In trading the preeminent risk-free security, the $21 trillion U.S. Treasury market supports the country’s borrowing needs, financial stability, and investor appetite for a safe asset. Straddling the nexus between a securities market and a systemically essential institution, the Treasury market must function at all costs, even if other markets fail.
This Article shows that Treasury market structure is fragile, weakened by a regulatory...
The 2008 financial crash precipitated a liquidity crisis of global proportions. With dollar funding shortages threatening the global financial system, the Federal Reserve turned to foreign central bank liquidity swaps as a key component of its crisis response. First used in the 1960s during the Bretton Woods era, foreign central bank liquidity swaps are essentially contracts between two central banks to lend each other currency....
In the past decade, robo-advisors—online platforms providing investment advice driven by algorithms—have emerged as a low-cost alternative to traditional, human investment advisers. This presents a regulatory wrinkle for the Investment Advisers Act, the primary federal statute governing investment advice. Enacted in 1940, the Advisers Act was devised with human behavior in mind. Regulators now must determine how an automated...
Introduction A central lesson of the financial crisis of 2007–2008 was that firms behaving like banks should be regulated like banks. Nonbanks that perform the same economic function as banks—so-called “shadow banks”—create the same risks and demand the same regulatory response as depository institutions with bank charters. The principal legislative reform passed in the wake […]
The Supreme Court’s denial of certiorari in Madden v. Midland Funding, LLC leaves a dangerous precedent standing in the Second Circuit that poses a significant risk to the consumer-credit market writ large. This Note highlights the dangers that the Madden ruling presents and in so doing cautions against the adoption of the ruling by other circuits. Moreover, given the centrality of New York in the financial economy...
In the aftermath of the global financial crisis, Congress significantly broadened the reach of various regulatory entities through the Dodd-Frank Act. One particular power, found in section 113 of the Act, gives the newly formed Financial Stability Oversight Council (FSOC) the authority to designate nonbank financial institutions (NBFIs) as systemically important financial institutions...
Insufficient liquidity can trigger fire sales and wreak havoc on a financial system. To address these challenges, the Federal Reserve (the Fed) and other central banks have long had the authority to provide financial institutions liquidity when market-based sources run dry. Yet, liquidity injections sometimes fail to quell market dysfunction. When liquidity shortages persist, they are often symptoms of deeper problems plaguing the financial system....