January 11, 2010
Saturday – Dispatch No. 4 from New Orleans – Securities Regulation after the Storm
Posted by Erik Gerding

The Securities Regulation Section on Saturday also focused on the financial crisis. I was on panel with Charles Whitehead (Cornell), Michael Guttentag (Loyola – LA), and William Birdthistle (Chicago –Kent) moderated by Therese Maynard (Loyola –LA).

Professor Whitehead presented his paper “Reframing Financial Regulation,” which argues that the crisis revealed the dangers of regulation based on old categories of financial institutions and financial products. He outlined how new financial products and institutions have taken market share from the old, regulated categories. The paper gives an excellent explanation of how the shadow banking system began to displace traditional banking. Whitehead then advocated for moving to what he calls “superfunctional” regulation – or regulation not based on traditional regulatory categories (like insurance companies or banks), but based on the economic function and economic risks posed by particular activities.

Professor Guttentag presented his research that seeks to explain the common link between financial crises. He argues that what might unite the 1929 Crash, the 1987 Crash, and the current crisis is that some investors may have had upward sloping demand curves for certain financial products. This could cause the overall market demand curve to be kinked and to result in multiple equilibria that would explain sudden price declines followed by steady prices.

Professor Birdthistle presented his research on Jones v. Harris, which was a centerpiece of the Glom’s forum  on the case this past November.

AALS, Financial Crisis, Securities | Bookmark

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