Where you go to college and what you choose to study has always been important, but, with the help of data science, it may now determine whether you get a student loan. Silicon Valley is increasingly setting its sights on student lending. Financial technology (“fintech”) firms such as SoFi, CommonBond, and Upstart are ever-expanding their online lending activities to help students finance or refinance educational expenses. These online companies are using a wide array of alternative, education-based data points—ranging from applicants’ chosen majors, assessment scores, the college or university they attend, job history, and cohort default rates—to determine creditworthiness. Fintech firms argue that through their low overhead and innovative approaches to lending they are able to widen access to credit for underserved Americans. Indeed, there is much to recommend regarding the use of different kinds of information about young consumers in order assess their financial ability. Student borrowers are notoriously disadvantaged by the extant scoring system that heavily favors having a past credit history. Yet there are also downsides to the use of education-based, alternative data by private lenders. This Article critiques the use of this education-based information, arguing that while it can have a positive effect in promoting social mobility, it could also have significant downsides. Chief among these are reifying existing credit barriers along lines of wealth and class and further contributing to discriminatory lending practices that harm women, black and Latino Americans, and other minority groups. The discrimination issue is particularly salient because of the novel and opaque underwriting algorithms that facilitate these online loans. This Article concludes by proposing three-pillared regulatory guidance for private student lenders to use in designing, implementing, and monitoring their education-based data lending programs.
In 2005, the perception that wealthy executives were being rewarded for failure led Congress to ban Chapter 11 firms from paying retention bonuses to senior managers. Under the new law, debtors could still pay bonuses to executives—but only “incentive” bonuses triggered by accomplishing challenging performance goals that go beyond merely remaining employed. This Article uses newly collected data to examine how this reform changed bankruptcy practice. While relatively fewer firms use court-approved bonus plans after the reform, the overall level of executive compensation appears to be similar, perhaps because the new regime left large gaps that make it easy for firms to bypass the 2005 law and pay managers without the judge’s permission. This Article argues that the new law was undermined by institutional weaknesses in Chapter 11, as bankruptcy judges are poorly situated to analyze bonus plans and creditors have limited incentives to police executive compensation themselves.
The transition to a low-carbon society will have winners and losers as the costs and benefits of decarbonization fall unevenly on different communities. This potential collateral damage has prompted calls for a “just transition” to a green economy. While the term, “just transition,” is increasingly prevalent in the public discourse, it remains under-discussed and poorly defined in legal literature, preventing it from helping catalyze fair decarbonization. This Article seeks to define the term, test its validity, and articulate its relationship with law so the idea can meet its potential.
The Article is the first to disambiguate and assess two main rhetorical usages of “just transition.” I argue that legal scholars should recognize it as a term of art that evolved in the labor movement, first known as a “superfund for workers.” In the climate change context, I therefore define a just transition as the principle of easing the burden decarbonization poses to those who depend on high-carbon industries. This definition provides clarity and can help law engage with fields that already recognize just transitions as a labor concept.
How should the executive branch respond to globalization? The president’s executive order on international regulatory cooperation provides a blueprint. The branch will turn to regulatory cooperation to make progress in freeing trade and will encourage a particular approach to that cooperation—harmonization—that was eschewed during the successful European integrative project. The executive order, which is assessed in this Article, represents a welcome political endorsement of a phenomenon that was previously pursued by agencies acting largely on their own remit. It is also an attempt to galvanize the use of regulatory cooperation by other agencies disinclined to pursue it in the past. In addition to analyzing how the executive order is meant to work, this Article argues that while the executive’s approach is promising, it must be paired with a commitment to political oversight to ensure that regulatory globalization remains legitimate. There are signs that the president is beginning to provide this commitment through the executive order; the Article identifies a roadmap for its continuation and a role for Congress as well.
The macroeconomic policies of states can produce significant costs and benefits for other states, yet international macroeconomic cooperation has been one of the weakest areas of international law. We ask why states have had such trouble cooperating over macroeconomic issues when they have been relatively successful at cooperation over other economic matters such as international trade. We argue that although the theoretical benefits of macroeconomic cooperation are real, in practice it is difficult to sustain because optimal cooperative policies are often uncertain and time variant, making it exceedingly difficult to craft clear rules for cooperation in many areas. It also is often difficult or impossible to design credible self-enforcement mechanisms. Recent cooperation on bank capital standards, the history of exchange rate cooperation, the European monetary union, and the prospects for broader monetary and fiscal cooperation all are discussed. Finally, we contrast the reasons for successful cooperation on international trade policy.
Strategic actors often require a great deal of informational and computational resources to calculate game-theoretic equilibria, and scholars need a precise accounting of incentives in order to model the decisions faced by these actors. Rarely are both of these conditions—player rationality and payoff quantifiability—met when scholars attempt to model the behavior of individual actors in the law (especially the behavior of lay people such as jurors, litigants, or criminals). Behavioral economists have proposed posthoc adjustments to account for the failure of player rationality, but these adjustments—if they are indeed correct—make the pursuit of equilibrium impossible for any actor with realistic informational and cognitive resources. This Article discusses the necessary conditions for the emergence of equilibrium strategies, and identifies examples of legal scholarship in which the use of equilibrium solution concepts is problematic because of the improbability that these conditions are met.
The law of exclusionary vertical restraints–contractual or other business relationships between vertically related firms–is deeply confused and inconsistent in both the United States and the European Union. A variety of vertical practices, including predatory pricing, tying, exclusive dealing, price discrimination, and bundling, are treated very differently based on formalistic distinctions that bear no relationship to the practices’ exclusionary potential. We propose a comprehensive, unified test for all exclusionary vertical restraints that centers on two factors: foreclosure and substantiality. We then assign economic content to these factors. A restraint forecloses if it denies equally efficient rivals a reasonable opportunity to make a sale or purchase (depending on whether the restraint affects access to customers or inputs). Market foreclosure is substantial if it denies rivals a reasonable opportunity to reach minimum viable scale. When substantial foreclosure is shown, the restraint should generally be declared illegal unless it is justified by efficiencies that exceed the restraint’s anticompetitive effects.
A “hybrid” or “mixed” country can be defined as having substantial common and civil elements in its legal system. Hybrid countries have been an overlooked aspect of legal origins literature. This study’s comparative analysis finds that most hybrids have experienced moderate to high economic growth rates, began as civil law countries, and maintained predominantly civil law–based property and contract law, while uniformly adopting common law–based corporate and securities law.
Modification-proof contracts boost commitment and can help overcome information problems. But when such rigid contracts are ubiquitous, they can function as social suicide pacts, compelling enforcement despite significant externalities. At the heart of the current financial crisis is a contract designed to be hyperrigid: the pooling and servicing agreement (“PSA”), which governs residential mortgage securitization. The PSA combines formal, structural, and functional barriers to its own modification with restrictions on the modification of underlying mortgage loans. Such layered rigidities fuel foreclosures, with spillover effects for homeowners, communities, financial institutions, financial markets, and the macroeconomy.
This Article situates PSAs in the context of theoretical and policy debates about contract rigidity, bond contract modification, and contractual bankruptcy. We propose a typology of contract rigidities, ranging from formal prohibition on amendment (formal rigidity) to extreme collective action problems (functional rigidity). We then draw on New Deal jurisprudence for strategies to overcome each type of rigidity. These strategies include narrowly tailored legislation that renders the problematic terms unenforceable on public policy grounds, administrative restructuring mandates, and special bankruptcy regimes.