July 20, 2010
Dodd-Frank Forum: everything in moderation
Posted by Erik Gerding

Since it is always a treat to get so many professors together to talk about financial regulation, let me pose a few questions to the forum participants based on their posts:

Brett: You point out that the too-big-to-fail concern misses the systemic risk of many smaller institutions engaging in herd behavior. What can we do about that? Is this a huge hole in the bill? You also write about Title I extending regulation to non-bank financial companies. Do you think this section is particularly prone to legal challenge? What would make the Financial Stability Oversight Council and the Office of Financial Research more effective in spotting new risks?  Does administrative law have anything to say? (Perhaps we can entice David to address these questions too.)

David: Should bond insurance be treated differently in terms of the federal/state divide?

Christine: Do you buy the stated premise of the executive compensation provisions that compensation led to excessive risk taking and contributed to the crisis? If so, is there a better way to address the issue? Why do lawmakers love clawbacks rather than pushing companies towards restricted stock? Requiring that executives hold on to stock would have many of the same benefits of clawbacks, but with less messiness of potential litigation and other transaction costs.

Gordon: Is there any argument that an over-inclusive definition of “accredited investors” played a role in the crisis? Or is this just “might as well put one more item in the shopping cart rather than make a separate trip”? Are you suggesting we re-think the net worth = sophistication premise of the accredited investor standard? You write: “perhaps we ought to find out which investors, if any, benefit from the disclosure system before we set these thresholds.” Where would we begin?

Larry: What would you have done had you been writing the reform legislation? Is there anything in the bill you would keep?

Financial Crisis, Masters: Dodd-Frank | Bookmark

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