The Looming Threat of Uninsured Nonbank Stablecoins

On May 21, 2025, the U.S. Senate voted to begin final consideration of the “GENIUS Act.” Despite its lofty title, the bill would create grave threats to our financial system and economy by allowing nonbanks to issue stablecoins without the protections provided by federal deposit insurance and other regulatory safeguards governing FDIC-insured banks. The GENIUS Act would set the stage for future runs on stablecoins triggering systemic financial crises and requiring government bailouts.The great majority of global stablecoins promise to maintain parity with the U.S. dollar and are functionally equivalent to bank deposits. Stablecoins are mainly used as payment instruments for speculating in crypto-assets with fluctuating values, like Bitcoin and Ethereum, and facilitating unlawful activities.Despite their promises, stablecoins have been anything but stable. More than 20 stablecoins collapsed between 2016 and 2022, and every leading stablecoin lost its “peg” to the U.S. dollar between 2019 and 2023. Stablecoins (like other uninsured, short-term financial claims) are vulnerable to investor runs whenever investors doubt the ability of issuers to redeem their stablecoins promptly. The GENIUS Act would establish a very weak and inadequate regulatory system for stablecoins, and it would not provide a federally-supervised fund to ensure their repayment.Advocates claim that nonbank stablecoins will improve our payments system and increase financial inclusion. In fact, nonbank stablecoins operating on public blockchains have not shown any ability to deliver fast, reliable, and inexpensive payment services. Public blockchains suffer from lack of scalability and immutability, which prevent them from providing a feasible technology for ordinary payments and other high-volume financial services. Nonbank stablecoins have not demonstrated any capacity to increase financial inclusion, and the crypto industry’s past dealings with underserved communities have been predatory and exploitative.To remove the dangers posed by uninsured nonbank stablecoins, Congress should reject the GENIUS Act and pass legislation mandating that all issuers and distributors of stablecoins must be FDIC-insured banks. That mandate would ensure that stablecoins are offered to the public in a safe, well-regulated manner that protects consumers and investors and maintains the stability of our financial system. Congress should encourage a more efficient and inclusive payments system by supporting tokenization of deposits on permissioned distributed ledgers administered by FDIC-insured banks, and by requiring FDIC-insured banks to provide basic, low-cost deposit accounts with online payment services to lower-income individuals and families who live in the banks’ designated service areas and meet minimum qualifications for lawful status and financial responsibility.The GENIUS Act would allow Big Tech firms and other commercial enterprises to acquire nonbank stablecoin issuers and use stablecoins to enter the banking business and build financial empires. That outcome would undermine our nation’s longstanding policy of separating banking and commerce and create enormous risks. To keep Big Tech giants and other commercial firms out of banking, Congress should reject the GENIUS Act and require all stablecoin providers to be FDIC-insured banks.The GENIUS Act would permit nonbank stablecoins to become a dangerous new category of “shadow deposits,” thereby creating “Shadow Banking 2.0” (a term coined by Hilary Allen). “Shadow Banking 2.0” would disintermediate FDIC-insured banks by pulling away large amounts of bank deposits, severely impairing the ability of banks to make loans to consumers and Main Street businesses.The GENIUS Act would also allow nonbank stablecoin issuers to inflate a “Subprime 2.0” crypto bubble by offering crypto derivatives. Crypto derivatives would generate multiple, highly-leveraged bets on volatile crypto-assets with fluctuating values. The resulting pile of speculative bets on crypto-assets would resemble the toxic pyramid of bets on subprime mortgages arranged by large financial institutions during the “Subprime 1.0” credit boom of the early 2000s.The collapse of “Subprime 1.0” caused the global financial crisis of 2007-09. The crypto bubble produced by “Shadow Banking 2.0” and “Subprime 2.0” would inevitably cause another crypto crash, with damaging spillover effects on traditional financial markets. It is very doubtful whether federal agencies could arrange costly bailouts without risking a crisis in the Treasury bond market and significant depreciation of the U.S. dollar. In addition to the foregoing dangers, the GENIUS Act has many other deeply-flawed provisions, which provide further reasons for Congress to reject the GENIUS Act and require all stablecoin providers to be FDIC-insured banks

Police Officer Use of Force and Officer-created Jeopardy After Barnes V. Felix: The Supreme Court’s Important (Albeit Incomplete) Step in the Right Direction

On May 15, 2025, the Supreme Court issued a unanimous decision in Barnes v. Felix, rejecting the Fifth Circuit’s “moment of threat” doctrine, which limited courts assessing the reasonableness of a law enforcement officer’s use of force to considering only those facts and circumstances known to the officer at the moment of the threat. Under the Fifth Circuit’s narrow time-framing approach, any pre-seizure conduct of the officer, i.e., acts occurring before the officer seized the individual, that may have contributed to the dangerous situation could not be considered as part of the reasonableness inquiry. Pre-seizure officer conduct that contributes to an officer’s need to use deadly force to protect himself has been called “officer created jeopardy” because such prior acts create or contribute to the situation of danger that put the officer’s life in jeopardy. Whether such conduct of the officer may be considered by the trier of fact was one of the critical questions underlying this case. Another critical question involved how broadly or narrowly to interpret the time frame. Rejecting the Fifth Circuit’s narrow approach, the Court reaffirmed its longstanding rule that in assessing the reasonableness of an officer’s use of force under the Fourth Amendment, courts must consider the totality of the circumstances and clarified that the totality of the circumstances inquiry “has no time limit.” However, the Court did not answer the harder and arguably more important question that this case presented: whether pre-seizure “officer created jeopardy” conduct may be considered by the trier of fact. This paper argues that given the Supreme Court’s holding that the totality of the circumstances inquiry has no time limit, lower courts going forward should find that pre-seizure “officer created jeopardy” conduct is a factor in the totality of the circumstances that may be considered in assessing the reasonableness of the officer’s use of force

Money, Money, Money: Universities, Government Funding, and Academic Freedom

Since the federal government began its large-scale funding of research at the start of World War II, the United States and American universities have been in a mutually beneficial relationship. The federal government has reaped the benefits of countless scientific, social science, and technological discoveries that have promoted national security and served the general welfare. In return, American universities have developed extraordinary research enterprises that are regarded as among the best in the world. From the outset of this relationship, however, scientists and university administrators expressed concern that federal funding would interfere with institutional autonomy and academic freedom. President Trump’s current attacks on higher education reveal that these concerns were well justified, albeit to a degree these early critics could have scarcely imagined. Assuming federal research funding will continue—and there is every reason to believe it will continue, even if diminished—it is likely that this funding will come with even more limitations and conditions that require universities to bend their missions and research priorities to secure this funding. Elite private universities are now facing, and will continue to face, some of the same kind of pressure public universities in red and purple states have faced for several years. As state universities well know, however, there is no easy resolution to the conflicts that arise when the government holds the purse strings

Compensation Under the Microscope: Connecticut

With the exception of the District of Columbia, Connecticut has paid exonerees the highest annual amount of compensation for wrongful convictions in the country, almost four times the national average. Perhaps in part because of this, Connecticut is one of a few states that has attempted to limit the scope and generosity of its statute. It, however, later backpedaled on some of those limits. Then, in a burst of activity in early January 2025, the Connecticut Claims Commissioner cleared a backlog of pending cases, awarding more than $36 million in compensation. The Connecticut statute has thus had three lives, having been passed in 2008 and amended twice eight years apart, in 2016 and 2024. Connecticut presents a particularly interesting example of the evolution of a progressive state compensation statute. In Connecticut, claims are decided by a single person – the Claims Commissioner – who has the authority to decide all claims against the state. As we shall see, the Commissioner resolved a substantial majority of claims during life number 1, the most generous one and the one in which the statute was most effective. This article summarizes the Commissioner’s decisions made during that period when the statute had no compensatory floors or caps. Instead, it listed factors the Commissioner should consider in exercising his or her uncabined discretion to arrive at an award adequately compensating the wrongly convicted. Those decisions, almost all of which were written by one Claims Commissioner, reviewed the relevant factors for decision, applied the facts presented, used language that was very empathetic and, ultimately, arrived at compensation amounts associated with each factor with virtually no published reasoning or analysis

To Predict the Post-Chevron World, You Must Understand the Pre-Chevron World and Then Add Extreme Political Polarity

In this contribution to a symposium on the Supreme Court’s opinion in Loper Bright Enterprises v. Raimondo, Professor Pierce explains how the Court has created a legal environment that will lead to many serious problems. He provides a roadmap to avoid that result

Analyzing the Benefits of Artificial Intelligence to Racially Inclusive Democracy

Over the past two decades—as the United States has grown more ethnically diverse—the U.S. Supreme Court has dismantled key voting rights protections, and state legislatures have erected a record number of voting restrictions. Largely oblivious to this growing gap in legal protections, several artificial intelligence (“AI”) optimists have claimed that AI can help usher in a more inclusive, participatory, and unbiased democracy. Such an outcome, however, is far from guaranteed. This Article is the first to comprehensively examine the extent to which AI—and the legal frameworks that regulate it—can advance racially inclusive democracy. It responds to the AI optimism literature by offering a clear-eyed assessment of relevant political, racial, and economic barriers to AI making democracy more racially inclusive. This analysis reveals that some of the AI optimists’ technological and legal proposals could, in fact, exacerbate racial disparities in political power and harm voters of color. The Article acknowledges, however, that certain AI tools, if applied appropriately, could help reduce turnout gaps and increase government responsiveness to communities of color. Although good AI law is no substitute for an updated Voting Rights Act and a Supreme Court committed to protecting voting rights, embedding values of racial inclusion into AI law at this formative stage could shape the trajectory of our democracy. For example, laws ensuring broad access to public AI infrastructure (particularly in historically marginalized communities) and robust AI accountability laws can foster conditions in which AI is more likely to be used to benefit racially inclusive democracy

Policy Brief: The Federal Banking Agencies Should Withdraw Their Deeply Misguided Proposal to Weaken Leverage Capital Requirements for the Largest U.S. Banks

On July 10, 2025, federal banking agencies issued a proposed regulation that would dangerously weaken capital requirements for the largest U.S. banking organizations. The proposed rule would significantly reduce the enhanced supplementary leverage ratio (eSLR) requirements for U.S. global systemically important banking organizations (G-SIBs). If adopted, the proposed rule would allow U.S. G-SIBs to become woefully undercapitalized, as their predecessors were at the outbreak of the global financial crisis of 2007-09. The proposed rule would make U.S. G-SIBs highly likely to fail during future systemic financial crises, with catastrophic consequences for our financial system, economy, and society. As explained in this Policy Brief, the federal banking agencies should withdraw the proposed rule for the following reasons: The proposed rule would contravene governing federal statutes, which require federal banking agencies to establish and enforce leverage capital requirements that are effective and binding components of capital standards for the largest U.S. banking organizations. Strong leverage capital requirements are necessary to prevent large, complex banking organizations from taking excessive risks and manipulating risk-based capital rules to justify dangerously low levels of equity capital. Federal bank regulators have permitted U.S. G-SIBs to reduce their leverage capital ratios to hazardously low levels by making excessive shareholder distributions, and the proposed rule would allow U.S. G-SIBs to become recklessly undercapitalized. The proposed rule would expand “too-big-to-fail” subsidies for U.S. G-SIBs and undermine the competitive viability of community banks and regional banks, thereby reducing the availability of credit to consumers, farmers, and small businesses. The proposed rule would increase the likelihood of a devastating systemic financial crisis by creating a sovereign-bank “doom loop,” in which the survival of U.S. G-SIBs would depend on the stability of the U.S. Treasury market and the credibility of the Federal Reserve System as monetary policy authority and lender of last resort

Circuit Capture and the National Court of Appeals

We are facing a crisis of confidence in our federal courts. Polarization in the judicial selection process and partisanship in judicial decision-making have yielded a steep decline in the public’s trust of the judicial branch. Much of the blame lies with the Supreme Court, whose repeated ethical scandals and aggressive rightward tilt have renewed calls for major court reform—from court packing to jurisdiction stripping, from term limits to lottery dockets, and much more in between. But the Supreme Court is not the only court in need of reform. The vast majority of cases go no further than the thirteen U.S. Courts of Appeals, which increasingly suffer from the same polarization and politicization problems without the same level of scrutiny. Regional organization is an arbitrary product of history. Perhaps it made sense when the Nation’s first circuit courts were staffed by Supreme Court justices, who had to contend with the realities of early 19th-century travel. But as the country expanded and the circuit courts evolved from trial courts into the powerful, law-making U.S. Courts of Appeals, that structure has long since outgrown its initial justification and is now being exploited for political gain. There’s no better example than the current Fifth Circuit—an ultra-conservative court stacked with appointees by Donald Trump hand-picked for their conservative bona fides and constantly in the headlines for its sweeping, politically-charged decisions. This problem—one of circuit capture by partisan judges—is structural, and a structural problem requires a structural solution: the dissolution of the regional circuits. The idea of a single, unified National Court of Appeals is not new. Several commissions and judicial administration scholars have unsuccessfully proposed it in one form or another to combat increasing caseloads. But the problems the courts face today is not one of caseloads, it is one of legitimacy. And taking aim at the margins and working within the bounds of the current structure will not solve it. This Article argues that a single, centralized intermediate federal appellate court would alleviate the partisan problems generated by captured circuits, promote uniformity of federal law, and streamline the appellate process

The Dangers of the Current “Global Deregulatory Drive” in Financial Regulation: Written Testimony Submitted to the UK House of Lords Financial Services Regulation Committee

This written testimony was submitted to the UK House of Lords Financial Services Regulation Committee in response to the Committee’s “Call for Evidence” regarding the growth of private credit markets since the global financial crisis of 2007-09 (https://committees.parliament.uk/work/9235/growth-of-private-markets-in-the-uk-following-reforms-introduced-after-2008). This written testimony was tendered in conjunction with the author’s oral testimony before the Committee on July 23, 2025, and addresses the following points: 1. As past deregulatory episodes have shown, the current “global deregulatory drive” to loosen financial regulation is likely to endanger global financial markets by encouraging excessive risk-taking by large banks and further expansion of “shadow banking” activities by private equity funds, hedge funds, and other nonbank financial institutions. 2. Strong equity capital requirements, incorporated in robust leverage capital standards, are essential to maintain the stability of the banking system and to sustain lending by banks through the business cycle. 3. Community banks play a vital role in the U.S. economy by providing credit to consumers, farmers, and small businesses, and by supporting the civic life of smaller and rural communities. However, community banks need greater support from Congress and regulators to maintain their viability. 4. Large universal banks, working in conjunction with nonbank financial intermediaries (“shadow banks”), have promoted a rapid and perilous expansion of private-sector and public-sector debts since 2009. Universal banks are supporting the growth of risky private credit obligations arranged by private equity firms as well as highly leveraged trading positions established by hedge funds in sovereign debt markets. 5. Private equity funds face severe challenges and are exposing bank lenders and captive insurance companies to increasing risks. Private equity funds and private credit funds are currently seeking to sell highly leveraged and illiquid investments to retail investors as well as pension funds and investment funds that serve retail investors. 6. The enormous costs of rescuing universal banks, shadow banks, and financial markets since 2007 have imposed huge fiscal burdens on governments and left central banks with bloated balance sheets. It is very doubtful whether governments and central banks could arrange another series of large bailouts in response to a future crisis without precipitating severe and destabilizing sovereign debt crises. 7. My written testimony recommends the following reforms: (a) Prohibiting nonbank financial institutions from offering “shadow deposits,” which are short-term, deposit-like financial claims that compete with bank deposits and are highly vulnerable to investor runs. (b) Requiring large universal banks to hold significantly higher levels of equity capital to satisfy enhanced leverage capital requirements, and to undergo more rigorous stress tests to assess the viability and resilience of their business models, (c) Supporting the formation of new community banks and reducing compliance burdens for those banks if they provide substantial amounts of relationship loans to small and medium-sized enterprises (d) Implementing the Financial Stability Board’s recommendations for (i) enhanced reporting and disclosure requirements for hedge funds, private equity funds, and private credit funds; (ii) mandates requiring central clearing of government securities, repurchase agreements, derivatives, and other systemically important financial instruments; (iii) strong capital requirements for clearing facilities and robust margin requirements for their customers; and (iv) increased margin requirements, position limits, and concentration limits for significant financial instruments that are not centrally cleared. (e) Adopting stronger reporting obligations, capital requirements, asset quality and diversification standards, and oversight procedures for life insurance and reinsurance companies that are controlled by private equity firms. (f) Prohibiting – or establishing very strong presumptions against – offerings of private equity funds and private credit funds to retail investors or to investment funds and pension funds that serve retail investors. (g) Restructuring financial institutions and financial markets by separating banks from securities broker-dealers and other firms engaged in capital markets activities, in accordance with principles derived from the Glass-Steagall Act of 193

FEATURE COMMENT: President Trump And Tariffs—The Procurement Exception

President Trump’s first administration was marked by very strong “Buy American” protectionism, focused closely on procurement. Since President Trump took office again on Jan. 20, 2025, the second Trump administration instead has focused, at least preliminarily, on tariffs as a policy and revenue-generating tool. This article reviews the Trump administration’s initial moves to impose new tariffs and their potential effect on procurement. The article explains that goods purchased by federal agencies are generally exempt from tariffs, as a matter of regulation, though how exactly that exemption will be applied is often unclear. The article reviews those and other policy issues which remain open for the procurement community, as President Trump looks increasingly likely to impose significant additional duties on goods coming into the U.S