August 14, 2015
icon Modest Ambitions
Posted by Philip Wallach

In this and a subsequent post I want to respond to David’s review of To the Edge. David says some very generous things about the book and its willingness to “take law and governance very seriously” as it tries “to figure out what else [other than law] mattered in responding to that collapse.” But he then laments that I sometimes seem to pull up shy of “taking a position” on the legitimacy of important crisis responses, offering discussion that “is more dispassionate than judgmental,” and noting that this lack of judgment leaves it hard for the reader to know exactly how my “legitimacy inputs – law, votes, trust, and accountability” would be applied in a future crisis.

To these charges, I plead “no contest.” Anyone hoping that the book will offer a straightforward account of how crisis responders should legitimate their actions, in the eyes of Philip Wallach of the Brookings Institution or in the eyes of the nation, will be disappointed. But I don’t feel apologetic about failing to live up to those expectations; to the contrary, I’d like to mount an aggressive defense of agnosticism.

David says that I keep my “cards close to my vest,” but that isn’t quite it. The reason I first started writing the book, and indeed that I got caught up in trying to understand the ins and outs of the crisis responses at all, was that I was struck by what seemed like wanton disregard for the law as the government fashioned its bailouts. I understood why so many people were angry about public money flowing out to irresponsible bankers, of course, but I was frustrated by how little attention people (including the media and our legislators) were paying to the rule of law questions. As my research eventually got much more serious (not until after most of the dust had settled), I expected to find that there had been a lively if not prominent debate about the legal issues in real time, but I was largely disappointed. This blog and some others had been pondering various puzzles (e.g., how Delaware law would complicate Bear Stearns’ sale to J.P. Morgan, whether the Fed’s emergency lending powers really allowed it to take most of AIG’s equity as “collateral”), but it seemed that those who tried to raise concerns were either steamrolled or simply ignored in the mad rush to combat the escalating crisis. Eventually more evaluative and in-depth law review articles emerged, notable among them: David’s seminal article with Steven Davidoff; a rather inflammatory accusation of “The Illegal Actions of the Federal Reserve” by Chad Emerson; a detailed dissection of why the Fed’s actions were so troubling by Alexander Mehra; and an extended defense of the Fed by José Gabilondo.

Two things struck me about this lawyerly discussion: it was highly technical and was just about totally ignored by the policy actors fashioning reforms of the implicated laws. That isn’t meant of a slight of these pieces, but as an observation about the place of legal discussion in the efforts to sort out the aftermath of the crisis. The people in a position to do something about what had struck me as offenses to the rule of law (which mostly turned out to be less wanton, at least, than they initially seemed) apparently had other fish to fry.

As I emphasize throughout the book (and in my first post here), I do not think that the right implication to draw from this fact is that “law didn’t matter.” But the implication I drew was that it would not be a particularly useful application of my energies for me to take on the mantle of retrospective judge of legality; that would have made for some good fun in joining the lawyerly arguments, but would have had very little impact. Instead, I wanted to get away from the mindset of applying a set normative framework for legitimacy and move toward asking, well, what was it that people did care about as they formed judgments about the Fed and Treasury’s responses to the financial crisis?

As David very nicely puts it, I ended up focusing on “a tincture of legality, legislative endorsement, trust, and accountability.” As I drafted the book, I had “inherent legitimacy” as a separate category, too, and perhaps I should have left it that way; the idea was that people’s direct apprehension of an action and its results would matter quite a lot, apart from what their legislators had to say about it. Results surely matter a great deal in people’s evaluations. In the end, I rolled this into the category of “democratic legitimacy,” along with legislators’ approval. In any case, I arrived at those factors inductively, basically through examining what kinds of things people were shouting about.

Why do I think this kind of positive analysis likely to be more useful than a normative evaluation on legal or philosophical grounds? If you hang around too many academic social scientists, you might expect some kind of bloviating answer about how careful measurement, statistical analysis, and causal inference will allow thinkers to find the key to governing more effectively. If there are any policy areas in which this vision is realized, financial crisis response is not among them. To my mind, anyone claiming to weigh out the public’s responses to the responses and carefully discern the formula for legitimacy would be selling snake oil.

I think the bar is much, much lower for making a contribution to the government’s thinking about legitimation, because my impression is that government officials dealing with financial crises are in the habit of addressing legitimacy only tangentially, as an afterthought. Economists think about first- and second-best policy choices, lawyers think about how they can protect their clients, and investment-bankers-cum-Treasury Secretaries think about driving a hard bargain. Politicians think about legitimacy, but one of the most remarkable things about our past round of crisis responses was how marginal politicians were. My hope is that just providing officials at the Fed and Treasury with a vocabulary for thinking seriously about legitimacy will cause them to have a little less tunnel vision next time around.

If it sounds condescending to suggest that the government barely even thought about legitimacy issues during the last crisis, perhaps it is fitting that I end with an obligatory presentation of Wallach’s Law, which is that everything is more amateurish than you think, even after accounting for Wallach’s Law. Everything: financial crisis responding and post-response analysis are no exceptions.

Next time: onto the question of what kinds of more concrete policy recommendations I did manage to make in the book.

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August 12, 2015
icon One Last Lap around Lehman
Posted by Philip Wallach

Many thanks to David for inviting me to grace the distinguished pages of the Conglomerate, which was a great help to me in understanding the corporate law controversies surrounding the government’s crisis responses as I wrote my book.  And many thanks for the kind words he has for my book in his New Rambler review, as well as for the criticisms, some of which I will address here in the coming days.

Before getting to those, in this first post I want to revisit a discussion that David has previously noted, about the Fed’s controversial claim that it faced insuperable legal obstacles to rescuing Lehman Brothers back in September 2008.  Peter Conti-Brown and I went back and forth (and back and forth) on this question.  We also inspired some interesting posts from Carolyn Sissoko (here and here) and Brad DeLong (here and here).  Peter recently stepped back and extracted lessons from this exchange, but rather than graciously let him have the last word I will do the same.

As I see it, the debate goes something like this.  I say that we have to at least take seriously the Fed’s claim that when it looked at Lehman Brothers, it saw a hopelessly insolvent financial institution—one that did not possess sufficient collateral to secure a loan of the magnitude apparently needed “to the satisfaction of the Federal Reserve Bank.”  Given that factual judgment (or estimate, really) about Lehman, it is clear that § 13(3) of the Federal Reserve Act says that they may not extend a loan.

Peter and some other respondents all seem to think that I am being far too literal in reading the law as we try to make sense of what the Fed’s Lender of Last Resort role practically entails.  By their lights, the whole notion of “solvency” apart from having the support of the central bank is too indeterminate to be of any use, and by extension the same is true of the “satisfactoriness” of an institution’s collateral.  (I think the logic is: If the central bank decides to throw its full support behind the institution, it will survive and return to profitability, and thus loans will get repaid with interest eventually.)  Thus the law doesn’t actually provide any real guidance to the Fed in figuring out which institutions it should save, and when the Fed decides not to save an institution, it oughtn’t be allowed to blame that choice on the law.  Its pronouncements doing so in the case of Lehman are to be understood as disingenuous excuses.

If I’m being honest, I have to admit that I don’t know enough about how bankers (central or otherwise) think about collateral adequacy to get inside the heads of the New York Fed officials charged with making sense of this statutory language. (Sadly, Fed officials and lawyers have not been forthcoming in clarifying their thinking in the nearly seven years since their momentous decisions.) I’d be delighted if readers with some practical experience would enlighten me. But in my ignorance, I continue to believe that Peter’s take renders a statutory constraint a nullity in a way that does not sit well with accepted practices of statutory interpretation. To put it bluntly, I think he is counseling a bad reading of the law.

Now, you might think that sounds insulting—and I suppose it does, especially since Peter has an excellent J.D. and legal experience and I just play a legal analyst in Belt-wonk-o-land—but I really don’t mean it to be! Sometimes, willfully misreading statutory language may be the right thing to do; after all, most of us think that following the law is ultimately only instrumentally valuable, and for central banks to be truly efficacious in fending off crises they may need to transcend the legal limitations that their legislative creators unwisely saddled them with. “What did the Fed’s underlying statutes require of it?” and “What should the Fed have done, given its sense that the financial system was hanging on by a thread?” need not have the same answer.

That’s what I take away from Brad DeLong’s intervention, too.  Brad notes that it is important to remember that the Federal Reserve Banks are not government agencies, but government-chartered corporations, and ones that are perhaps expected to act ultra vires during crises—preferably with the tacit or, better, explicit consent of the government itself, such that no nasty legal consequences ought to flow from those legally problematic actions.  He sees that this creates something a puzzle baked into the institutional and legal structure of central banks:

Robert Peel’s remarks around the Recharter of 1844 about just why they were writing the Recharter to forbid the Bank of England to do things in a crisis that they did, in fact, hope it would assume responsibility and do are, I think, very interesting…

He likewise notes that “the Legal Realists” would be dubious of seeing any such requirement, expected to be waived rather than enforced, as a genuine legal constraint.

To the extent there’s any disagreement, it’s largely terminological. I don’t have any objection to the idea that the Fed could have gotten away with making a loan to Lehman—it would have been well-nigh unthinkable for a judge to step into the middle of that transaction in any time frame that matters, even if anyone had standing, which probably they wouldn’t. (I’m sure the AIG case is popping into many people’s heads now, and I promise I’ll get to it later in my stint here). I am very ready to agree that the language in § 13(3) was almost certainly not an enforceable, effective legal constraint. I just don’t understand why that should make us pretend that the law is, in its very language, devoid of meaning or irrelevant to the situation. If the Fed’s powerful lawyers said that, given a negative assessment of Lehman’s collateral quality, the Fed was not authorized by the statute to lend, I think that would have been a correct interpretation of the statutory language. Which, to belabor the point, wouldn’t necessarily be the same as saying that the loan should not be made, all things considered.

Perhaps more substantively, I also insist that clear-eyed, all-things-considered decision-makers will take the law into account even if they don’t treat it as determinative. The law structures expectations rather than controlling actions. In this case, by setting collateral requirements, it specified exactly how far the Fed would be sticking its neck out when making a loan to a potentially failing financial institution. And that is really the right metaphor, because the question is always about whether the independent central bank is going to get its head chopped off for dutifully playing the role of financial crisis savior. Whether rightly or wrongly, Americans don’t want to live with a central bank empowered to do, literally, anything to fight off financial crises, though they surely want the crises fought off. In a sense, the law is there to make it politically risky for the central bank to embrace its awesome powers too enthusiastically.

The more I think about the problem in this way, the more enthusiastic I am about Dodd Frank § 1101 and its requirement, now 12 U.S.C. 343(3)(B)(iv), that the Fed get the Treasury Secretary’s approval for any emergency non-bank lending. The Treasury Secretary in such a situation should not be allowed to prevaricate while the Fed sticks its neck out and takes all the risk. He should either support the Fed, and in doing so bring along the President’s legitimating blessing, or clearly prevent the Fed from putting itself in a politically untenable situation in which its future depends on the public’s devotion to the idea of a non-governmental independent central bank. For better or worse, in our twenty-first century democracy, the Fed needs a sturdier base of institutional support than that.

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icon Introducing Guest Blogger Philip Wallach
Posted by David Zaring

Philip Wallach has written a legal history of the financial crisis, To The Edge.  I reviewed it over at the New Rambler Review and a we've had occasion to discuss it on the blog.  We thought we'd have him in to talk about the crisis and the legal response to it, as well as other subjects of his fancy.  Philip is a fellow in governance studies at Brookings.  Welcome! 

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August 11, 2015
icon Call for Papers for Conference on Comparative Business and Financial Law
Posted by David Zaring

The Younger Comparativists Committee (YCC) of the American Society of Comparative Law (ASCL) is pleased to invite submissions for its second workshop on comparative business and financial law to be held on February 5-6, 2016 at UC Davis School of Law in Davis, California. The purpose of the workshop is to highlight, develop, and promote the scholarship of new and younger comparativists in accounting, banking, bankruptcy, corporations, commercial law, economics, finance, and securities.
Up to fifteen papers will be chosen from those submitted for presentation at the workshop pursuant to this Call for Papers. The workshop audience will include invited young scholars, faculty from UC Davis School of Law and Graduate School of Management, faculty from other institutions, and invited guests.
Submissions will be accepted from scholars who have held a full-time academic appointment for no more than ten years as of June 30, 2016.
Submission Instructions
To submit an entry, scholars should email an attachment in Microsoft Word or PDF containing an abstract of no more than 1000 words before October 15, 2015, to the following address: Please title the email “YCC Business Law Workshop – [Name].” Abstracts should reflect original research that will not yet have been published, though may have been accepted for publication, by the time of the workshop. Abstracts should include a cover page with the author’s name, title of the paper, institutional affiliation, contact information, as well as the author’s certification that she/he qualifies as a younger scholar.
Scholars may make only one submission. Both individual and co-authored submissions will be accepted. For co-authored submissions, at least one author must qualify as an eligible younger comparativist.
Invitees will be selected via a blind review by a workshop selection committee. Authors of the submissions selected for the workshop will be notified no later than November 15, 2015. There is no cost to register for the workshop but participants are responsible for securing their own funding for travel, lodging and other incidental expenses. A limited number of travel stipends may be awarded to scholars from ASCL member schools who demonstrate financial need. If you
would like to be considered for a travel stipend, please make that request in your submission.
Final papers for the workshop will be due no later than January 18, 2016.
Acknowledgements and Questions
The YCC gratefully acknowledges the support of UC Davis School of Law and the California International Law Center. Please direct all inquiries to Professor Afra Afsharipour, Chair of the Program Committee, by email at or telephone at 530-754-0111.
Please feel free to share this Call for Papers with any colleagues who may be interested.
The Program Committee:
Afra Afsharipour (UC Davis School of Law) (Chair)
Martin Gelter (Fordham University School of Law)
Haider Ala Hamoudi (University of Pittsburgh School of Law)
Virginia Harper Ho (University of Kansas School of Law)
Workshop Selection Committee:
Afra Afsharipour (UC Davis School of Law)
Martin Gelter (Fordham University School of Law)
Haider Ala Hamoudi (University of Pittsburgh School of Law)
Virginia Harper Ho (University of Kansas School of Law)
Andrew Tuch (Washington University School of Law)
YCC Board of Directors:
Afra Afsharipour, Professor of Law, University of California - Davis
Richard Albert, Associate Professor, Boston College, Chair
Virginia Harper Ho, Associate Professor, University of Kansas, Treasurer
Sally Richardson, Associate Professor, Tulane University
Ozan Varol, Associate Professor, Lewis & Clark, Vice Chair & Secretary

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August 10, 2015
icon Family Film Blogging (YA Edition): Paper Towns and Me and Earl and the Dying Girl
Posted by Christine Hurt

The end-of-summer blahs took me and the two teenagers to see the latest Young Adult book-turned-movie selections.  These aren't sci-fi dystopian movies with a little too much violence, these are angsty teen films with a little too much profanity.  And, they are the same movie.  In both, a male senior is about to graduate from high school and a vague friend of the female variety enters the picture suddenly.  By the time the female friend exits, our male protagonist has been nudged out of his comfort zone and learned to appreciate his friends and family.  The female friend is ancillary and fairly symbolic.  Some differences exist.

Paper Towns.  If you have heard of The Fault in Our Stars, then you may be familiar with John Green, the wonderkind author of several YA books, creator of the YouTube educational sensation Crash Course, and host of the Mental Floss YouTube channel.  My eighth-grader is a big fan of all things John Green, but especially Paper Towns, the book.  So, I sped-read the book and braced myself for the film.  Quentin (or "Q") has grown up next door (or across the street in the film version) to Margo Roth Spiegelman, who is generally called by her full name, and has been secretly in love with her in high school, though MRS barely acknowledges him.  As you probably can guess, Q is a big nerd with two nerdy friends, and MRS is super-cool and dating a super-handsome jock.  But, before graduation, MRS crawls into Q's bedroom late at night and convinces him to accompany her on a revenge fantasy aimed at her now ex-boyfriend and former friends.  Then, just as Q believes he will wake up the next day and see his new girlfriend, or at least lunch buddy, at school, MRS disappears.  Q spends the last few weeks trying to solve the mystery of where MRS has gone, following clues he believes that she has left for him.  The book (to me) gets rather confused at the end as to which clues MRS intentionally left for Q and why, and the movie is no clearer.  However, the movie is clearer on the point that Q's transformation comes not from finding (and keeping) MRS, but from the journey.  In the short few weeks that the movie covers, Greg does things he otherwise wouldn't do:  breaking and entering, going to parties, driving cross-country, skipping school, etc.  Unfortunately, the movie has to truncate Q's sleuthing, so the mystery of where MRS has gone is not quite as interesting, but the madcap road trip from Orlando to upstate New York is still entertaining.  The bottom line is that Q is very likable and watchable, and the eighth-grader felt the film lived up to the book.  

Me and Earl and the Dying Girl.  This film is also adapted from a YA novel, but is artsier and definitely has an indie-vibe.  The filmmaking feels a little surreal, like Scott Pilgrim vs. the World or 500 Days of Summer.  Because it aims a little higher than Paper Towns, it's also a little grittier, with more adult language and situations, even though the characters are still high school seniors.  Our senior boy is Greg, who has survived high school by being invisible, drifting around the various cliques that he has identified and staying just vaguely friendly with all of them, but not enough to alienate any others.  He eats lunch in the history teacher's office, with his "co-worker," Earl.  He and Earl have been friends for years, but Greg keeps Earl at arm's length, like the rest of the world, even though they have made 43 (really bad) stop-action and live-action films together.  Greg's mom forces Greg to visit a fellow student, Rachel, who has recently been diagnosed with leukemia.  Greg's ability to stay untouched by those around him is put to the test as he begrudgingly begins to visit Rachel, ultimately growing very attached.  In the process, Rachel forces Greg to do things he otherwise wouldn't do, like eat in the school cafeteria and apply to college.  To a grown-up, this movie is superior to Paper Towns because of the better script and much better acting, but I think my teenagers thought it was too depressing.  When they realized that Park & Rec's Ron Swanson was in it, they were cheering for a comedy, but that was not to be.  They loved Earl, who is the foul-mouthed comic relief and soul of the movie, but they were taken aback by the non-YA depiction of Rachel's struggle.  And when I say Rachel's struggle, I mean Greg's.  The audience really learns very little about Rachel until the end of the movie, and I was not that attached to her.  However, I was very moved by Greg's pain being a witness to Rachel's struggle.  In fact, it was a little hard to watch on a breezy summer afternoon.

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August 06, 2015
icon More On Wallach And The Fed During The Financial Crisis From Peter Conti-Brown
Posted by David Zaring

My colleague Peter Conti-Brown is interested in Philip Wallach's legal history of the financial crisis, as am I. He's got a post up on it over at the Yale J. on Reg. blog, and go give it a look.  They've debated, over there, whether the Fed had the authority to rescue Lehman Brothers; it rather famously claimed that it did not, only to give AIG a massive bailout a couple of days later:

One of the features of Philip’s stint here was a debate we had on the Fed’s claim that it lacked the legal authority to save Lehman Brothers. I say that’s a post-hoc invention; Philip thinks it’s not, or at least,not so obvious. What do we learn from this fascinating exchange?


I still think those inside the Fed—whether at the Board of Governors or the Federal Reserve Bank of New York—had the authority to do whatever they wanted with Lehman. And given the political maelstrom they faced, I’m not sure I would have done a thing differently than they did. My critique of their legal analysis is not a critique of their crisis decision-making. But the legal arguments are distracting from the bigger question, about the appropriate levels of discretion that a central bank should have in using its lender of last resort authority. What the debate with Philip has shown me is that, even if I’m not wrong—and, well, I’m not—the law is something of an omnipresence in the way the government faced the financial crisis. That omnipresence may even have brooded from time to time.

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August 03, 2015
icon Alabama Law is Hiring
Posted by Gordon Smith

The University of Alabama School is hiring, and my friend Julie Hill is chairing the appointments committee. Position descriptions after the break.

more ...

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icon Dan Price as Henry Ford: Who Needs the Dodge Brothers When You Have Your Own?
Posted by Christine Hurt

Last week, the NY Times did a piece on Dan Price, CEO of Gravity Payments, who announced in April that each of his employees should make at least $70,000 a year.  You might think that this announcement would make him a very popular figure, but I guess you would be wrong.  Polarizing, maybe.  Story here.  You can read the details, but Price, who was raised in a very religious home, believed very strongly in creating an atmosphere in which employees would not need to worry about basic human needs and therefore be more productive and creative and happy.  Where would the new money come from?  Well, from his own salary, leveling the pay chart.  But not everyone is happy.

Here is probably an incomplete list of the haters:  (1) clients who feared their bills would be increased to cover the shortfall; (2) other employers who compete in the labor market; (3) other employers who don't compete for the same labor but who don't want to look bad; (4) Gravity Payments employees who feel that some employees don't deserve $70,000; and (5) Dan's brother and co-founder Lucas Price who feels that as a shareholder, he is being denied a return on his investment.  That last number (5) reminds us corporate law geeks a little of Dodge v. Ford.  I'm also interested in number (4), having written before on the hatred of so-called "windfalls." 

Price v. Price.  Here is the complaint.  It is brief, and the answer is more brief.  The brothers started the company as a 50/50 LLC in 2004.  After disagreements, the brothers reorganized as a corporation in 2008, with Daniel having a majority share.  This would seem to be a definitive moment for Lucas and possibly his downfall.  The complaint does not give any hints as to why Lucas would agree to this, but there must be more to the story -- My brother was trying to grab control of the company, so we reorganized and gave him control to solve the problem?  As part of the reorganization, the brothers entered into a Shareholders Agreement, which is not attached.  The causes of action are breach of fiduciary duty, not breach of the agreement.  The complaint states that Daniel used his majority control to grant himself "excessive compensation and to deprive Lucas of the benefits of ownership in Gravity Payments.  Daniel's actions have been burdensome, harsh, and wrongful, and have shown a lack of fair dealing toward Lucas."  The complaint does not give examples of the wrongful actions.  The complaint was filed shortly after the minimum wage announcement, but had been in the works before.  Further litigation may flesh out whether this complaint has a future, but shareholder oppression is a hard case to make out.  Most notably, and possibly good news for Lucas, Gravity Payments is a Washington corporation, not a Delaware corporation.  Lucas wants, among other things, either dissolution or to be bought out without a minority/marketability discount.  Corporations aren't partnerships, Lucas.  Dissolution seems a stretch.  How does this affect Daniel's minimum wage plan?  Well, he wasn't counting on having high litigation expenses when he changed the salary structure.

Employee Envy.  According to the article, several employees have left Gravity Payments because they suddenly felt undervalued when junior employees and recent hires received raises, even though they themselves did also.  When I wrote The Windfall Myth, I researched the use of the term "windfall" in the NYT and WSJ in a 12-month period.  I was astounded at the depth of bitterness people have against other people's "windfalls," even when the windfall does not affect the observer at all.  Hundreds or thousands of experiments have tried to capture why subjects will give up money if they believe under that regime others will get more (the Ultimatum Game).  Here, GP employees were given raises, but others were given larger ones, and some small raise receivers left for jobs that paid less.

This story is a great case study in how to tackle wealth inequality in the U.S., where a fidelity to pure meritocracy is heavily ingrained.  Even when the founder and CEO is willing to reduce the salary disparity at his company, some of his employees were not.  Fascinating.   

Permalink | Corporate Governance, Corporate Law, Fiduciary Law | Comments (View) | Bookmark

icon Family Film Blogging: Ant-Man
Posted by Christine Hurt

So, I'm sure loyal readers were wondering if I were ill or at the International Space Station given the fact that I had yet to review Ant-Man, the latest edition to the Marvel Cinematic Universe.  Actually, my middle guy has been at back-to-back camps for 4 weeks, so we literally went to the first showing after he returned on Saturday morning.  It was worth the wait.

First, the answers to the obvious questions.  Yes, Ant-Man will be an Avenger (in the second tier with Falcon and Quiksilver).  Yes, one of the Avengers is in Ant-Man (Falcon).  No, Agent Coulson does not show up in the movie, and the current state and future of S.H.I.E.L.D. is not discussed.  No, in the movie Hank Pym is not linked to Ultron, a clear break from the "historical record" of the comic books.  Yes, Hydra is still out there.  Yes, there are special effects ants, and scientist agree that the ants are realistic, except that they would all be female.

Scott Lang (the very likeable Paul Rudd) has served three years in prison for a very likeable crime.  An electrical engineer at VistaCorp, he discovers that his employer has been bilking clients and hacks into the network to return the funds to their rightful owners.  He also releases secrets.  (I've only seen the movie once, and his actual crime is alluded to only once.)  He's a combination of a hacker and a self-proclaimed cat burgler.  And, he seems to be a small folk hero.  Anyway, he's determined to go straight, but after finding it difficult to obtain employment with his record and thus be able to have visitation with his daughter, he decides to do one burglary offered up by his former cellmate and friends.  (This hilarious trio of good-hearted thieves makes the movie.)  The whole thing is a set up by Dr. Hank Pym (Michael Douglas), former S.H.I.E.L.D. agent, scientist and Ant-Man.  Pym uses the job to confirm his belief that Scott should be the next Ant-Man.

Why does the world need a new Ant-Man?  Because, Pym's former mentee Darren Cross has developed the mothballed Pym Particle (a formula to reduce the space between atoms -- in other words shrink living beings) and wants to sell it as a weapon.  Just as Captain America had to defeat Red Skull and Winter Soldier, Iron Man had to defeat Obadiah Stane and Anton Vanko, and Hulk had to defeat Abomination, our superheroes always seem to be coming up against frenemies who "steal their tech."  All the scientific breakthroughs in the Marvel Universe seem to be double-edged swords and the tension always between saving mankind and weaponization.  Anyway, Scott needs to don Pym's Ant-Man suit to steal back/destroy Cross' research and his new Yellowjacket suit.  There will be a brief training montage with Hank's daughter Hope Pym, and then Scott will need to enlist the good-hearted thieves to help.

Rudd's Ant-Man is very self-aware and doesn't take himself or the movie very seriously.  he's much like Guardians of the Galaxy's Peter Quill, cracking jokes while saving the world.  His niche in the superhero ensemble is that he is smart in a practical way and humbly selfless, an altruistic engineer to Tony Stark's narcissistic genius.  Though in the end all the Avengers throw themselves on the grenade, Scott seems to come to the job with a clear knowledge that he is, in his own words, expendable.

Hope (Evangeline Lilly) is, at least in this movie, fairly underused and underdeveloped.  In fact, there is a moment when it is clear to cast and audience alike that Hope would make a much, much better Ant-Man than Scott.  Hank's reasons for recruiting Scott seem quite sexist at first, but are revealed to be more admirable than that.  After the credits, the audience is treated to a hint that we will see much more of Hope (the new Wasp) in the future. 

So, the plot isn't all that new, but at least it isn't as hard to follow as Avengers 2.  The ending turns very Big Hero Six, but it works.  The movie is here to introduce us to the new characters and does that well.  The dialogue is witty, the characters are likeable, and the appetite for Ant-Man is sufficiently whetted for future appearances.

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icon A Review Of A Financial Crisis
Posted by David Zaring

Over at the New Rambler Review (which I'm really enjoying), I've got a review of Philip Wallach's legal history of the financial crisis.  The kick-off offers a riff on the crisis:

The government’s response to the financial crisis was an example of messy policymaking that occasioned a happy ending, although not everyone sees it that way. Some are unsure about the ending – they have decried the very modest meting out of punishment that followed the recovery of the economy. Others are unsure that the policymaking was messy – they are likely to think of the government’s response to the financial crisis as an inevitable manifestation of executive preeminence as the doer of last resort, institutionally capable of acting when courts and legislatures cannot.

But I will take a stable economy over a few prison sentences, especially when it is possible that you can’t have both at the same time. And you won’t convince me that the things government officials did during the crisis – last minute deals, concluded late at night and paired with creative reimaginings of underused statutes and regular resorts to Congress for more legislation – was the mark of the smooth progress of an imperial presidency.

Go over there and read the whole thing!

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icon Occupational Licensing
Posted by Gordon Smith

The White House recently released an excellent report on occupational licensing. The purported goal of occupational licensing is to improve the quality of services, but the costs of licenses on workers and consumers can be substantial. As noted in the Executive Summary, "There is evidence that licensing requirements raise the price of goods and services, restrict employment opportunities, and make it more difficult for workers to take their skills across State lines." The report recommends alternative forms of occupational regulation, notably certification, to strike a better balance of costs and benefits. Amen!

The new report follows License to Work, a report by the Institute for Justice on the effects of occupational licensing. Most of these licenses (including law) look like protectionism to me, and I am not sure this new report will significantly change the landscape. The report offers a list of "best practices," but in a world of regulatory capture, it would be nice to see governors and legislatures pressing the issue more forcefully.

Permalink | Entrepreneurship | Comments (View) | Bookmark

July 30, 2015
icon Sean Griffith's Deal Tax Clinic
Posted by David Zaring

Fordham's Sean Griffith is putting his motions where his writing is, and taking positions against "deal tax" shareholder settlements.  If you missed it, here's a bit from the Wall Street Journal story on the approach.

Over the past few months, Mr. Griffith says he has bought a small number of shares in about 30 companies following the announcement of a takeover. When the expected shareholder lawsuits are ultimately settled, he plans to use his standing as a shareholder to formally object.

His first salvo came Monday at a Delaware hearing to approve a settlement of litigation over Riverbed Technology Inc.’s sale. Under terms of the settlement, Riverbed, now owned by private-equity firm Thoma Bravo LLC, would pay plaintiffs’ lawyers a $500,000 fee and provide additional details on the buyout process. Riverbed and its new owners also would get immunity from future litigation stemming from the buyout, which closed in April.

Riverbed and Thoma Bravo declined to comment.

Mr. Griffith, who owns 100 shares of Riverbed, said the agreement would enrich plaintiffs’ lawyers while delivering no real benefits to investors, and he asked a judge to reject it.

Matt Levine thinks it is the lord's work.  Bainbridge approves.  And Alison Frankel is interested.  I approve as well - it's nice to see a law professor doing a research based quasi-clinic, and if Sean gets his law students to help out, he'll be following Lucian Bebchuk's very effective model.


Permalink | Legal Scholarship, M&A | Comments (View) | Bookmark

July 29, 2015
icon Peter Conti-Brown on the Fed's Regional Banks
Posted by David Zaring

My colleague Peter Conti-Brown has an op-ed in the Times today regarding the Fed's crazy regional bank system.  A taste:

Congress should let the Board of Governors appoint and remove the 12 Reserve Bank presidents, as they may do with other employees of the board. The 12 regional Feds would then become branch offices of our central bank, continuing to do research and data analysis, while leaving policy making to Washington.

This plan has several benefits. First, the next time the Fed makes an egregious mistake — like failing to predict the meltdown of the housing market — we would know for certain whom to hold accountable. Second, it would allow the Fed to modernize the distribution of the 12 Reserve Banks. There is strong evidence that the cities for the 12 banks were chosen as much for politics as economics. In 2015, do we really need two regional Feds (Kansas City and St. Louis) in Missouri, but only one (San Francisco) west of Texas?

Everything Peter writes about the Fed is worth reading, and this is no exception.  Give it a look here.

Permalink | Administrative Law, Finance, Financial Institutions | Comments (View) | Bookmark

July 28, 2015
icon Shadow Everything
Posted by David Zaring

I was looking at Dan Scwarcz's lastest paper on Shadow Insurance, which is a thing:

Shadow insurance – defined as life insurers’ reinsurance of policies with captive insurers that are not “authorized” reinsurers and do not maintain a rating from a private rating agency – creates important risks to policyholders, the insurance industry, and potentially even the broader financial system. Although the standard state regulatory safeguards help mitigate some of these risks, they leave other hazards of shadow insurance largely unchecked. Even granting that shadow insurance likely helps reduce the cost of insurance associated with the excessive conservatism of some state reserving rules, the practice ultimately undermines insurance markets by impeding accurate risk assessments and tradeoffs by policyholders, regulators, and other market participants.

It's a nice paper, but it made me think we're at peak shadow.  There's Shadow Banking, Shadow Bankruptcy, and there if a firm called Shadow Financial Systems.

Of course, there may be a real world reason for this - shadow institutions are in theory nimbly entering markets that heavily regulated incumbents can't serve well.  This is the regulation is bad story of the growth of shadow finance.

Permalink | Administrative Law, Finance, Financial Institutions | Comments (View) | Bookmark

July 26, 2015
icon Dodd-Frank at Five
Posted by David Zaring
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