VOLUME 15 • COLUMNS
RULE IN GIBBS: THE CONTINUATION OF TERRITORIALISM BY OTHER MEANS?
Louis Noirault1LL.M. 2025, Harvard Law School, Master’s in Law and Finance 2024, Sciences Po Law School, Bachelor’s of Art 2020, Sciences Po. I am grateful to Yun Kei Chow, Christopher Kies, Felipe Gomes De Almeida Albuquerque, and the Harvard Business Law Review editors for their help and insightful comments. All errors are mine.
The 19th-century Rule in Gibbs has recently been given a new life by the England and Wales High Court: the Court held that a debt can only be discharged under the law chosen by the parties to govern the contract. This principle strikes at the core of the debate over which jurisdiction should be in charge of the insolvency proceedings of international companies. Universalists argue in favor of centralizing proceedings in one single jurisdiction, while territorialists believe that each jurisdiction should govern the assets located in its territory. This Column argues that the Rule in Gibbs has been mistakenly lumped together with territorialism. It questions both the efficiency and the moral rationales for favoring universalism over the Rule in Gibbs. In doing so, it opens the way for the Rule in Gibbs to be given more serious consideration by scholars and policymakers in this normative debate.
VOLUME 15 • COLUMNS
BASEL III ENDGAME: SHOULD WE STRENGTHEN CAPITAL REQUIREMENTS FOR BANKS?
Nick Wu2J.D. Candidate (2026), Harvard Law School. I am deeply thankful for the patience of my friends and their valuable feedback during the drafting process.
Policymakers, agencies such as the Federal Reserve and other regulators, and financial institutions all have a vested interest in the health of the American financial system. And the health of the banking system largely depends on the level of bank capital. Therefore, since the Global Financial Crisis of 2008, regulators have been working on a supervisory framework—aptly named “Basel III endgame”—that would strengthen capital requirements for banks. An initial proposal was released in July 2023, followed by a re-proposal in September 2024. Both have generated a lot of discourse and vehement support and opposition. Supporters argue that strengthening capital requirements would mitigate risk and help prevent financial panics, but critics are quick to point out that doing so would hurt banks’ profitability while raising borrowing costs. After analyzing policy arguments on both sides, this piece will make a normative argument that Basel III endgame should be further rolled back and will also briefly explore the future (or lack thereof) of Basel III endgame under President Trump’s second administration.
VOLUME 14 • ISSUE 2 • PRINT
PRIVATIZING DEPOSIT INSURANCE
Christina Parajon Skinner
For the past 90 years, the federal government has provided insurance to bank depositors against the risk of loss associated with a bank’s failure. In many ways, this insurance scheme—managed by the Federal Deposit Insurance Corporation (“FDIC”)—is the bedrock of banking law. FDIC insurance aims to preempt bank runs by ensuring that depositors remain confident in the security of their funds, even when turbulent times hit. In practice, however, FDIC insurance has suffered from one key design flaw—it has never managed to reconcile the tradeoffs between the moral hazard it produces and the financial stability it ensures. In large part, this is due to policymakers’ inability to credibly commit to maintaining the limits on insurance payouts that Congress statutorily sets. Over the past forty years, the cap has consistently been lifted to protect uninsured depositors in each successive banking crisis.
VOLUME 14 • ISSUE 2 • PRINT
BANK RUNS DURING CRYPTO WINTER
Gary B. Gorton & Jeffery Y. Zhang
“Crypto Winter” refers to a systemic event that occurred in the cryptocurrency ecosystem—what we call “crypto space”—in 2022. Crypto space was wracked by plummeting crypto prices, the troubles of a large crypto hedge fund, and runs on many crypto lending platforms. Several large crypto firms went bankrupt. Collectively, everyday people lost billions of dollars. And crypto investors are still feeling the aftershocks.
VOLUME 13 • ISSUE 2 • PRINT
BANKING ON A CURVE: HOW TO RESTORE THE COMMUNITY REINVESTMENT ACT
Peter Conti-Brown and Brian D. Feinstein
This Article suggests that the federal government’s primary financial-regulatory tool for combating wealth inequality is broken. Intended to push banks towards deeper engagement with lower-income and minority communities, the Community Reinvestment Act (CRA) of 1977 has failed to meaningfully reduce the prevalence of “banking deserts” across lower-income communities or to reduce the racial wealth gap. As regulators circulate a proposed overhaul and the prospect of generational reform appears within reach, there is a danger that the CRA’s current moment in the sun will pass without the law being substantially improved.
VOLUME 10 • COLUMNS
THE DEMOCRATIC DIGITAL DOLLAR: A DIGITAL SAVINGS & PAYMENTS PLATFORM FOR FULLY INCLUSIVE STATE, LOCAL, AND NATIONAL MONEY & BANKING SYSTEMS
Robert Hockett3† Edward Cornell Professor of Law and Finance, Cornell Law School; Visiting Professor of Finance, Georgetown McDonough School of Business; Senior Counsel, Westwood Capital, LLC; Co-Founding Director, Digital Fiat Currency Institute; Board Member, Public Banking Institute. The author has drafted legislation that would institute a version of the plan here discussed in the State of New York. This legislation has now been proposed by Assemblyman Ron Kim in the New York State Assembly and Senator Julia Salazar in the New York State Senate. See Empire State Inclusive Value Ledger Establishment & Administration Act, H.R. 8686, 2019 Assemb. Reg. Sess. 2019-2020. (N.Y. 2019), https://assembly.state.ny.us/leg/?default_fld=&bn=A08686&term=2019&Summary=Y&Actions=Y&Text= Y&Committee%26nbspVotes=Y&Floor%26nbspVotes=Y.
Many national and subnational units of government see a need for more inclusive money, payment, and retail banking systems for the capture, storage, and transfer of spendable value among their constituents. Existing and still proliferating payments platforms, most provided by for-profit private sector entities, exclude too many people, and extract too much value in the form of needless transaction charges and other rents, to be up to the task of efficiently affording this essential commercial and financial utility to the full public on sensible terms. This Article sketches a smart-device-accessible platform— the ‘Digital Dollar Platform Plan’—which, thanks to new payment technologies, can easily be put in to place and administered by any unit or level of government with a view to supplying this critical commercial and financial infrastructure to all of its constituents.
VOLUME 9 • ISSUE 1 • PRINT
NONBANK CREDIT
Christina Parajon Skinner
Investment funds increasingly substitute for banks in supplying credit to the economy. Regulators have paid considerable attention to the potential financial stability risks of this migration to nonbank credit. This Article, however, argues that certain private investment funds (and the asset management institutions that house them) can enhance financial stability by promoting economic resilience. Specifically, it argues that certain private funds are incentivized and structured to supply the economy with a countercyclical source of credit—turning on their credit spigots precisely when banks are likely to turn theirs off. In doing so, these private funds have the potential to keep the economy buoyant in periods of economic downturn or distress.
VOLUME 6 • COLUMNS
CAN VOLUNTARY PRICE DISCLOSURES FIX THE PAYDAY LENDING MARKET?
Jim Hawkins
Eric J. Chang’s provocative article, www.PayDayLoans.gov: A Solution for Restoring Price-Competition to Short-Term Credit Loans—which, as its title suggests, proposes to facilitate price competition in the payday lending market by creating a federal online exchange for payday lenders to post lending rates—has sparked thoughtful reactions among consumer borrowing experts. This Response provides constructive criticism to Chang’s proposal, arguing that such an exchange is unlikely to meet its goal of restoring price competition and offering tweaks that would raise the likelihood of doing so.
VOLUME 6 • COLUMNS
THE SWAPS PUSHOUT RULE: MUCH ADO ABOUT THE WRONG THING?
John Crawford and Tim Karpoff
A notably bitter battle over financial reform in the wake of the crisis of 2008 has centered on the Swap Pushout Rule: a Dodd-Frank mandate that federally insured depository institutions—i.e., banks—refrain from entering into certain derivatives contracts. After several of the largest U.S. financial institutions successfully lobbied to roll back the Rule, the rollback inspired intense criticism, but the critiques have not accurately reflected what is really at stake for the banks or the public. While the Rule was sold as an anti-bailout measure, this Article argues that the Rule would have been ineffective as a means of preventing further bailouts of systematically important bank holding companies. The Article further argues that the primary reason systematically important bank holding companies care about the Rule is that it costs more to fund these swaps if they are booked at a different legal entity, such as a broker-dealer, rather than at a bank.
VOLUME 5 • COLUMNS
WHY THE LACK OF INTEREST IN INTEREST? ANOTHER LOOK AT PREFERENCES AND SECURED CREDITORS
Samuel D. Krawiecz
The Bankruptcy Code (sometimes referred to herein as the Code) disallows preferential payments made to creditors. Preference law is “designed to prohibit insolvent debtors, on the eve of filing for bankruptcy, from paying off their debts held by ‘preferred’ creditors—those creditors whom the soon-to-be bankrupts wish to favor.” The preference rule has five elements. The payment must be (1) a transfer to a creditor, (2) for the benefit of an antecedent debt, (3) while the debtor was insolvent, (4) within ninety days of the filing of the petition (unless the creditor is an insider), and (5) the payment must “enable such creditor to receive more than such creditor would receive” in a Chapter 7 liquidation. This Article will analyze how the fifth and last element is applied, particularly with regard to fully secured creditors.
VOLUME 5 • ISSUE 1 • PRINT
ANTI-HERDING REGULATION
Ian Ayres and Joshua Mitts
In some contexts, an individual’s choice to mimic the behavior of others, to join the herd, can increase systemic risk and retard the production of information. Herding can thus produce negative externalities. And in such situations, individuals by definition have insufficient incentives to separate from the herd. But the traditional regulatory response to externality problems is to impose across-the-board mandates. Command-and-control regulation tends to displace one pooling equilibrium by moving behavior to a new, mandated pool. Mortgage regulators, for example, might respond to an unregulated equilibrium where most homeowners start with 2% down by imposing a requirement that causes most homeowners instead to place 10% down. But this Article shows that society can at times be better off if regulation induces separating behaviors by regulated entities. We evaluate a variety of mechanisms including licenses, subsidies, and regulatory variances as well as regulatory menus and heterogeneous altering rules that can incentivize a limited number of regulated entities to take the path less chosen. Anti-herding regulation provides a new means to attend to ways that mimicry can both suppress the production of information and exacerbate systemic risk.
VOLUME 4 • ISSUE 1 • PRINT
REGULATING CAPITAL
Prasad Krishnamurthy
Most observers agree that the excessive debt or leverage of systemically important financial institutions (SIFIs) was a central reason why the housing crash of 2007–2009 led to a recession. The Dodd-Frank Act authorizes the Financial Stability Oversight Council and the Federal Reserve to adopt new prudential standards for regulating these institutions. A fundamental challenge for these standards is how to restrain the leverage of SIFIs by prescribing a minimum amount of capital or equity they must hold relative to their assets.
VOLUME 2 • ISSUE 2 • PRINT
DYNAMIC RESOLUTION OF LARGE FINANCIAL INSTITUTIONS
One of the more important issues emerging out of the 2008 financial crisis concerns the proper resolution of a systemically important financial institution. In response to this, Title II of Dodd-Frank created the Orderly Liquidation Authority, or OLA, which is designed to create a resolution framework for systemically important financial institutions that is based on the resolution authority that the FDIC has held over commercial bank failures. In this Article, we consider the various alternatives for resolving systemically important institutions. Among these alternatives, we discuss OLA, a European-style bail-in process, and coerced mergers, while also extensively focusing on the bankruptcy code. We argue that implementing several discrete modifications to Dodd-Frank, as well adopting an ambitious Chapter 14 proposal written by a working group at the Hoover Institution is the best way forward for establishing a strong resolution framework.
VOLUME 2 • ISSUE 2 • PRINT
THE NEED FOR SPECIAL RESOLUTION REGIMES FOR FINANCIAL INSTITUTIONS—THE CASE FOR THE EUROPEAN UNION
VOLUME 1 • COLUMNS
THE COCONUNDRUM
Frederick Ryan Castillo
Digging deeper into their analytical toolbox, policymakers, academics, and regulators are increasingly exploring whether, and to what extent, a system of contingent capital can strengthen the resilience of the banking sector. The global financial crisis unearthed fragile and troubled banks, riddled with excessive leverage, poor quality capital buffers, and liquidity problems. Because these institutions were deemed “too big to fail,” governments were forced to intervene and prop them up by way of costly, taxpayer-funded bailouts. With the benefit of hindsight, regulators are now looking at contingent capital as a potentially speedy and less costly alternative for recapitalizing banks in periods of financial distress.