Print Archive

Banks, which are businesses that simultaneously make loans and take deposits that are available to customers on demand, are inherently unstable. The instability exists because the mismatch in the (long-term) maturity of banks’ assets and the (short term) maturity of their liabilities makes them susceptible to runs and panics that destabilize the broader economy and require bailouts on a regular basis. As such, banks essentially hold society hostage. They must be continuously propped up by the government to prevent them from collapsing and bringing the rest of the economy down with them.
There is a strong need for the transaction-account services provided by banks, and there is a strong need for the loans provided by banks. Why it is necessary to combine lending and deposit taking, within a single firm, rather than have them supplied by separate firms, such as commercial lending companies and money market mutual funds, is an issue that has received surprisingly little attention. The main argument in favor of banks is that econ-omies of scope can be achieved by combining lending and deposit taking. For example, by offering checking accounts to borrowers, banks obtain private in-formation about these borrowers that is not available to rival, non-bank lenders. This private information from depositors is thought to make banks unusually efficient lenders.
In this Article I first argue that improvements in technology and information retrieval and sharing have reduced or eliminated the traditional efficiency justification for combining deposit-taking and lending. At the same time, other improvements in technology have made banks even more fragile by making it easier for depositors to trigger runs by withdrawing their funds electronically.
Previous scholars have argued for “narrow banks” that would unbundle the provision of lending and deposit-taking. Here I observe that these scholars do not consider the rationales offered by financial economists to explain why these activities are combined. They ignore the sparse but important literature in economics and finance that models how combining lending and deposit taking generates efficiencies in the form of synergies. Thus, these scholars focus on the costs of combining lending and deposit taking without considering the benefits.
While the scholars who argue for narrow banks ignore the beneficial efficiencies associated with combining lending and deposit taking, the financial economists who argue that combining lending and deposit taking is efficient ignore the harmful costs associated with combining these two functions. In particular, combining lending and deposit taking makes banks unstable, re-quiring the creation and maintenance of a thicket of regulation to deal with that instability, which still fails to prevent periodic runs and panics. This Article concludes that when the costs associated with combining lending and deposit taking are properly considered, the arguments that traditional banking is efficient appear highly doubtful.

Fraudulent transfer law is one of the principal bulwarks of private law. Fraudulent transfer law, however, now faces a crisis. Courts have long assumed that it was easy to determine whether a debtor made a fraudulent transfer of its property. One could use traditional markers of ownership to determine whether the debtor transferred property to a confederate. But today, most assets are intangible. Transactions happen in the blink of an eye, and they take place entirely on corporate books. Reliance on simple notions of what constitutes a “transfer” of property is wholly inadequate. Understanding what it means for a debtor to transfer property for fraudulent transfer purposes requires revisiting the foundational principles of fraudulent transfer law, a task that has proved elusive because one of those foundational principles has been forgotten.

The Texas Stock Exchange’s registration as a new national securities exchange is arguably the most formidable challenge to the NYSE and Nasdaq duopoly in recent memory. TXSE has raised expectations not only among those who champion the rise of Texas as a financial center and resist the imposition of progressive norms through securities law, but also among scholars who favor competition as a solution to structural problems in the national market system (NMS) for equity trading. This Article explores the extent to which a new exchange can manage these expectations. It further considers what it means to be a “fully integrated stock exchange” in a political and judicial climate increasingly hostile to the self-regulatory model and whether an opportunity for ideological competition can restore confidence in that model.

Should insurance companies be allowed to charge different prices based on a policyholder’s likelihood of making claims? This Article challenges the common view that “risk-based pricing” in insurance presents a tradeoff be-tween the twin goals of efficiency and fairness. It argues that the most com-pelling justification for charging policyholders prices that reflect their indi-vidual risk is grounded not in efficiency, but in egalitarian distributive jus-tice. The Article begins by shifting the focus of distributive analysis from the burdens of insurance (i.e., premium costs) to the benefits of insurance, measured as the consumer surplus each participant gains from coverage. It then demonstrates that risk-based pricing distributes this surplus more equally among high-risk and low-risk insureds than does a uniform “com-munity rate.” This egalitarian perspective helps to explain and justify a puz-zling feature of American law: the surprising lack of comprehensive antidis-crimination rules for insurance compared to other sectors like housing and employment. By providing a fairness-based defense of risk-based insurance pricing, the Article reframes the debate. The central conflict is not one of effi-ciency versus fairness

Courts routinely miscalculate pre-judgment interest, thereby failing to fully restore injured parties. Because pre-judgment interest can be substantial—often rivaling or even exceeding the underlying award—errors in its calculation are important and may create distorted incentives, promote opportunistic behavior, and suppress investment and economic activity. These errors often stem from reliance on speculation to determine the costs covered by interest. This Article argues that such speculation is unnecessary. The litigation claim is identified as the asset which has burdened the injured party with risks and costs imposed by the wrongful act, eliminating the need to rely on a hypothetical asset to estimate costs. From this premise, one can derive the appropriate rate of interest required to restore the claimant to the position he or she would have occupied absent the harm. Grounded in empirical evidence and established financial principles, this framework offers a rigorous and practicable alternative to prevailing methodologies.

Textualism has gotten a bad rap, at least insofar as employment discrimination law is concerned. Derided by antidiscrimination scholars as an interpretive smokescreen concerned less with faithfully construing statutory text than reliably yielding pro-employer results, textualism is understood to pose an existential threat to employment discrimination law. This Article challenges academic orthodoxy by demonstrating that, in practice, textualism is correlated with employee-favorable outcomes. Specifically, the Article examines a subset of the Supreme Court’s major employment discrimination cases over the past thirty years and finds that textualism is twice as likely to be associated with outcomes benefiting employees than it is with outcomes benefiting employers. It then considers this finding’s implications for an atextual evidentiary framework that has bedeviled employment discrimination plaintiffs for more than half a century: the multi-step, burden-shifting regime of McDonnell Douglas Corporation v. Green.

Private credit, a financing method where non-bank lenders provide loans to predominantly middle-market businesses, has experienced exponential growth since the 2008 financial crisis, with its offerings, client base, and collaborations with other market participants expanding significantly. Recent trends highlight regulatory acceptance of this growth and increased interconnectedness between private credit and the broader financial industry, as private credit firms form numerous new partnerships with traditional lenders and deposit-taking institutions. These developments have raised concerns about systemic risk, the potential for financial instability in private credit to spread to the broader financial system, and how to deal with increased exposure to this type of risk. This Comment examines the history, growth, and systemic risk implications of private credit, proposing a regulatory framework or “system” designed to mitigate the negative spillovers of these developments. This system emphasizes enhanced disclosure requirements, stricter capital reserves, leverage limitations, restrictions on certain investment activities, and covenant drafting to ensure financial containment of the systemic risks associated with private credit.

The music industry is highly concentrated at multiple stages along the production chain between the Big Three music group conglomerates (Universal, Sony, and Warner) and the three largest streaming services (Spotify, Apple, and YouTube). The Big Three and the streaming services have extensive vertical arrangements, from the Big Three having ownership stakes in the largest streaming services to their contracts for the streaming services’ algorithms to prioritize Big Three artists. This resembles historical radio era payola arrangements. This double layer of market concentration and the arrangements between music production and distribution primarily harm musicians, who lack the bargaining power to negotiate for better contracts or terms with either the Big Three or the major streaming services.
This Comment evaluates the reasoning behind, and outcomes of, radio era payola arrangements, compares these historical arrangements to the modern digital streaming era, and considers modern payola in the context of recent trends in antitrust law jurisprudence. Congress’s solution of required disclosure for radio era payola largely failed to substantially improve access to the radio for smaller artists and labels, and would likely fail again if attempted for the modern music streaming distribution system. In recent years, however, courts and regulators have utilized an increasingly holistic antitrust analysis with a growing focus on labor-side harms and vertical integration. The growing openness to labor-side concerns and the heightened scrutiny recently placed on vertical integration should weigh heavily in favor of musicians and independent labels in courts’ rule of reason analyses. These newly emphasized concerns provide new lenses for analyzing the modern music industry structure and payola and suggest a solution to Congressional inaction.

The rapid advancement of generative artificial intelligence (AI) is testing the limits of Section 230 of the Communications Decency Act, a statute that has long shielded online platforms from liability for user-generated content. This liability shield helped shape the modern internet, but AI’s ability to create its own content blurs the traditional distinction between platforms acting as passive hosts and those functioning as active publishers. As a result, courts and lawmakers are reexamining the scope and future of Section 230. This Comment examines how proposed reforms to Section 230 could impact startups and emerging tech companies that use generative AI in their products and services. It argues that broad rollbacks or carve-outs from Section 230 protections would impose disproportionate burdens on smaller companies, exposing them to increased litigation risks, major compliance costs, and crucially, barriers to innovation. Using a comparative analysis of existing proposals, caselaw, and international AI regulations, this Comment introduces a hybrid tiered liability framework that scales regulatory obligations based on company capacity and the risk level of the AI application. The framework’s goal is to hold companies accountable without stifling innovation for smaller market entrants. As a result, this model offers a balanced path forward for regulating generative AI content in the digital age.

Democrats and Republicans strongly disagree about climate policy. This Article explains how these political disagreements can affect greenhouse gas emissions of private-sector corporations. Combining a hand-collected dataset tracking the careers of U.S. state governors over two decades and a proprietary emissions database, I find that companies release more greenhouse gas emissions when their headquarter state has a Republican governor. To establish a causal connection between gubernatorial partisanship and corporate emissions, I analyze the effect of close elections. After a Republican replaces a Democratic governor in a closely contested election, which cannot be easily predicted in advance, companies headquartered in that state increase their greenhouse gas emissions. These empirical results are consistent with anecdotal evidence that companies face significantly more pressure from Democratic governors to adopt climate-friendly policies than from Republicans. Companies may increase carbon emissions during Republican rule because they anticipate that these governors are less likely to propose new climate regulations or enforce existing environmental laws.

The Article’s findings have three major legal and policy implications. First, it suggests that managers may use discretion over business operations to cater to the preferences of powerful politicians, in both shareholder- and stakeholder-centric models of corporate governance. Second, the empirical analysis in this Article suggests that voluntary pledges by corporations to reduce pollution have limited effect. Elections have consequences for corporate emissions, and voluntary corporate actions may not suffice to reduce pollution as long as approximately half of state governors are skeptical about climate change mitigation. Thus, the findings raise questions about whether corporate social responsibility (CSR) is an effective substitute for a broader political consensus on climate change mitigation. Finally, this Article provides a novel justification for mandatory corporate disclosure of greenhouse gas emissions. Investors, equipped with information about firms’ climate impact, will be able to push managers to become more prosocial and diminish the magnitude of the political carbon cycle, assuming that investors are willing and able to use that information.

The Capital Market doesn’t get much love these days. It is viewed with suspicion in many quarters, and graduates who take jobs related to finance are described as “selling out.” Rather than defending them on their own terms, many seem to think that they are valuable as a means to achieve other—largely unrelated—social goals. This Article, adapted from a pair of lectures in the first quarter of 2024, pushes back against these perceptions. It explains the vital role that the capital market plays in our society and cautions against grafting on secondary objectives. Rather, efforts to regulate the capital market should focus on furthering its primary function so as to promote the common good it already serves.

Bad actors launder dirty money through cryptocurrency non-custodial service providers, including cryptocurrency unhosted wallets, non-custodial mixers, and decentralized exchanges (DEXs). Unlike banks and other traditional financial intermediaries, these providers do not take custody of payment assets. Therefore, the Bank Secrecy Act (BSA) cannot require them to comply with its substantive obligations, such as monitoring and reporting of suspicious payment activities associated with money laundering. As a result, law enforcement agencies are unable to obtain useful reports and records to effectively investigate money laundering and prosecute bad actors.

To address this issue, this Article analyzes how cryptocurrency non-custodial service providers, despite not taking custody of payment assets, can retain a certain degree of controlling power over payment assets in three key dimensions: (1) clearing and settlement, (2) asset ownership, custody, and balance sheet recording, and (3) governance. This Article argues that the BSA should cover some of the cryptocurrency non-custodial service providers that can retain a certain degree of controlling power over payment assets. This Article argues that the BSA’s definition of “money transmitting business,” which merely considers the second dimension, is unable to accurately measure the collective degree of control a cryptocurrency service provider has over payment assets, namely cryptocurrencies. As such, this Article argues that the BSA should measure the collective degree of controlling power a service provider has over payment assets through all three dimensions. These three dimensions serve as variables within this framework: the more variables present, the greater the degree of collective control a provider has over cryptocurrency payments, and the more likely it is to fall within the scope of the regulatory perimeter of the BSA.