“Ring-fencing” is often touted as a regulatory solution to problems in banking, finance, public utilities, and insurance. However, both the precise meaning of ring-fencing, as well as the nature of the problems that ring-fencing regulation purports to solve, are ill-defined. This Article examines the functions and conceptual foundations of ring-fencing. In a regulatory context, the term can best be understood as legally deconstructing a firm in order to more optimally reallocate and reduce risk. So utilized, ring-fencing can help to protect certain publicly beneficial activities performed by private-sector firms, as well as to mitigate systemic risk and the too-big-to-fail problem inherent in large financial institutions. If not structured carefully, however, ring-fencing can inadvertently undermine efficiency and externalize costs.
Fish might be considered “brain food,” but there is nothing smart about the way the United States currently manages its seafood production. Although the U.S. government has long promoted the health benefits of products from the sea—even urging Americans to double their seafood intake—it has fallen far behind in developing a domestic source for this seafood. Currently, the United States relies on an almost primitive method for domestic seafood production: taking animals found naturally in the wild. However, this approach is no longer sustainable: most federally managed capture fisheries are either stable or declining, with forty-eight currently overfished, and forty subject to overfishing in 2010. What seafood the United States does not take from its own fisheries it imports; in 2011 the United States imported as much as 91 percent of its seafood supply. Fortunately, there is a way for the United States not only to ease the pressure on traditional fisheries—allowing them to recover—but also to provide a significant domestic source of seafood products: through the development and promotion of its domestic offshore aquaculture industry. However, this industry should not be allowed to expand free from regulation, as offshore aquaculture may have serious consequences for both marine and human environments.
In the early months of the financial crisis that started in August 2007, Citigroup suddenly had to take onto its balance sheet $25 billion of assets–which, due to subprime mortgage exposure, were worth on the market only a third the amount that Citigroup was required to pay for them. The reason for the appearance of these troubled assets on the bank’s balance sheet was a liquidity guarantee provided by Citibank from the time it originally sold the assets to protect short-term lenders from the possibility that their debt could not be refinanced at maturity. The Financial Crisis Inquiry Commission would conclude that such guarantees helped “bring the huge financial conglomerate to the brink of failure.”
The assets in question were collateralized debt obligations (“CDOs”), which package together a large number of loans and other debt products and use the income from those loans to pay returns to the investors in the CDOs. It is clear, however, that not all of the “loans” underlying Citibank’s CDOs were actual loans. Some of them were financial contracts called derivatives that promised payments based on the performance of a specific set of actual loans. That is, some of the underlying assets were not loans, but simply represented the promise of one financial institution to make payments to another.
On January 11th, 2011, the Supreme Court unanimously held in Mayo Foundation for Medical Education and Research v. United States that all agency regulations, including Treasury regulations, should be afforded the standard of deference set out in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc, a case that prescribed how courts should review agency regulations. Before Mayo, Chevron did not have very much influence in the tax world–Chevron had been cited in only a few Supreme Court tax cases, and the Tax Court continued to cite pre-Chevron authority when evaluating whether to defer to the Treasury’s construction of the Internal Revenue Code (“Tax Code”). Thus, the Mayo decision superseded a line of tax cases, including National Muffler Dealers Ass’n v. United States, which had established a less deferential, tax-specific standard of review.
Few doubt that executive compensation arrangements encouraged the excessive risk taking by banks that led to the recent Financial Crisis. Accordingly, academics and lawmakers have called for the reform of banker pay practices. In this Article, we argue that regulator pay is to blame as well, and that fixing it may be easier and more effective than reforming banker pay. Regulatory failures during the Financial Crisis resulted at least in part from a lack of sufficient incentives for examiners to act aggressively to prevent excessive risk. Bank regulators are rarely paid for performance, and in atypical cases involving performance bonus programs, the bonuses have been allocated in highly inefficient ways. We propose that regulators, specifically bank examiners, be compensated with a debt-heavy mix of phantom bank debt and equity, as well as a separate bonus linked to the timing of the decision to take over a bank. Our pay-for-performance approach for regulators would help reduce the incidence of future regulatory failures.
The Federal Trade Commission (“FTC”) adopted new disclosure rules in 2009 for “consumer-generated media.” The “Guides Concerning the Use of Endorsements and Testimonials in Advertising” warn bloggers, people who post on social networking sites, and other generators of new media content that they must disclose when they receive payments or free products related to what they write about. Failure to disclose material connections can result in fines of up to $10,000 for each violation.
The FTC endorsement rules do not apply to journalists who work for newspapers, magazines, or television and radio stations. When the guides were released, new media journalists protested that the government was creating a two-tiered regulatory regime that singled them out for unfavorable treatment. Jack Shafer, the media critic for Slate, called the rules “preposterous” and denounced “[t]he FTC’s [m]ad [p]ower [g]rab.”
INTRODUCTION “The use of steroids [in sports] has become a public health crisis. Half a million kids a year in the U.S. are taking steroids . . . and many of them do this because they are emulating their sports heroes.” In the past several years, performance-enhancing drug (“PED” or “steroid”) use in major professional sports has captured the attention of not only average fans, but also lawmakers in Congress. Rampant steroid abuse in Major League Baseball (“MLB”) catalyzed a 2005 congressional hearing at which famous ballplayers like Mark McGwire testified. In 2009, two National Football League (“NFL”) players challenged their suspensions for using substances banned by the NFL collective bargaining agreement (“CBA”) in court. This suggests sports leagues may lack the legal authority to conclusively bargain for and uniformly apply certain aspects of a CBA such as the PED policy—a fact that compelled NFL Commissioner Roger Goodell to seek congressional intervention in the steroids arena.
During this so-called steroids era, sports radio and television shows have shifted in focus from the magic of record-breaking performances to the possibility that PED use tainted those achievements. Cynics have cast the entire 1990s as a statistical lie, claiming there is no way to tell who was taking PEDs and who was not; as a result, many commentators have recommended adding asterisks to individual or team records that indicate those records might have been tainted by PED abuse. Scholars from a variety of fields have explored how PED use has negatively affected the integrity of professional sports, the medical dangers of taking PEDs, and how professional athletes’ use of PEDs has adversely affected youth athletes. In response to this outburst of PED use in professional sports and the subsequent explosion of literature decrying it, leagues such as the NFL and MLB have significantly increased the penalties for players caught using PEDs in an attempt to cleanse the leagues’ images.
Unlike the federalism cases typical of the Rehnquist Court, modern federalism cases will not involve interpretation of the Commerce Clause or the Tenth Amendment, particularly after Gonzales v. Raich refused to expand the Commerce Clause to protect state autonomy. Instead, modern federalism cases will involve basic statutory construction. The Supreme Court has become increasingly interested in cases dealing with the intersection of federalism and statutory construction, deciding two such cases during the October 2007 Term and granting certiorari in two other cases for the 2008 Term.
Federalism concerns in statutory construction arise most frequently in administrative law, as modern federal agencies produce an enormous amount of laws. As a result, the hard questions about federalism now appear in administrative law cases. Courts and commentators are becoming wary of the ability of federal agencies to encroach on state autonomy, given the underenforced constitutional norms of federalism and the nondelegation doctrine.
Telecommunications services have always been a mix of wireline services, such as wireline telephone, cable television, and Internet access, and wireless services, such as AM/FM radio, broadcast television, and microwave-satellite transmission of electronic signals. Each mode of service has certain properties, both beneficial and detrimental. Wireline has the potential for almost unlimited capacity, such as the use of multigigabit fiber optics, but requires that the service be delivered to a particular location. Wireless frees the customer from being tied to a specific location, allowing service to be rendered wherever the customer is, but suffers from fading or nonexistent connections and possible privacy concerns. The mix between wireline mode and wireless mode is in constant flux; recently, however, the focus of the market has been shifting toward wireless. Cellular telephony has exploded worldwide, and after a slow start, the market penetration has increased dramatically. Meanwhile, the number of wired access lines in the United States has been declining, for the first time since the Great Depression.
Municipal wireless is an important trend, but not for the reasons implied by much of the popular reporting that surrounds this topic. Cities are unlikely to dominate the roster of wireless broadband operators that directly serve the residential and business public. Municipalities, however, have been significant early adopters of innovative unlicensed wireless broadband technologies, providing both a market toehold to innovative products and services using those technologies, and an experimental testing ground for novel organizational models. Most cases of municipal wireless involve the use of unlicensed wireless broadband to meet the local government’s own needs for ubiquitous broadband services, or to construct public-private partnerships aimed at facilitating broadband wireless services to the business and residential public. These uses express local government interests long recognized as legitimate: provision of efficient city services, local economic development, and equity within the community. Thus, the concern for policymakers should not be whether cities should be involved in wireless broadband; there are legitimate reasons why they should, and why increasing numbers of them will be. Rather, the important public policy concern is how to ensure that, in the process of facilitating the first uses of wireless, city authority does not get subverted to create artificial limits on future broadband wireless competition. Doing so will require thoughtful melding of separate legal frameworks governing access to city property and public rights of way into a coherent policy that guides when exclusivity legitimately can or cannot feature in public-private partnership arrangements for communications services.