Tag: Administrative Law

From Jitneys to App-Based Ridesharing: California’s “Third Way” Approach to Ride-For-Hire Regulation – Note by Ravi Mahesh

From Volume 88, Number 4 (May 2015)
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A new breed of “app-based” ride-for-hire providers has caused a stir in California, helped rewrite the state’s rules governing ridesharing, and stoked tensions among taxicab drivers, state and local regulators, and the technology companies behind the new apps. UberX, Lyft, and Sidecar are among the most well-known of the new app-based rideshare services, which allow customers to hail a ride using smartphone applications by connecting them with drivers who also use the apps. Critically, the drivers need not be professionals; rather, they merely need to have downloaded a ridesharing app and been cleared by the app provider to drive. For a time, the app-based rideshare companies pointed to these novel aspects of their services to flout regulation entirely. New laws and rules in California, however, provide for the regulation of the nascent industry under a statewide scheme mandating insurance coverage, driver background checks, and other safety-based requirements. In substance, the new rules signal the state’s tacit approval of the development of app-based ridesharing services. Users of these app-based services, which are currently available only in major metropolitan areas like Los Angeles, have been impressed by the apps’ lower prices and perceived higher quality of service.

 

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Narrow Banking as a Structural Remedy for the Problem of Systemic Risk: A Comment on Professor Schwarcz’s Ring-Fencing – Postscript (Comment) by Arthur E. Wilmarth, Jr.

From Volume 88, Number 1 (November 2014)
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In Ring-Fencing, Professor Steven Schwarcz provides an insightful overview of the concept of “ring-fencing” as a “potential regulatory solution to problems in banking, finance, public utilities, and insurance.” As Professor Schwarcz explains, “ring-fencing can best be understood as legally deconstructing a firm in order to more optimally reallocate and reduce risk.” Ring-fencing has gained particular prominence in recent years as a strategy for limiting the systemic risk of large financial conglomerates (also referred to herein as “universal banks”). Professor Schwarcz describes several ring-fencing plans that have been adopted or proposed in the United States, United Kingdom, and European Union.

This Comment argues that “narrow banking” is a highly promising ring-fencing remedy for the problems created by universal banks. Narrow banking would strictly separate the deposit-taking function of universal banks from their capital markets activities. If properly implemented, narrow banking could significantly reduce the safety net subsidies currently exploited by large financial conglomerates and thereby diminish their incentives for excessive risk-taking.

 

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Ring-Fencing and Its Alternatives – Postscript (Response) by David Zaring

From Volume 88, Number 1 (November 2014)
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Steven Schwarcz’s “Ring-Fencing” gets much of its impact from its broad definition of the term, which is usually heard these days when thinking about whether a multinational bank ought to be forbidden from removing the assets of its branches in one country to support its activities in another.

One of the singular contributions of the article lies in its willingness to look beyond that use of the term to think about what ring-fencing means more broadly and conceptually. As Schwarcz observes, ring-fencing is nothing less than a way to allocate resources, regulate firms, and reassure stakeholders that could be applied any enterprise. The ring-fencing metaphor posits the separation of assets within a firm—some are inside the ring fence, and others are not. To Schwarcz this amounts to “legally deconstructing a firm in order to more optimally reallocate and reduce risk,” which could include any restructuring involving holding companies, off-balance sheet entities, and even the creation of corporate subsidiaries.

 

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Performance-Enhancing Drugs in Boxing: Preventing the Sweet Science from Becoming Chemical Warfare – Note by Jonathan H. Koh

From Volume 87, Number 2 (January 2014)
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Throughout its history, the sport of boxing has been known as much for its corruption and scandals as its courageous fighters and memorable bouts. Indeed, it has been referred to by some as the “red light district of sport[s].” Even today, boxing is plagued by fixed fights, exploitative promoters, greedy sanctioning organizations, unnecessary health risks to boxers, incompetent state athletic commissions, and a confusing array of weight divisions with a multitude of world champions. In fact, some of these issues were so rampant that Congress, in 1996 and 2000, passed federal legislation attempting to address them.

 

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Ring-Fencing – Article by Steven L. Schwarcz

From Volume 87, Number 1 (September 2013)
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“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.

 

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Farm Fishing Holes: Gaps in Federal Regulation of Offshore Aquaculture – Note by Kristen L. Johns

From Volume 86, Number 3 (March 2013)
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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.

 

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Is Financial Regulation Structurally Biased to Favor Deregulation? – Note by Carolyn Sissoko

From Volume 86, Number 2 (January 2013)
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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.

 

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The State of Treasury Regulatory Authority After Mayo Foundation: Arguing for an Intentionalist Approach at Chevron Step One – Note by Joana Que

From Volume 85, Number 5 (July 2012)
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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.

 

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