Why Regulation Fails

I’d like everyone to go out and buy a copy of Professor Paul Mahoney’s slender new book, Wasting a Crisis – Why Securities Regulation Fails.  Paul is a brilliant guy.  Until this spring, he was the dean of the University of Virginia School of Law where he is the David and Mary Harrison Distinguished Professor of Law and the Arnold H. Leon Professor of Law, teaching securities laws.  This is a great book and an important read.  Paul argues cogently that: Continue Reading

The Marketplace Lending Industry Sneezes and Securitization Catches a Cold – Bad Law in the Madden Decision

For the past year or so, Dechert has been keeping a close eye on the marketplace lending industry and the tension between innovation, which portends the development of an entirely new non-banking financial space, and the instinctual reaction of the regulatory state to resist and restrict innovation. Earlier this summer, we published an OnPoint providing a comprehensive review of recent hurdles and developments affecting the marketplace lending industry, including the potentially far-reaching Madden v. Midland Funding case from the Second Circuit. The Supreme Court has now denied cert in the case and so the Second Circuit’s decision will stand. Continue Reading

“Shaking” Things Up: Seismic Risk Assessments

Closeup of a seismograph machine earthquake

Returning to our theme that nothing’s easy and everything keeps changing, here is one out of left field. Let’s talk Probable Maximum Loss (“PML”) and seismic risk. ASTM International, the market standard setting organization for everything from toilet bowls to condoms, has just issued an amended seismic standards: Standard Guide for Assessments of Buildings (E2026-16) and their Standard Practice for Probable Maximum Loss Evaluations for Earthquakes (E2557-16) (the “Standards”)[1]. These Standards establish an industry norm for the requirements to evaluate the financial risk for real estate in zones with seismic activity. Each investigation of real estate is “graded” between a Level 0 investigation (high uncertainty) and a Level 3 investigation (very low uncertainty) based on the qualifications of the assessors and the work done during the investigation. The Standards refer to a Level 0 investigation as a “desktop” investigation, maybe (in a completely subtle way) to imply something about the proximity of the assessors to the potentially shaking site.

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Dodd-Frank Rulemaking Developments by the Fed for Fed-Supervised Insurance Firms

The Dodd-Frank Act was a cornucopia of opportunity for rule writers. To the regulatory community, this was almost a bottomless candy jar. And so our regulatory apparatchiki began to beaver away and produced, to date, something like 22,000 pages of rules which purport to moderate or prevent bad behavior by all those nasty institutions perceived to have some responsibility for the financial crisis of 2008. Curiously, at least, to me, Dodd-Frank included in among its bad boys, those institutions “significantly engaged in insurance activities.” Apparently, our Congressional grandees in the overheated environment of the Great Recession conflated insurance and banking. Hey, they are kind of like financial institutions, and they’re big, or at least some of them are, and are probably filing with nefarious types inclined to go off the reservation and therefore in need of “guidance” from the regulatory community. Continue Reading

Coming to a Hotel Near You: The Starwood-Marriott Merger

It seems fitting that Marriott’s upcoming acquisition of Starwood Hotels & Resorts (creating one of the largest hotel companies in the world) is anticipated to occur during the prime summer vacation season.  The combined company will be comprised of more than 5,500 hotels and 30 brands.  By way of comparison, Hilton is comprised of over 4,600 hotels and 13 brands and International Hotels Group is comprised of over 5,000 hotels and 10 brands.

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Text on the Dotted Line: A Text Message Can Create a Binding Contract

Here’s another story in the “It never gets easier” file.

The Massachusetts Land Court recently decided a case that perhaps we should have all guessed was coming.

This is the above the fold headline:  Text messages may now create binding contracts.  Specifically, a text message can constitute a signature sufficient to satisfy the Statute of Frauds and form a binding contract for the purchase and sale of land. Continue Reading

A Trip Through the Labyrinth – The Regulatory Man in Full

And now to return to our commentary a few weeks back about the stultifying impact of ill-thought through rules and regulations (at best) (Brexit has intervened).  This is our Regulatory State which broadly attempted to pick winners and losers and modify market behavior, to get an engineered outcome by using the blunderbuss of proscriptive rules and regulation.

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Brexit – Okay, I Really Do Care!  (I Think)

Back in early April I observed in this commentary that I wasn’t really sure how much Brexit mattered, at least here in North America.  Of course, looking back, I realized we issued it on April Fool’s Day and now I simply can’t remember whether I was being ironic or not.  In any event, at that time we were exploring the notion that neither in nor out may ultimately affect the arc of the success of the European Union project, the health and viability of the City of London or CRE deal volume in the States.

But now that it’s happened…damn!  We needed another disruption in this volatile economy of ours like we need a social disease.  And while I am absolutely sure that a Remain vote would not have ended the ongoing debate about the future of Europe and its ability to get its sclerotic economy performing again, it sure would have been nice to at least take one issue off the table.

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