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Lev Menand, Academic Fellow and Lecturer in Law at Columbia Law School, has recently published Why Supervise Banks? The Foundations of the American Monetary Settlement, 74 Vanderbilt Law Review 951 (2021).  Menand has actually worked in the Federal Reserve Bank of New York’s Bank Supervision Group.  I’m excited to read this article as banking law scholars are increasingly focused on the area of bank supervision and I’ve no doubt it makes a significant contribution to the literature.     Here’s the article’s abstract:

Administrative agencies are generally designed to operate at arm’s length, making rules and adjudicating cases. But the banking agencies are different: they are designed to supervise. They work cooperatively with banks and their remedial powers are so extensive they rarely use them. Oversight proceeds through informal, confidential dialogue.

Today, supervision is under threat: banks oppose it, the banking agencies restrict it, and scholars misconstrue it. Recently, the critique has turned legal. Supervision’s skeptics draw on a uniform, flattened view of administrative law to argue that supervision is inconsistent with norms of due process and transparency. These arguments erode the intellectual and political foundations of supervision. They also obscure its distinguished past and deny its continued necessity.

On June 3rd, the United States Court of Appeals for the Second Circuit (Court) decided Lacewell v. Office of the Comptroller of the Currency (here).  I’d previously blogged about the “Dueling Law Professor Amicus Curiae Briefs” (here and here, see Appendix A of the Opinion for a listing of these briefs) in this heavily watched federal fintech charter case about whether the Office of the Comptroller of the Currency (OCC) has the authority to issue special-purpose national bank (SPNB) charters for fintech firms “engaged in the ‘business of banking,’ including those that do not accept deposits.”  I promised to update BLPB readers when the Court rendered its decision.

In a nutshell, the Court reversed the district court’s amended judgement and remanded “with instructions to enter a judgement of dismissal without prejudice.”  The Court explained that DFS [the New York State Department of Financial Services, of which plaintiff Lacewell is Superintendent] lacked “standing because it failed to allege that the OCC’s decision caused it to suffer an actual or imminent injury in fact and…that DFS’s claims are constitutionally unripe for substantially the same reason.”  Given these considerations, the Court stated that it did not have…

I thought I’d essentially copy the idea behind co-blogger Joshua Fershee’s post from yesterday (thanks, Josh!) and share with readers that my new short article, Clearinghouse Shareholders and “No Creditor Worse Off Than in Liquidation” Claims is now available!  Similarly, my article is a combination of a prior post and my presentation at the fourth annual Business Law Prof Blog Symposium.  Here’s its abstract:

Clearinghouses are the centerpiece of global policymakers’ 2009
framework of reforms in the over-the-counter derivative markets in
response to the 2007–08 financial crisis. Dodd-Frank’s Title VII
implemented these reforms in the U.S. More than ten years have now
passed since the establishment of this framework. Yet much work
continues on outstanding issues surrounding the recovery and
resolution of a distressed or insolvent clearinghouse. This Article
examines one of these issues: the possibility of clearinghouse
shareholders raising no creditor worse off than in liquidation claims
in resolution. It argues that such claims are nonsensical and should
be unavailable to clearinghouse shareholders. This would decrease
moral hazard in and promote the rationalization of the global
clearing ecosystem for derivatives.

I also want to encourage BLPB readers to review the perceptive commentary by Professor Thomas E. Plank on my…

If you missed this past Monday’s Regulating Megabanks: A Conference in Honor of Art Wilmarth, don’t worry, it was recorded! I’ll keep BLPB readers posted about when the recorded webinar is available online [now available -see link at bottom of post!].  In the meantime, Professor Wilmarth has just posted a new working paper, Wirecard and Greensill Scandals Confirm Dangers of Mixing Banking and Commerce, to keep you busy until then!  Here’s the abstract:

The pandemic crisis has accelerated the entry of financial technology (“fintech”) firms into the banking industry. Some of the new fintech banks are owned or controlled by commercial enterprises. Affiliations between commercial firms and fintech banks raise fresh concerns about the dangers of mixing banking and commerce. Recent scandals surrounding the failures of Wirecard and Greensill Capital (Greensill) reveal the potential magnitude of those perils.

The Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) have encouraged commercial enterprises to acquire fintech banks. The FDIC has authorized commercial firms to acquire FDIC-insured industrial banks in reliance on a controversial loophole in the Bank Holding Company Act (BHC Act). The OCC is seeking to charter nondepository fintech national banks, which…

Dear BLPB readers:

Here’s an event you won’t want to miss!  Check out the phenomenal speaker lineup! 

Regulating Megabanks: A Conference in Honor of Arthur Wilmarth

May 24 @ 8:50 am – 5:30 pm

Join the University of Colorado Law School and the University of Colorado Law Review for a daylong online symposium regarding the regulation of large financial conglomerates.  This symposium honors Professor Arthur Wilmarth of the George Washington University Law School, who has devoted his entire scholarly career to this topic and whose book Taming the Megabanks was just published by Oxford University Press.

The public may access the webinar at the following link: https://cu.law/lawreview

Last week, I blogged about my new article, The Federal Reserve As Collateral’s Last Resort, in the Notre Dame Law Review.  I mentioned that this shorter work is a first step in a larger normative project on central bank collateral frameworks.  As I progress with this research, I’m adding new articles to my reading list for this new article.  Peter Conti-Brown, Yair Listokin, & Nicholas R. Parrillo recently posted their new work, Towards An Administrative Law of Central Banking, published in the Yale Journal on Regulation.  It immediately made the list!  Here’s the Abstract:

A world in turmoil caused by COVID-19 has revealed again what has long been true: the Federal Reserve is arguably the most powerful administrative agency in government, but neither administrative–law scholars nor the Fed itself treat it that way. In this Article, we present the first effort to map the contours of what administrative law should mean for the Fed, with particular attention to the processes the Fed should follow in determining and announcing legal interpretations and major policy changes. First, we synthesize literature from administrative law and social science to show the advantages that an agency like the…

I’m delighted to share with BLPB readers that my new Essay, The Federal Reserve As Collateral’s Last Resort, 96 Notre Dame L. Rev. 1381 (2021) is now available (here).  Its focus is central bank collateral frameworks, a critical and timely topic that has thus far received scant attention from legal scholars.  I recently blogged about Professor Skinner’s Central Bank Activism.  Regardless of one’s perspective on this issue, it’s crucial to realize that a central bank’s collateral framework is the mechanism that promotes or limits such activism.  The institutional features of these frameworks are a combination of legislation and central bank policy, with the latter arguably being the most important influence on the Fed’s framework.   

As the first paragraph of my Essay explains “Central bank money or liquidity is at the heart of modern economies.  It is issued against collateral designated as eligible by, and on terms defined by, central bank collateral frameworks…what is often underappreciated is that the ultimate practical difference between an illiquid and insolvent firm is whether a firm has assets a central bank, such as the Federal Reserve, will accept as collateral for lending or for purchase, and at what valuation. …

I always learn a ton in reading Professor Julie Andersen Hill’s banking articles.  A TON!  Hence, I’m excited to see that she recently posted her new piece, Cannabis Banking: What Marijuana Can Learn from Hemp (forthcoming 2021, Boston University Law Review).  This is her second article on cannabis banking, the first being an excellent symposium piece, Banks, Marijuana, and Federalism.  As both houses of Congress have recently reintroduced the SAFE Banking Act, these articles couldn’t be more timely.  Here’s the abstract for Cannabis Banking:

Marijuana-related businesses have banking problems. Many banks explain that because marijuana is illegal under federal law, they will not serve the industry. Even when marijuana-related businesses can open bank accounts, they still have trouble accepting credit cards and getting loans. Some hope to fix marijuana’s banking problems with changes to federal law. Proposals range from broad reforms removing marijuana from the list of controlled substances to narrower legislation prohibiting banking regulators from punishing banks that serve the marijuana industry. But would these proposals solve marijuana’s banking problems?

In 2018, Congress legalized another variant of the Cannabis plant species—hemp. Prior to legalization, hemp-related businesses, like marijuana-related businesses, struggled with banking. Some hoped legalization would solve…

I recently had the good fortune to hear Professor Jonathan R. Macey speak about his insightful and timely new article, Fair Credit Markets: Using Household Balance Sheets to Promote Consumer Welfare (forthcoming, Texas Law Review).  I wanted to highlight it to readers and share the Abstract:

Access to credit can provide a path out of poverty. Improvidently granted, however, credit also can lead to financial ruin for the borrower. Strangely, the various regulatory approaches to consumer lending do not effectively distinguish between these two effects of the lending process. This Article develops a framework, based on the household balance sheet, that distinguishes between lending that is welfare enhancing for the borrower and lending that is potentially (indeed likely) ruinous, and argues that the two types of lending should be regulated in vastly different ways.

From a balance sheet perspective, various kinds of personal loans impact borrowers in vastly different ways. Specifically, there is a difference among loans based on whether the loan proceeds are being used: (a) to make an investment (where the borrower hopes to earn a spread between the cost of the borrowing and the returns on the investment); (b) to fund capital expenditures (homes, cars…

Truth be told, I don’t know a whole lot about SPACs.  HOWEVER, I’ve been encountering this topic frequently these days, whether I’m following clearing and settlement news such as Ex-Cosmo editor teams up with ice hockey owner in Spac deal or doing my daily glance at the FT and reading about Why London should resist the Spac craze.  Wanting to be more in the know, I’ve just added Michael Klausner, Michael Ohlrogge & Emily Ruan’s “A Sober Look at SPACs” to my reading list.  Here’s the abstract:

A Special Purpose Acquisition Company (“SPAC”) is a publicly listed firm with a two-year lifespan during which it is expected to find a private company with which to merge and thereby bring public. SPACs have been touted as a cheaper way to go public than an IPO. This paper analyzes the structure of SPACs and the costs built into their structure. We find that costs built into the SPAC structure are subtle, opaque, and far higher than has been previously recognized. Although SPACs raise $10 per share from investors in their IPOs, by the time the median SPAC merges with a target, it holds just $6.67 in cash for each…