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Shadow Banking and Securities Law
No full textShadow banking may be the single greatest challenge facing financial regulation. Financial institutions that function like banks, but fall outside the scope of banking regulation—aptly termed “shadow banks”—were at the heart of the Global Financial Crisis and most episodes of serious financial stress since then. Scholars have largely focused on one response to this problem: extending traditional banking regulation to shadow banks. Yet more than fifteen years after the crisis, major regulatory efforts along this route have stalled.
In this Article, we explore the uneasy case for greater regulation of shadow banking through a different route—securities law. Our first contribution is analytical. We demonstrate the vast but varied jurisdiction that securities regulators already enjoy over shadow banking, which has deep roots in the architecture of U.S. financial regulation. While banking law adopts a narrow and formalistic definition of banking, securities law does the opposite, adopting a set of open-ended, capacious, and functional definitions of its core categories—”security,” “investment company,” “dealer,” and the like—that end up encompassing almost all financial investments. As a result, securities regulators can regulate shadow banking. Just as importantly, we show that how shadow banking falls under securities law matters. Each categorization comes with its own statutory basis governed by distinct policy levers. The contours of these authorities will only prove more important in an era of judicial skepticism of agency power.
Our second contribution is to explore the promise and limits of regulating shadow banking through securities law. The core affirmative case lies in the fact that securities regulators have clear authority to act, and that shadow banking poses grave dangers to financial stability. In fact, securities regulators already address financial instability to a greater extent than is widely appreciated. The case remains uneasy, however, because the SEC’s mandate and tools are limited, and there are legitimate concerns about the agency’s ability to effectively craft ex ante regulations aimed at shadow banking. Nonetheless, we argue that greater action in certain arenas is justified. Our account has important implications for policy as well as for understanding the architecture of financial regulation
Reckoning with Social Policy in Utility Regulation
No full textState public utility regulation in the energy sector is undergoing a rapid transformation driven by public and private investment in clean energy deployment, the corresponding threat to incumbent fossil fuel interests, and growing demands for energy justice. This transformation will impact many aspects of societal well-being—from energy insecurity in disadvantaged communities to dramatic shifts in energy-sector employment—so it is unsurprising that public utility commissions would engage with social policy concerns. However, for decades, state courts and utility stakeholders have admonished commissions that they are economic regulators and that their jurisdiction does not include social policy. This Article shows that state public utility commissions are—and have always been—social policymakers as part of their statutory mandate to regulate in the public interest, limit monopoly power in the energy sector, and set just and reasonable utility rates.
We demonstrate the central role of social policy in state public utility regulation through an analysis of state proceedings over several decades. These proceedings include (1) longstanding contestations over low-income rates and economic development rates, (2) more recent efforts to address energy justice concerns, and (3) actions designed to keep aging coal plants open to preserve local jobs and tax revenues.
The theoretical, doctrinal, and process implications of reckoning with social policy in utility regulation are potentially far-reaching. For theory, our evaluation supports the contemporary scholarly project to reinvigorate public utility regulation for network and infrastructure industries now being studied under the banner of “networks, platforms, and utilities,” or “NPUs.” For doctrine, our account provides a basis for state courts to give commissions more discretion to expressly incorporate social policy into their decisions and allow state legislatures, rather than courts, to limit that discretion. As for process, our analysis allows advocates to more fully embrace state utility regulation as a social policy process that unfolds as a conversation between regulated parties, other stakeholders, utility commissioners, legislators, and courts. In this conversation, utility commissions offer a critical forum for public deliberation, evidence gathering, and negotiation, making them essential venues for networks of stakeholders to grapple with the complexity of social policy decisions that touch the energy sector
Automating International Human Rights Adjudication
Full text linkInternational human rights courts and treaty bodies are increasingly turning to automated decision-making (“ADM”) technologies to expedite and enhance their review of individual complaints. These tribunals have yet to consider many of the legal, normative, and practical issues raised by the use of different types of automation technologies for these purposes. This article offers a comprehensive and balanced assessment of the benefits and challenges of introducing ADM into international human rights adjudication. We argue in favor of using ADM to digitize documents and for internal case management purposes and to make straightforward recommendations regarding registration, inadmissibility, and the calculation of damages. In contrast, we reject the use of algorithms or artificial intelligence (“AI”) to predict whether a state has violated a human rights treaty. In between these polar categories we discuss semi-automated programs that cluster similar cases together, summarize and translate key texts, and recommend relevant precedents. We weigh the benefits of introducing these tools to improve international human rights adjudication—which include greater speed and efficiency in processing and sorting cases, identifying patterns in jurisprudence, and enabling judges and staff to focus on more complex responsibilities— against two types of cognitive biases—biases inherent in the datasets on which ADM is trained and biases arising from interactions between humans and machines. We also introduce a framework for enhancing the accountability that mitigates the potential harms caused by ADM technologies
The Allure of Trade and Sustainable Development Chapters
Full text linkBeginning in 2011, the European Union (“EU”) began to include independent Trade and Sustainable Development (“TSD”) chapters in its trade agreements. These chapters seek to protect international labor standards, environmental laws, and corporate social responsibility practices within the scope of the EU’s trade agreements. Trading states that sign onto TSD chapters are meant to engage in ongoing dialogue regarding the substantive commitments outlined in the chapters. If one of the states fails to uphold its substantive commitments, the other state may invoke a unique enforcement mechanism contained within TSD chapters. But unlike arbitration proceedings for non-TSD trade disputes, the TSD enforcement mechanism does not contain clearly spelled-out compliance measures. Instead, the gentle-appearing TSD enforcement mechanism relies on collaboration and dialogue between the trading states. Continued discussion over politically popular goals is likely in the interests of both states, but TSD chapters are uniquely beneficial to the EU’s expansion of regulatory authority. Rhetorically, TSD chapters fit within the EU’s claims of championing multilateral cooperation and upholding international law. And from a practical standpoint, TSD chapters allow the European Union to gracefully expand its trading relationships and its web of legal authority. This note examines the TSD enforcement mechanism, looking at how it differs from the enforcement mechanism for non-TSD trade disputes. Although the TSD enforcement mechanism appears weak due to its language, this note argues that the TSD chapters are quasi-enforceable and therefore a clever tool for advancing EU interests. An analysis of the 2018 EU-Korea proceedings uncovers the potential implications of TSD chapters. Notwithstanding their effectiveness in promoting their actual objectives, TSD chapters are an unsuspecting but effective method for expanding EU regulatory authority and indirect lawmaking through trade
Public Patent Powers
Full text linkCongress has created multiple structures for agencies to control how patents are used, but that institutional design choice has received little academic attention. This Article provides the first comprehensive survey of existing laws that expressly authorize agencies to control patents. I locate 113 express conditions across 68 laws that expressly authorize executive actors to make some form of decision about patents. These powers, which I refer to as “public patent powers,” allow the government to use patented inventions, to obtain patents, to authorize third parties to use patented inventions, and to regulate how patents are used. Agencies have used many of these powers, but they have been reluctant to use others. Notably, agencies have refused to grant compulsory licenses on patents covering federally funded drugs, despite multiple requests to do so.
The descriptive account of public patent powers has several implications for patent regulation. Public patent powers show different actions that the executive branch could take without the need for any legislative action when patents create policy concerns, as is currently happening with high drug prices. Themes in public patent powers and their use also reveal consistent policy judgments present throughout the history of patent regulation in the United States. These themes create a framework for identifying contexts where executive control over patents may be appropriate and politically feasible. The descriptive account further suggests that the Supreme Court’s decision in Oil States v. Greene’s Energy may have broader implications than previously recognized. Moving forward, this Article contends that the executive branch should create an interagency framework to guide how agencies use public patent powers and that courts should consider themes in public patent powers when deciding whether to grant injunctions in patent cases
Retaliatory Taxation
Full text linkThis paper discusses the Trump administration\u27s potential use of section 891 and pending legislation to apply retaliatory taxes to foreign countries that impose discriminatory or extraterritorial taxation on US multinationals
After Courts: Democratizing Statutory Law
Full text linkIn Federalist No. 78, Alexander Hamilton argued for locating interpretive authority over law separately from those institutions tasked with formulating it. Hamilton’s vision, never accurate as a description of American practice, has not been credible for a long time. To the extent enormous power is still allocated to judges, our legal institutions have been out of step with our legal theory, which has long regarded them as political actors and policymakers. More practically, every term it is clearer and clearer that the role of the Supreme Court in statutory cases (including checking administrative rulemaking and other processes) is, if anything, more menacing than its role in the rare instances when it deploys its heaviest weaponry of constitutional invalidation. Against progressive calls to reclaim the judiciary, this Article extends our proposal to disempower courts exercising lawmaking authority—to include when they are interpreting statutes alone. Indeed, the same considerations that counsel the constitutional disempowerment of courts counsel their statutory disempowerment, and the allocation or reallocation of their authority over law to politically accountable agents. The heart of our Article offers a survey of court disempowerment strategies and tools, which are comparable to, though not identical with, the disempowerment mechanisms that have been proposed in the arena of constitutional reform. Such strategies and tools are appealing in the short term; but the long term requires a fuller rethinking of our institutions of legal interpretation. Available and existing disempowerment strategies for courts are best conceived as early and partial versions of full-scale allocation of interpretive authority over law to “political” branches and openly political control.
[Judges] have battered their way to supremacy with their double axes; one edge is the control over legislation by its unconstitutionality, the other is such free interpretation of statutes as suits their purposes. —Learned Han
The Insurance Solution for Financial Advice Failures
No full textSolving the retirement savings crisis requires widespread access to reliable financial advice. Yet financial advisers often operate without insurance, collecting fees and commissions from customers and leaving them penniless when substandard advice causes harm. Instituting insurance coverage requirements would protect investors and allow market forces to discipline misconduct. For decades, advocates and regulators have raised awareness about the millions of unpaid arbitration awards each year; an insurance solution would significantly reduce the harm suffered.
This paper aims to create a roadmap to solve the problem. It identifies the problem and maps out the different levers available to policymakers to increase overall insurance coverage across a fragmented regulatory landscape
Spending Clause Standing
No full textThe Biden Administration’s American Rescue Plan Act allotted almost $220 billion to state, local, and tribal governments to help combat the COVID-19 pandemic. This money, the Coronavirus State and Local Fiscal Recovery Fund, gave recipients wide spending discretion to address their struggling economies. But the legislation had one key limitation: Recipients could not use the money to “directly or indirectly” cut their taxes. If a recipient violated this “Offset Provision,” the Department of the Treasury might recoup the funds.
Nearly two-dozen states alleged that the Offset Provision was unduly coercive and ambiguous, violating the Spending Clause. However, with no threatened recoupment looming, it was unclear whether the states had standing to sue at all. The five circuit courts that heard these cases did not reach consensus on the standing issue. Numerous opinions across six cases offered differing conceptions of “sovereign” injuries and applied Massachusetts v. EPA’s command for “special solicitude” to the state plaintiffs inconsistently.
The Offset Provision cases provide the first opportunity to study the intersection of the Spending Clause and state standing. With no precedent on when states can challenge congressional spending legislation, the cases navigated standing’s incoherent doctrine to craft new rules. The Offset Provision cases offer two novel categories of sovereign injuries-in-fact that states allegedly suffer in Spending Clause cases: the “Spending Contract” and “Tax Power” injuries. The former relates to an unconstitutionally ambiguous or coercive federal offer, while the latter describes an impermissible regulatory subject matter.
The Offset Provision cases define the terms of federalism’s future battleground. The Spending Contract and Tax Power injuries provide enterprising state attorneys general with the weapons to dismantle disfavored federal policy. Instead of adhering to standing doctrine’s core separation-of-powers principles, a majority of the involved circuit courts have enabled states to readily air their policy grievances in federal court. Because Congress increasingly relies on its spending power to pass legislation, when states can and cannot challenge federal policy has enormous implications for modern policymaking. When appropriate, Spending Clause standing doctrine should permit heightened scrutiny when a state unilaterally attempts to block a federal program
Independent Justice? U.S. Attorneys as a Case Study of Political Appointments
No full textConcerns over presidential use of federal prosecution as a political weapon and the overall independence of the Department of Justice have increased in recent years. While most scholarship exploring the potential for political prosecution has focused on the legal and political forces that influence prosecutorial discretion, few studies have identified the varying ways that federal prosecutors obtain their jobs or how those processes affect who serves as U.S. Attorney. This is a consequential oversight, as U.S. Attorney appointments provide an informative case study of the legal frameworks, historical conventions, and politics that influence presidential appointments more generally.
In this Article, we illustrate how historical battles across different branches of government for control of federal prosecution have resulted in legal frameworks that provide for at least seven different U.S. Attorney appointment mechanisms. We then provide both qualitative examples and quantitative analysis of U.S. Attorney appointments from 1970 to 2022 to evaluate whether U.S. Attorneys appointed through the “traditional” presidential nomination and Senate confirmation process have different backgrounds and careers than U.S. Attorneys who obtain office through “non-traditional” methods, including appointment by federal district courts.
We find that, like with other political appointees, U.S. Attorneys are increasingly likely to obtain their jobs through “non-traditional” methods. In addition, U.S. Attorneys appointed through these methods differ from their presidentially-nominated and Senate-confirmed counterparts in important ways, including their background experience and what they go on to do after serving in office. While these findings may raise alarm bells for those who worry that presidents increasingly circumvent Senate confirmation of political appointments to further executive control of government, this Article illustrates that “non-traditional” appointments are the result of over two centuries worth of bargaining between the branches over the power of appointment in an effort to prioritize expertise over politics