Found 34 article(s) for author 'Mark Roe'

JPMorgan Inside the Whale

JPMorgan Inside the Whale. Mark Roe, October 7, 2013, Opinion. “It has been a bad few weeks for JPMorgan Chase (JPM), the multinational financial-services firm that by some measures is America’s biggest bank. Two of its traders were indicted, and the bank agreed to a billion-dollar fine for failing to report the extent of its “London Whale” losses fast enough and accurately enough. Now it faces even bigger fines – perhaps exceeding $10 billion – for mortgage activities, mostly by two of the financial firms, Bear Stearns and Washington Mutual, that it bought up during the financial crisis. The conventional wisdom is that the United States government…” Link verified March 28, 2014

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How the Chrysler Reorganization Differed from Prior Practice

How the Chrysler Reorganization Differed from Prior Practice. Mark Roe, September 4, 2013, Paper. “Chrysler, a failing auto manufacturer, was reorganized in a controversial chapter 11 in 2009. Financial creditors were paid a quarter of the amount owed them, while other creditors were paid more. The reorganization’s defenders asserted, among other things, that the proceeding and the sale structure was typical of prior practice. To see if this view fits the evidence, we examine all prior large section 363 sales for key financial ratios…” Link verified June 19, 2014

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Derivatives Markets in Bankruptcy

Derivatives Markets in Bankruptcy. Mark Roe, September 2013, Paper. “By treating derivatives and financial repurchase agreements much more favorably than it treats other financial vehicles, American bankruptcy law subsidizes these arrangements relative to other financing channels. By subsidizing them, the rules weaken market discipline during ordinary financial times in ways that can weaken financial markets, thereby exacerbating financial failure during an economic downturn or financial crisis emanating from other difficulties, such as an unexpectedly weakened housing and mortgage market in 2007 and 2008…” May require purchase or user account. Link verified June 19, 2014

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Did Taxes Cause the Financial Crisis?

Did Taxes Cause the Financial Crisis? Mark Roe, August 21, 2013, Opinion. “After the financial crisis erupted in 2008, many observers blamed the crisis in large part on the fact that too many financial firms had loaded up on debt while relying on only a thin layer of equity. The reason is straightforward: whereas equity can absorb a business downturn – profits fall, but the firm does not immediately fail – debt is less forgiving, because creditors do not wait around to be paid. Short-term creditors cash out or refuse to roll over their loans, denying credit to financially weakened firms. Long-term creditors demand to be “made whole” and…” Link verified March 28, 2014

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Harpooning the London Whale is no Substitute for Reform

Harpooning the London Whale is no Substitute for Reform. Mark Roe, August 15, 2013, Opinion. “And so the drama moves on to a courtroom. Two prime traders in JPMorgan Chase’s “London whale” misadventure have been indicted. Side plots may unfold, perhaps via extradition proceedings. But here is the big question: will the indictments lead to better, stronger financial markets? Well, yes and no. Recall the problem: JPMorgan’s London trading desk made trades that would be profitable if the post-crisis American economy remained weak. As the economy improved, the traders sought to reverse the investments…” Link verified August 15, 2013

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Clearinghouse Overconfidence

Clearinghouse Overconfidence. Mark Roe, August 11, 2013, Paper. “Regulatory reaction to the 2008-2009 financial crisis focused on complex financial instruments that deepened the crisis. A consensus emerged that these risky financial instruments should move through safe, strong clearinghouses, which would be bulwarks against systemic risk, and that the destructive impact of the failures during the crisis of AIG, Lehman Brothers, and the Reserve Primary Fund could have been softened or eliminated were strong clearinghouses in place…” Link verified June 19, 2014

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Measuring the Costs of “Too Big To Fail”

Measuring the Costs of “Too Big To Fail.” Mark Roe, June 26, 2013, Opinion. “The idea that some banks are “too big to fail” has emerged from the obscurity of regulatory and academic debate into the broader public discourse on finance. Bloomberg News started the most recent public discussion, criticizing the benefit that such banks receive – a benefit that a study released by the International Monetary Fund has shown to be quite large. Bankers’ lobbyists and representatives dismissed the Bloomberg editorial for citing a single study, and for relying on rating…” Link 

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The Dodd-Frank Act’s Maginot Line: Clearinghouse Construction

The Dodd-Frank Act’s Maginot Line: Clearinghouse Construction. Mark Roe, May 8, 2013, Opinion. “Regulatory reaction to the 2008–2009 financial crisis, following the failures of AIG, Bear Stearns, Lehman Brothers, and the Reserve Primary Fund, focused on complex financial instruments that deepened the crisis. A consensus emerged that these risky financial instruments should move through safe, strong clearinghouses, which would be bulwarks against systemic risk. The consensus turned into law, via the Dodd-Frank Wall Street Reform Act, in which Congress instructed regulators to construct clearinghouses…” Link verified June 19, 2014

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A Capital Market, Corporate Law Approach to Creditor Conduct

A Capital Market, Corporate Law Approach to Creditor Conduct. Mark Roe, May 1, 2013, Paper. “The problem of creditor conduct in distressed firms — for which policymakers ought to have the economically-sensible repositioning of the distressed firm as a central goal — has vexed courts for decades. Because courts have not come to coherent, stable doctrine to regulate creditor behavior and because they do not focus on using doctrine to facilitate the sensible repositioning of the distressed firm, social costs arise and those costs may be substantial…” Link verified June 19, 2014

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Apple’s Cash-Flow Problem

Apple’s Cash-Flow Problem. Mark Roe, April 18, 2013, Opinion. “I recently examined the problem of corporate short-termism from two nonstandard angles. One was that some short-termism is sensible. Large firms face an increasingly fluid economic, technological, and political environment – owing to more global and competitive markets, to the greater potential of technological change to alter firms’ business environment, and to governments’ growing influence over what makes business sense. In this fluid environment, large companies must be cautious before making large, long-term commitments…” Link verified March 28, 2014

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