Copyright (c) 2009 All rights reserved. http://works.bepress.com/willa_gibson Recent documents in Willa E Gibson en-us Mon, 05 Jan 2009 15:06:49 PST 3600 http://works.bepress.com/willa_gibson/9 http://works.bepress.com/willa_gibson/9 Fri, 25 Apr 2008 15:18:40 PDT This essay discusses the economic and societal implications of the subprime market losses with an emphasis on the federal regulators' inability to curtail such losses. It discusses collateralized mortgage obligations and how these debt securities fueled the subprime market. The essay discusses how each of the players - lenders, debtors, investment bankers, securities firms and investors - speculated on homes whose values were a mere illusion. It describes how each party along the chain starting with the lender, used basic risk-shifting principles to engage in reckless speculation assuming they could externalize the cost associated with their behavior. It also identifies the problems with securitizing mortgage receivables; and discusses a possible solution. Willa E. Gibson Banking and Finance http://works.bepress.com/willa_gibson/8 http://works.bepress.com/willa_gibson/8 Mon, 14 Apr 2008 13:10:31 PDT Please find attached an essay entitled "The Subprime Market Roller Coaster." The essay discusses the economic and societal implications of the subprime market losses with an emphasis on the federal regulators' inability to curtail such losses. It discusses collateralized mortgage obligations and how these debt securities fueled the subprime market. The essay discusses how each of the players - lenders, debtors, investment bankers, securities firms and investors - speculated on homes whose values were a mere illusion. It describes how each party along the chain starting with the lender used basic risk-shifting principles to engage in reckless speculation assuming they could externalize the cost associated with their behavior. It also discusses the economic consequences of the subprime losses, and criticizes the inability of federal regulators to monitor trade transactions involving esoteric financial products, and to forecast the many financial crises the economy and financial markets have experienced over the last 20 years - from Orange County, California over-the-counter derivatives losses to Long Term Capital Management hedge fund losses to the present day collateralized mortgage securities losses. The essay reviews the remedial efforts currently underway, and criticizes the Treasury's recent proposal to eliminate the SEC and make the Fed the "super-cop" of the financial market. It discusses what federal and state regulators could have done to stymie losses in the subprime market without broad sweeping changes. The essay concludes that the price tag for the government's failure to regulate the financial markets and to require market players and debtors to internalize their negative externalities will cost the taxpayers millions - creating a moral hazard. Willa E. Gibson Banking and Finance Commercial Law Economics Law and Economics Securities Law http://works.bepress.com/willa_gibson/7 http://works.bepress.com/willa_gibson/7 Wed, 06 Feb 2008 12:35:40 PST Forthcoming in 2009 by Vanderplas Publishing. Willa E. Gibson Revised Article 9 http://works.bepress.com/willa_gibson/6 http://works.bepress.com/willa_gibson/6 Wed, 06 Feb 2008 12:19:25 PST This Article examines the derivatives market, its regulation and the concept of suitability as it applies--and should be applied--to the derivatives market. The Article first provides an overview of the derivatives market. Next, the Article reviews the existing regulatory framework to which derivatives transactions and derivatives dealers are subject and also discusses the various legal actions that can be brought based on suitability claims. The Article argues against the imposition of suitability rules to OTC derivatives dealers and instead emphasizes the need to view OTC derivatives transactions as arm's length transactions. Finally, the Article identifies ways of achieving policy objectives concerning counter-party losses. Willa E. Gibson OTC Derivatives http://works.bepress.com/willa_gibson/5 http://works.bepress.com/willa_gibson/5 Wed, 06 Feb 2008 12:11:31 PST Swap agreements are one of the most popular types of over-the-counter (OTC) derivative contracts. The market's popularity stems from the financial success that market participants have experienced in using swap agreements to manage risks associated with their commercial and financing transactions. Through financial engineering, swap dealers are able to identify and to isolate various risks associated with financial portfolios, and to develop swap agreements that specifically address those risks. Unfortunately, several market participants have incurred substantial losses from trading swap agreements. The phenomenal growth of the market along with its accompanying losses have raised questions about whether the swap market should be regulated. Currently, swap transactions are not subject to any single regulatory framework. Swap transactions are regulated only to the extent that the market participants trading such transactions are regulated. For example, banks, which are major OTC derivatives dealers, are overseen by federal bank regulators and are subject to certain regulatory requirements those regulators imposed. Other major swap dealers are insurance companies and securities firms that are subject to limited or no federal oversight. The traditional approach to regulating the financial markets has been to allocate regulatory authority of new financial products based on whether the product falls within the definition of a security or a futures. Classifying swap agreements as futures or securities is inappropriate, given that they possess features that distinguish them from both securities and futures. The OTC derivatives market is an innovative market that designs financial instruments that are especially tailored to meet counterparties' financial needs. These instruments cannot easily be pigeonholed into categories of futures or securities. Subjecting such instruments to existing securities or commodities laws would stymie product development and prevent OTC derivatives dealers from competing effectively with foreign OTC derivatives dealers who are subject to less restrictive regulation. This Article contends that the classification of swap agreements as securities or futures is inappropriate given that the OTC derivatives market is a wholly different market than the ones for which securities and commodities laws were devised. Part II provides an overview of the swaps market. Part III discusses the jurisdictional problems between the SEC and CFTC regarding derivatives. Part IV examines whether swap transactions are securities. Part V examines whether swap transactions are futures contracts. Part VI surveys the exemption of swaps from CFTC authority. Part VII discusses the public policy goals in the OTC derivatives market, including what regulatory framework should be implemented to achieve these goals, and it is followed by a brief conclusion. Willa E. Gibson Securities http://works.bepress.com/willa_gibson/4 http://works.bepress.com/willa_gibson/4 Wed, 06 Feb 2008 12:02:03 PST Recently, various hedge funds have incurred significant financial difficulty. The most widely publicized being the difficulties encountered by Long Term Capital Management, L.P., operating Long Term Capital Portfolio, L.P. ("LTCM"). The LTCM fund employed various trading strategies, with the majority of its trading positions in government bonds of the G-7 countries. In summer 1998, conditions caused by financial problems in Russia and other emerging markets caused LTCM to incur substantial losses. The enormous size of the LTCM hedge fund placed its trading counterparties and creditors in a position to lose substantial amounts because they had extended excessive credit to LTCM, either through trading counterparty or lending relationships. Since LTCM's creditors and counterparties had allowed LTCM to build up dangerous levels of leverage, they faced the real possibility that LTCM would default on the credit obligations it owed them. To protect themselves from an LTCM default, some of the fund's creditors and counterparties created a consortium, which injected $3.6 billion in equity into LTCM in return for receiving ninety-percent equity stake in the fund. Banking regulators assisted LTCM creditors and counterparties in creating the consortium because they feared that LTCM's losses could cause financial shock to the markets if LTCM's seventy-five counterparties sought to liquidate their positions simultaneously in response to an LTCM default. The financial collapse of LTCM has led federal legislators and financial regulators to question whether additional regulatory constraints on a hedge fund's use of leverage are necessary to protect against financial market disruption. This Article discusses whether additional regulation is needed to protect against the possibility of systemic loss triggered by a hedge fund's excessive use of leverage. After reviewing the existing federal regulations to which hedge funds are potentially subject, this Article concludes that private market regulation, through the exercise of more diligent market discipline by both hedge funds and those entities that extend credit to hedge funds, is needed to protect against systemic loss. Further, the Article concludes that public regulation requiring hedge funds to disclose comprehensive information about their trading positions to financial regulators is also needed. Without such disclosures, hedge funds can assume dangerous levels of leverage that could disrupt financial markets without the foreknowledge of financial regulators, as illustrated by LTCM's recent predicament. Part I of this Article provides an overview of the hedge fund industry, while Part II reviews existing federal securities and commodities laws that potentially apply to hedge funds. Part III discusses the major public policy concerns surrounding hedge fund trading and argues that these policy concerns can be addressed through limited public regulation and private market regulation. Willa E. Gibson Hedge Funds http://works.bepress.com/willa_gibson/3 http://works.bepress.com/willa_gibson/3 Wed, 06 Feb 2008 11:53:44 PST A Comprehensive Review of Revised Article 9 provides a detailed review and explanation of Revised Article 9 of the UCC by examining revisions made to areas of Scope, Attachment, Perfection, Priority, and Default provisions found within Article 9. The book treats each area separately with cross-referencing to other areas when necessary to provide an in-depth analysis of Revised Article 9. For each area, the book provides a commentary concerning differences between Revised and Former Article 9, and it also includes detailed outlines of the revised rules. Many hypotheticals are included within the outlines to illustrate the legal application of the rules to both commercial and consumer financing transactions. The book also includes multiple choice questions for each of the revised areas along, with discussions that identify the correct answers (and explain why the answers are correct as well as why the other choices are incorrect). The book is ideal for students or practitioners who need guidance in this new area of law and can serve as a reference source for academicians. Willa E. Gibson Revised Article 9 http://works.bepress.com/willa_gibson/2 http://works.bepress.com/willa_gibson/2 Wed, 06 Feb 2008 11:43:19 PST One of the significant changes Revised Article 9 made to the Uniform Commercial Code Rules of Secured Transactions was the inclusion of deposit accounts as collateral within its scope. Revised Article 9 requires creditors to have control of deposit accounts before perfection of their security interest in them. This article examines deposit account rules by focusing on the efficiency of, and the justification for, the control rules. Willa E. Gibson Revised Article 9 http://works.bepress.com/willa_gibson/1 http://works.bepress.com/willa_gibson/1 Wed, 07 Nov 2007 11:25:33 PST Willa E. Gibson Revised Article 9