Liability holding companies

UCLA Law Review

Volumn 59, Issue 4, 2012, Pages 852-913

  Admati, Anat R ^a   Conti Brown, Peter ^b   Pfleiderer, Paul ^a  

^a STANFORD UNIVERSITY   (United States)

^b STANFORD LAW SCHOOL   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 84862702763     PISSN: 00415650     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Review

References (120)

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18. See, e.g., John C. Coffee, Jr., Regulating the Market for Corporate Control A Critical Assessment of the Tender Offer's Role in Corporate Governance, 84 COLUM. L. REV. 1145, 1156-57 & n.24, 1167-69, 1224-34 (1984)
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31. Dodd-Frank Wall Street Reform and Consumer Protection Act § 165. The living wills-blueprints prepared by the SIFIs themselves-are intended to guide SIFIs' potential resolution in the event of failure.
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33. Mark Whitehouse, More Bank Reforms Needed, Economists Say, WALL ST. J. ONLINE (Jan. 9, 2011), http://onune.wsj.com/article/ SBl0001424052748704482704576071890928787936.html. Much additional related commentary on the subject is available at Research News, STANFORD GRADUATE SCH. BUS., http://www.gsb.stanford.edu/news/research/Admati.etal.html (last visited Feb. 22,2012).
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45. Andrew Winton, Limitation of Liability and the Ownership Structure of the Firm, 48 J. FIN. 487 (1993).
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48. Henry Hansmann & Reinier Kraakman, Toward Unlimited Shareholder Liability for Corporate Torts, 100 YALE LJ. 1879 (1991).
49. Graeme G. Acheson, Charles R. Hickson & John D. Turner, Does Limited Liability Matter?: Evidence From Nineteenth-Century British Banking, 6 REV. L. ScECON. 1 (2010).
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53. Merton H. Miller, The Cost of Capital, Corporation Finance, and the Theory of Investment, 48 AM. ECON. REV. 261 (1958), must be the starting point of any discussion of capital regulation.
54. Martin F. Hellwig, Systemic Risk in the Financial Sector: An Analysis of the Subprime-Mortgage Financial Crisis, 157 DE ECONOMIST 129 (2009)
55. Mervyn King, International Harmonisation of the Regulation of Capital Markets: An Introduction, 34 EUR. ECON. REV. 569 (1990)
56. Stephen M. Schaefer, The Regulation of Bank and Securities Firms, 34 EUR. ECON. REV. 587 (1990)
57. Anat R. Admati et al, Letter to the Editor, Healthy Banking System Is the Goal, Not Profitable Banks, FIN. TIMES, Nov. 9,2010, available at http://www.gsb.stanford.edu/news/research/admatiopen.html Despite support from policymakers, especially in the UK, Switzerland, and Sweden, political forces in the Basel Committee have produced only moderate increases in capital requirements.
58. Whimsical but instructive article of Merton H. Miller, Do the M&M Propositions Apply to Banks?, 19 J. BANKING & FIN. 483 (1995).
59. Paul Pfleiderer, On the Relevance of Modigliani and Miller to Banking: A Parable and Some Observations (Rock Ctr. for Corporate Governance at Stanford Univ., Working Paper No. 93,2010), available at http://www.gsb.starford.edu/ news/paclcage5/pcl1/Relevancy.pdf.
60. Armen Hovakimian, Edward J. Kane & Luc Laeven, How Country and Safety-Net Characteristics Affect Bank Risk-Shifting (NBER Working Paper No. 9322,2002), available at http://www.nber.org/papersAv9322.pdf.
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63. Victoria Ivashina & David Scharfstein, Bank Lending During the Financial Crisis of 2008, 97 J. FIN. ECON. 319 (2010).
64. Adam J. Levitin, In Defense of Bailouts, 99 GEO. L.J. 435,439 (2011).
65. Steven L. Schwarcz, Systemic Risk, 97 GEO. L.J. 193 (2008).
66. 26 U.S.C. § 163(a) (2006)
67. William Poole, Moral Hazard- Tie Long-Lasting Legacy of Bailouts, 65 FIN. ANALYSTS J., Nov. /Dec 2009, at 17. Another possibility is to limit the deductibility of interest beyond a certain level of debt.
68. Kimberly A. Clausing & Reuven S. Avi-Yonah, Reforming Corporate Taxation in a Global Economy: A Proposal to Adopt Formulary Apportionment (Brookings Inst., Hamilton Project Discussion Paper, 2007), available at http://www.brookings.edu/papers/2007/06corporatetaxes-clausing.aspx.
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70. Narayana Kocherlakota, President, Fed. Reserve Bank, Speech at Tri-State Bankers Summit: Re-Thinking Leverage Subsidies (June 27,2011) (transcript available at http:/www.bis.org/review/rl10704h.pdf).
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72. DEAN BAKER & TRAVIS MCARTHUR, CTR. FOR ECON. & POLICY RESEARCH, THE VALUE OF THE TOO BIG TO FAIL BIG BANK SUBSIDY (2009), available at http://www.cepr.net/documents/publications/too-big-to-fail-2009-09.pdf.
73. Joe Nocera, Lehman Had to Die, It Seems, So Global Finance Could Live, N.Y. TIMES, Sept. 12, 2009, at Al (summarizing the views of the French Finance Minister, the head of the European Central Bank, and the autiW himself in criticizing the decision to allow Lehman to fail). Dodd-Frank allows the FDIC to resolve systemicalry important financial institutions outside of the bankruptcy process. However, this remains a problematic alternative, especially for global institutions.
74. Michael C. Jensen, Eclipse of the Public Corporation, HARV. BUS. REV., Sept.-Oct. 1989, at 61.
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79. Charles W. Calomiris, Building an Incentive Compatible Safety Net, 23 J. BANKING & FIN., 1499 (1999).
80. FRANK H. EASTERBROOK & DANIEL R. FISCHEL, THE ECONOMIC STRUCTURE OF CORPORATE LAW 40 (1996).
81. Dodd-FrankWall Street Reform and Consumer Act, Pub. L. No. 111-203, § 121(a), 124 Stat. 1376,1410 (2010) (to be codified at 12 U.S.C. § 5331).
82. Financial Stability Oversight Council, 76 Fed. Reg. 64,264 (Oct. 18, 2011) (to be codified at 12 C.F.R.pt.1310).
83. Dodd-Frank Wall Street Reform and Consumer Protection Act § 121(a).
84. Victor Fleischer, Taxing Founders'Stock, 59 UCLA L. REV. 60 (2011).
85. Heather M. Field, Choosing Tax: Explicit Elections as an Element of Design in the Federal Income Tax System, 47 HARV. J. ON LEGIS. 21 (2010).
86. RICHARD SCOTT CARNELL, JONATHAN R. MACEY & GEOFFREY P. MILLER, THE LAW OF BANKING AND FINANCIAL INSTITUTIONS (4th ed. 2009).
87. SCOTT J. LEDERMAN, HEDGE FUND REGULATION § 2:3.3[E][i] (2008).
88. Peter Conti-Brown, Scarcity Amidst Wealth: The Law, Finance, and Culture of Elite University Endowments in Financial Crisis, 63 STAN. L. REV. 699,730-36 (2011).
89. Howell E.Jackson, The Expanding Obligations of Financial Holding Companies, 107 HARV. L. REV. 507 (1994) (policy and theoretical), and
90. Howell E. Jackson, The Superior Performance of Savings and Loan Associations With Substantial Holding Companies, 22 J. LEGAL STUD. 405 (1993).
91. Bank Holding Company Art of 1956, Pub. L. No. 511,70 Stat. 133.
92. Saule T. Omarova & Margaret E. Tayhar, That Which We Call a Bank Revisiting the History of Bank Holding Company Regulation in the United States, 31 REV. BANKING & FIN. L. (forthcoming 2012), available at http://papers.ssrn.com/sol3/papers.cfm?abstract-id=1969522.
93. Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, Pub. L. No. 103-328, §§ 101-115,108 Stat. 2338,2338-68 (codified as amended in scattered sections of 12 U.S.C.).
94. Policy Statement, Responsibility of Bank Holding Companies to Act as Sources of Strength to their Subsidiary Banks, 52 Fed. Reg. 15,707 (Apr. 30,1987) (to be codified at 12 C.F.R. pt.261).
95. Leonard Bierman & Donald R. Fraser, The "Source of Strength Doctrine": Formulating the Future of America's Financial Markets, 12 ANN. REV. BANKING L. 269 (1993).
96. Bd. of Governors of the Fed. Reserve Sys. v. MCorp Fin., Inc., 502 U.S. 32 (1991).
97. Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, § 167(bX3), 124 Stat 1376,1433 (2010)
98. Andrew Ross Sorkin & Vikas Bajaj, Democrats Set Conditions on Bailout as 2 Firms End Investment Banking Era: Radical Shift for Goldman and Morgan, N.Y. TIMES, Sept. 22, 2008, et al (citing the "access to the full array of the Federal Reserve's lending facilities" that come as part of the BHC model).
99. DEL. CODE ANN. tit. 8, § 141 (2011).
100. Ronald J. Gilson & Reinier Kraakman, Reinventing the Outside Director An Agenda for Institutional Investors, 43 STAN. L. REV. 863,872-76 (1991), for a nuanced example of this literature.
101. Eric J. Phan, Rethinking the Boards Duty to Monitor A Critical Assessment of the Delaware Doctrine, 38 FLA. ST. U. L. REV. 209 (2011), for a summary of this perspective.
102. Michael C. Jensen, The Modem Industrial Revolution, Exit, and the Failure or Internal Control Systems, 48 J. FIN. 831 (1993)
103. The Business Roundtable, Corporate Governance and American Competitiveness: A Statement of the Business Roundtable, 46 BUS. LAW. 241 (1990).
104. Henry Hansmann, Why Do Universities Have Endowments? 19 J. LEGAL STUD. 3 (1990).
105. FAQs: Institutional Planning and Budget Planning: How Can You Tell Me That We're in a Tight Budget Environment When We Have a Billion Dollar Endowment? Why Can't We Just Use More of the Endowment or Endowment Income in the Base Budget? GRINNELL C, http://www.grinnell.edu/ofRces/ insritutionalplanning/increasedendowmentuse (last visited Feb. 23,2012).
106. Jeffrey Brown et al., Why I Lost My Secretary: The Effect of Endowment Shocks on University Operations (NBER Working Paper No. 15861,2010),/http://www. nber.org/papers/wl5861.
107. Robert Townsend, Optimal Contracts and Competitive Markets With Costly State Verification, 21 J. ECON. THEORY, 265 (1979).
108. ANDREW ROSS SORJON, TOO BIG TO FAIL (2009).
109. John C. Coffee, Jr., Bail-Ins Versus Bail-Outs: Using Contingent Capital to Mitigate Systemic Risk (Columbia Law & Econ. Working Paper No. 380,2010), available at http://papers.ssrn.com/sol3/papers.cfrn?abstract-id=1675015
110. Suresh Sundarcsan & Zhenyu Wang, On the Design of Contingent Capital With Market Trigger (Fed. Reserve Bank N.Y. Staff Reports, No. 448,2010), http://www.newyorkfed.org/research/staff-reports/sr448.pdf.
111. JOINT COMM. ON TAXATION, PRESENT LAW AND BACKGROUND RELATING TO TAX TREATMENT OF BUSINESS DEBT (2011), available http://www.jct.gov/publications. hrrnl?fUnc=dowrdoad
112. Jennifer Hughes, Credit Suisse Cocos Issue Deluged, FIN. TIMES, Feb. 17,2011, http://www.ft.comAntl/cms/s/0/31da02a0-3ac6-lIe0-9cla-00144feabdc0.html
113. Adam Ewing, Danish Banks Face Funding Relief as Bail-In Isolation Ends, BLOOMBERG (Nov 9, 2011, 3:37 AM), http://www.bloomberg.com/news/2011-ll-08/ danish-banks-face-funding-relief-as-bail-in-isolation-set-to-end.html
114. HERB ALLISON, THE MEGABANKS MESS (2011)
115. THOMAS M. HOENIG & CHARLES H. MORRIS, FED. RESERVE BANK OF KANSAS CITY, RESTRUCTURING THE BANKING SYSTEM TO IMPROVE SAFETY AND SOUNDNESS (2011), available at http://www.kansastityfed.org/publicat/speeches/Restructuring-the- Banking-System-05-24-ll.pdf,
116. SIMON JOHNSON & JAMES KWAK, 13 BANKERS: THE WALL STREET TAKEOVER AND THE NEXT FINANCIAL MELTDOWN (2010).
117. Timothy Curry & Lynn Shibut, The Cost of tie Savings and Loan Crisis: Truth and Consequences, 13 FDIC BANKING REV., no. 2,2000, at 26, available at http://www.fdic.gov/bank/analytical/banking/2000dec/brvl3n2-2.pdf.
118. Jeffrey N. Gordon & Christopher Muller, Confronting Financial Crisis: Dodd-Frank's Dangers and the Case for a Systemic Emergency Insurance Fund, 28 YALE J. ON REG. 151 (2011).
119. Anat Admati & Martin Hellwig, Global 'Level Playing Field Arguments Are Invalid, FIN. TIMES ECONOMISTS' F. (June 6,2011,11:29 AM), http://ww.gsb.stanford.edu/neWpackages/PDF/MartmWolfFT060611.pdf.
120. RICHARD BOOKSTABER, A DEMON OF OUR OWN DESIGN: MARKETS, HEDGE FUNDS, AND THE PERILS OF FINANCIAL INNOVATION (2007), for the most thoughtful of these arguments.