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Volume 35, Issue 1 (Winter 2018)

In this Article, we argue that regulatory examples make law. Our claim is that, as a default rule, the legal content offered by regulatory examples is coequal with, not subordinate to, the non-example portions of regulations. Treating examples as co-equal with other portions of the regulations empowers agencies to improve regulatory content through concrete communication, while also acknowledging regulated parties’ natural inclination to treat such communications as law. We reject counterarguments that regulatory examples merit extra scrutiny, or less respect, that would relegate them to second-class status.

We also set forth a method for interpreting regulatory examples. We argue that they are best understood through analogical, or common law, reasoning, and we illustrate this approach. We show how analogical reasoning can be reconciled with the rest of the broader regulatory and statutory scheme using various interpretive approaches, such as textualism or purposivism. Our method places regulatory examples in dialogue with their broader regulatory and statutory schemes. It both empowers and constrains courts, agencies, and regulated parties in their efforts to understand the meaning of regulations.

This Article offers an analytical framework for understanding manipulation, which resolves these questions, clarifies federal law, and can guide regulators in successfully prosecuting financial law’s most intractable wrong. We draw on the tools of microstructure economics and the theory of the firm to provide a synthesis of the various distinct forms of manipulation, identify who is harmed by each form, and evaluate their social welfare effects. This Article thus lays the foundation for a renewed understanding of manipulation and its place within securities regulation.

There is an alternative to regulation by litigation. Drawing upon the code and panel-based models of merger regulation in the United Kingdom and Ireland, this Article explores whether a regulatory model might be better at protecting shareholder interests in merger transactions. A regulatory alternative holds a number of significant advantages, including greater speed, responsiveness, certainty, and lower administrative costs. In light of these potential advantages, it is remarkable that no U.S. state has experimented with a code and panel-based model of merger regulation. We explain the persistent difference between the U.S. and Anglo-Irish models by reference to interest group politics and, in particular, the power of the bar to influence corporate law reforms in the United States.

A key but underappreciated reason for banks’ recurring excessive risktaking is the structure of corporate taxation. Current tax rules penalize equity and boost debt, thereby undermining the capital adequacy efforts that have been central to the post-crisis reform agenda. This tax-based distortion incentivizes financial firms to undermine regulators’ capital adequacy rules, either transactionally or by lobbying for their repeal. The resulting debt-heavy structure not only renders banks fragile but also pushes them toward further excessively risky strategies.

This result is not inevitable. By repurposing tax tools used elsewhere, we show how the safety-undermining impact of the corporate tax can be reversed without affecting the overall level of tax revenue that the government raises from the financial sector. Several means to the desired end are possible, with the best trade-off between administrability and effectiveness being to lift the tax penalty on banks to the extent that they add to their loss-absorbing, safety-enhancing equity buffer above the regulatory minimum. This solution would minimize the tax impact. Revenue loss would be small and could be offset by modest tax changes targeted at the riskiest forms of financial sector debt. Existing studies indicate that the magnitude of the resulting safety benefit should rival the size of the benefit from all the post-crisis capital regulation to date. Thus the main thesis
we bring forward is not a small or technical claim.

Standard bank regulatory style is command-and-control, and while much can be and has been accomplished with the standard style, it has its limits. In today’s political environment, current safety rules’ continuance may not be viable, as a repeal of recent regulatory advances, rather than refinement, has become a serious possibility. Yet rolling back the post-crisis regulatory advances without addressing the underlying risk-taking incentives would be unwise. While our policy preference would be to supplement and not replace traditional and recent regulation with the tax reform, any major rollback makes reducing the risk-taking tax distortion more urgent than ever.

This Article cuts to the core of the dysfunction of delegated governance regimes within cooperative federalism. It argues that given the federal statutes in place—with requirements that even recalcitrant federal and state agencies must follow—the design and implementation of cooperative federalism must change. Even if the original purpose of delegation was an ignoble one, the baseline requirements of federal statutes may not and should not be ignored.

The Article builds a theoretical framework for understanding and normatively assessing the shared features of numerous forms of delegation under cooperative federalism, and it applies this framework to environmental and energy law case studies. It argues that necessary regulatory design changes include, among others, consistent case-by-case and long-term monitoring of both principals’ (federal agencies) and agents’ (subfederal governments’) behavior and expanded use of judicial review and other mechanisms for overseeing all actors within delegated governance regimes.

This Note explores whether a more robust muni CDS market should be developed and considers the available options for doing so. While a number of policies could make the muni CDS market safer and more robust, policymakers must grapple with costs and benefits that come with more widespread use of
muni CDSs. Besides tracing the reasons for the historical lack of a robust muni CDS market, this Note makes a number of additional contributions. It provides an overview of the mechanics and state of the extant muni CDS market. Additionally, it argues that the current distressed conditions within the municipal bond market may be tempering some of the constraints that have historically limited the muni CDS market. It also suggests a number of proposals that would help make the muni CDS market more robust, while also discussing at length the costs and benefits of these proposals.