Nondeposit Deposits and the Future of Bank Regulation

We argue in this paper that the nation has already entered with a vengeance into the era of nondeposit deposit banking. The traditional bank deposit against which reserves must be held and deposit insurance paid is suffering encroachment from a wide variety of competitive instruments and arrangements, all of which, to one degree or another - often to a substantial degree - serve a function economically similar to that of the checking account at a depository institution. The legal system may respond to these developments by attempting to bring nondeposit deposits under regulation, as it has done with other banking oxymorons such as the nonbank bank and the nonthrift thrift. However, the wide variety of nondeposit deposit instruments already available in the marketplace, coupled with the extraordinary ingenuity of bank lawyers at devising new ways of doing business while avoiding regulations, suggest that any attempt to close the nondeposit deposit loophole will ultimately prove unsuccessful. Nondeposit deposits are here to stay. The results of this development for the future of banking regulation are likely to be profound and longlasting

Nondeposit Deposits and the Future of Bank Regulation

We argue in this paper that the nation has already entered with a vengeance into the era of nondeposit deposit banking. The traditional bank deposit against which reserves must be held and deposit insurance paid is suffering encroachment from a wide variety of competitive instruments and arrangements, all of which, to one degree or another - often to a substantial degree - serve a function economically similar to that of the checking account at a depository institution. The legal system may respond to these developments by attempting to bring nondeposit deposits under regulation, as it has done with other banking oxymorons such as the nonbank bank and the nonthrift thrift. However, the wide variety of nondeposit deposit instruments already available in the marketplace, coupled with the extraordinary ingenuity of bank lawyers at devising new ways of doing business while avoiding regulations, suggest that any attempt to close the nondeposit deposit loophole will ultimately prove unsuccessful. Nondeposit deposits are here to stay. The results of this development for the future of banking regulation are likely to be profound and longlasting

Market Approach to Tort Reform via Rule 23

In a stimulating paper prepared for this symposium, Professor Richard L. Marcus addresses the proposal to substitute an administrative scheme for all future mass tort claims (and some present ones). Professor Marcus cogently observes that many of the pressure points in mass tort litigation can properly be labeled substantive -including all the baggage that such a label carries with it. When dealing with mass tort class actions, federal courts face enormous problems of case management. Creative attempts to deal with such problems, however, often involve the courts altering or amending private rights under state law

America\u27s Banking System: The Origins and Future of the Current Crisis

This Article explains why contraction of commercial banking—as defined, organized, and conducted under federal supervision since the 1930s—is inevitable over time. We show how technological innovation and improvements in the primary and secondary trading markets for financial products have led to an irreversible decline in the demand for the services commercial banks are permitted to offer. We then show why the Bush Administration\u27s reform proposals, although dramatic, far-reaching, and, in certain important respects highly constructive, ultimately will not solve the bank failure problem resulting from these economic trends. We also explain what further changes must be made to correct the now-endemic problems that plague the U.S. banking industry

The Community Reinvestment Act: An Economic Analysis

The Community Reinvestment Act ( CRA ) provides, innocuously enough, that federal bank supervisors must assess how a depository institution (a bank or savings association) serves the credit needs of its entire community, including low- and moderate-income neighborhoods, consistent with safe and sound operation. The supervisors must take such record into account in evaluating applications to acquire deposit facilities. For many years after its adoption in 1977, the CRA was little more than a vague statement of principle without much real-world effect. In 1989, however, Congress greatly enhanced the CRA\u27s impact as part of the comprehensive banking legislation of that year. This Article offers a preliminary economic analysis of the CRA in its new, post-1989 manifestation

America\u27s Banking System: The Origins and Future of the Current Crisis

This Article explains why contraction of commercial banking—as defined, organized, and conducted under federal supervision since the 1930s—is inevitable over time. We show how technological innovation and improvements in the primary and secondary trading markets for financial products have led to an irreversible decline in the demand for the services commercial banks are permitted to offer. We then show why the Bush Administration\u27s reform proposals, although dramatic, far-reaching, and, in certain important respects highly constructive, ultimately will not solve the bank failure problem resulting from these economic trends. We also explain what further changes must be made to correct the now-endemic problems that plague the U.S. banking industry

The Canons of Statutory Construction and Judicial Preferences

A regrettable side-effect of Karl Llewellyn\u27s interesting critique of the canons of statutory construction1 was that intellectual debate about the canons was derailed for almost a quarter of a century. In his critique, Professor Llewellyn purported to show that the canons of statutory construction were useless as rules for guiding decisions. His claim, that every canon could be countered by an equal and opposite countercanon, transformed the canons from exalted neutral principles into conclusory explanations appended after the fact to justify results reached on other grounds. This Article\u27s first goal is to demonstrate that Karl Llewellyn\u27s critique was largely beside the point