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| Roberta Karmel |
An Orderly Liquidation Authority is Not the Solution to Too-Big-To-Fail, 6 BROOKLYN J. CORP., FIN. & COMM. L. 1 (2011)
Although the Dodd-Frank Consumer Protection and Wall Street Reform Act of 2010 (“Dodd-Frank”) is an improvement over the financial regulatory system that preceded it, Karmel argues that it will not abolish “too big to fail” because the major banks and other financial institutions in the capital markets are bigger now than they were before the meltdown of 2008 and too complicated. Furthermore, she states that these financial institutions have grown to their current size and shape because they were permitted, and even encouraged, to do so by the very same financial agencies that are now supposed to do a better job of regulating them. These regulators did so for a variety of reasons that have not been altered by Dodd-Frank.
In her article, Karmel sets forth the provisions of Dodd-Frank that deal with the mechanisms for closing banks and providing liquidity in a financial crisis, and suggests that, although the orderly liquidation procedures of Dodd-Frank might make the resolution of a failed mega-bank less chaotic, these procedures will not prevent any financial institutions from being too big to fail. Also, she discusses the dynamics of the creation of the mega-banks, and how they grew, through the destruction of the statutory geographical restrictions on banking and the separation of commercial and investment banking through interpretations by the banking regulators that were first upheld by the courts, and much later endorsed by Congress. Finally, this Article will discuss various mechanisms that have been proposed for dealing with the size and complexity of the mega-banks.
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| James Park |
Rules, Principles, and the Competition to Enforce the Securities Laws, 100 CALIF. L. REV. 115 (2012)
Though the Securities and Exchange Commission (SEC) is the primary securities enforcer, multiple enforcers are active in enforcing the securities laws. Some scholars argue that enforcement should be centralized to eliminate or control enforcers with incentives to overenforce, while others contend that competition checks the SEC from a tendency to underenforce. The debate is characterized by a focus on whether the system produces an optimal quantity of enforcement.
Park assesses the centralization debate through a different lens, emphasizing differences in the quality of enforcement, particularly the values that influence and are expressed by enforcement. To frame the discussion, he draws a distinction between two categories of enforcement: rule-enforcement and principle-enforcement.
The choice between a centralized and decentralized enforcement system is fundamentally a choice between a one-dimensional and multidimensional conception of the values relevant to securities enforcement. Proposals to centralize securities enforcement are motivated by a desire to eliminate the conflicts that can arise between enforcement approaches that reflect different values. The cost of such centralization is that the advantages diverse enforcers bring to the table will be eliminated. Park concludes that a decentralized system is best justified by recognizing the particular strengths of different enforcers rather than focusing on whether an optimal amount of enforcement is produced.