard held a panel on financial advice.  I served as the moderator for three fantastic panelists, Donald Langevoort, James Cox, and Ann Lipton.  As part of my role, I opened the panel with a summary of the current landscape for financial advice.  Hopefully this helps others who are trying to understand the current state of play:

In the past, American retirements had often been supported by three different sources of retirement income: an employer-sponsored, defined-benefit pension; social security; and personal savings.  Today, few Americans have all three sources of support.  Employers have largely shifted to offering defined-contribution retirement plans, allowing participants to contribute a portion of their salary to a 401k plan or similar plan, which the employer may or may not also make some contributions to.  At the same time, Americans, on the whole, generally lack financial sophistication, and often struggle to navigate our increasingly complex financial landscape.  In short, Americans need access to competent, trustworthy advice to make decisions.

Sadly, far too many Americans struggle to access high-quality and trustworthy financial advice.  Our fragmented regulatory system makes this even harder.  A person holding themselves out as a

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