Found 38 article(s) for author 'Mark Roe'

The Regulatory Confidence Cycle

The Regulatory Confidence Cycle . Mark Roe, March 16, 2014, Opinion. “Unfortunately, too many reports on the transcripts miss the big picture. Criticizing the Fed for underestimating the dangers from the underground rumblings that were about to explode makes it seem that particular players just got it wrong. In fact, underestimating financial risk is a general problem – the rule, not the exception…” Link

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Corporate Short-Termism – In the Boardroom and in the Courtroom

Corporate Short-Termism – In the Boardroom and in the Courtroom. Mark Roe, March 14, 2014, Paper. “A long-held view in corporate circles has been that furious rapid trading in stock markets has been increasing in recent decades, justifying corporate governance and corporate law measures that would further shield managers and boards from shareholder influence, to further free boards and managers to pursue their view of sensible long-term strategies in their investment and management policies. Here, I evaluate the evidence in favor of that view…” Link verified June 19, 2014

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Breaking Bankruptcy Priority: How Rent-Seeking Upends the Creditors’ Bargain

Breaking Bankruptcy Priority: How Rent-Seeking Upends the Creditors’ Bargain. Mark Roe, February 25, 2014, Paper. “Bankruptcy reallocates value in a faltering firm. The bankruptcy apparatus eliminates some claims and alters others, leaving a reduced set of claims to match the firm’s diminished capacity to pay. This restructuring is done according to statutory and agreed-to contractual priorities, so that lower-ranking claims are eliminated first and higher ranking ones are preserved to the extent possible. Bankruptcy scholarship has long conceptualized this reallocation as a hypothetical bargain among creditors…” Link verified June 19, 2014

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Another Way to Make Finance Safer

Another Way to Make Finance Safer. Mark Roe, December 3, 2013, Opinion. “Since the financial crisis erupted in 2008, policymakers have sought to make the world’s banks safer, mainly via detailed instructions: use more capital, avoid specified risky activities, provide more transparency, and punish reckless behavior. But this approach to financial regulation, while laudable, requires officials to make, or shape, banks’ most important strategic decisions: capital levels, liability structure, and the scope of their business activities. And, while regulators often target bank executives’ incentives, they often leave intact the organization’s…” Link verified March 28, 2014

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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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