Showing 9 of 45 Publications by Todd J. Zywicki

The Supreme Court’s Restoration of Executive Prerogative

Popular Media In its brief history, the Consumer Financial Protection Bureau (CFPB) has been the subject of three of the most important separation of powers cases in . . .

In its brief history, the Consumer Financial Protection Bureau (CFPB) has been the subject of three of the most important separation of powers cases in the last half century. In the first two cases, NLRB v. Noel Canning (2014), which addressed the recess appointment power of the President, and Seila Law LLC v. Consumer Financial Protection Bureau (2020), which dealt with the authority of the President to remove a sitting head of a single-member independent agency, the Supreme Court sided with the challengers.

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Financial Regulation & Corporate Governance

The Law and Political Economy Project: A Critical Analysis

Scholarship The Yale Law and Political Economy (“LPE”) Project began in 2017 following the surprising election of Donald Trump as President. In that time, LPE has . . .

The Yale Law and Political Economy (“LPE”) Project began in 2017 following the surprising election of Donald Trump as President. In that time, LPE has increasingly emerged into an intellectual and ideological movement particularly at elite law schools involving the efforts of numerous leading academics, substantial foundation backing, and its own dedicated journal. Lina Kahn, an early contributor to the movement while still a student, has gone on to become Chair of the Federal Trade Commission.

LPE calls for a deconstruction of what it sees as the dominant intellectual paradigm in law over the past several decades, namely the influence of law and economics in law and regulation and a retrenchment of redistributionist policies. Underlying this critique is an appeal to the so-called “Golden Age of American Capitalism” that spanned the period 1945-1973. Building on the foundation of French economist Thomas Piketty’s book Capital in the Twenty-First Century, LPE scholars view this period as one of steady economic growth, widely-shared prosperity, and economic stability, that suddenly ended around 1973 for no clear reason and was replaced with what they alternately characterize “Neoliberal” worldview or “Twentieth-Century Consensus.”

This article critiques this narrative. As is demonstrated, U.S. policymakers turned away from the post-War consensus because of a myriad of clear reasons—“stagflation” (simultaneous high rates of inflation and unemployment combined with slow economic growth), declining global economic competitiveness, and the increasing financial burden of resisting Soviet aggression during the Cold War. It was widely recognized that the economic successes of the post-War era resulted largely from the United States’s dominant global economic position following the decimation of World War II and that the economy succeeded despite, rather than because of the various factors extolled by LPE thinkers. Fears of real economic decline and its consequences prompted a groundswell of support for modernization of regulatory and antitrust policies.

Read at SSRN.

 

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Antitrust & Consumer Protection

Consumer Privacy, Information Sharing, and Consumer Finance: Tradeoffs and Opportunities

Scholarship Abstract Concerns over the ownership, use, security, and flows of consumer data information are not new. Yet the dominance of the Internet and electronic payments . . .

Abstract

Concerns over the ownership, use, security, and flows of consumer data information are not new. Yet the dominance of the Internet and electronic payments has elevated such concerns to a high level. Traditionally there was perceived to be a tradeoff between the flow of information necessary for the consumer financial system to work well (such as to solve information asymmetries necessary in order to make credit-granting decisions) and consumer control over their data and keeping their information private. Data security approaches historically pursued a state “fortress” model that rested on the ability of consumers to keep private a small amount of information the consumer uniquely knew, such as a PIN or password.

Today, however, it is becoming apparent that this static model is no longer viable and can be expected to grow less viable with the growth of artificial intelligence and machine-learning. But such approaches have costs as well—not only are they often more cumbersome, when the fortress walls are breached these systems can be slower to adapt and can result in increased harm to consumers on the back end. Some people have suggested that we respond to these emergent threats by trying to build taller and thicker fortress walls and other static, such as the use of biometric identification. The approach suggested here, by contrast, attempts to model what a more dynamic approach to information security would look like and how such a system would be dependent on more data flows rather than less. I suggest some areas of current and proposed regulation that should be reexamined in light of the analysis presented here.

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Data Security & Privacy

Looking Forward by Looking Backward: The Future of Consumer Finance and Financial Protection

Scholarship Abstract This essay was prepared for “The Future of Financial Regulation Symposium” October 6, 2023, sponsored by the C. Boyden Gray Center. I assess the . . .

Abstract

This essay was prepared for “The Future of Financial Regulation Symposium” October 6, 2023, sponsored by the C. Boyden Gray Center. I assess the future of consumer finance and financial protection by looking to the lessons of history. Consumer finance and financial protection in the United States exhibits a spontaneous evolution driven by changes in technology and consumer preferences in a repeated cycle. In general, consumers use consumer finance in a manner consistent with the predictions of rational behavior in order to improve their lives. Consistently, this goal of consumer betterment runs up against paternalistic and repressive laws, which attempt to prevent the beneficial evolution of technology and competition. Eventually economic forces overwhelm regulatory repression for the betterment of consumers.

I track three distinct eras in the evolution of consumer finance and financial regulation that provide a roadmap to the future evolution in the virtual era and emergent threats to consumers from private and public sources, including the growing use of the consumer finance system to infringe on the exercise of constitutionally-protected values.

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Financial Regulation & Corporate Governance

The Supreme Court ‘Pulled a Brodie’: Swift and Erie in a Commercial Law Perspective

Scholarship Abstract Erie Railroad v. Tompkins is a cornerstone of modern American law. Erie overturned Swift v. Tyson, a case that had stood for nearly a century with minimal objection. Swift involved . . .

Abstract

Erie Railroad v. Tompkins is a cornerstone of modern American law. Erie overturned Swift v. Tyson, a case that had stood for nearly a century with minimal objection. Swift involved the negotiability of commercial paper and the holding of the case, that in disputes heard in federal courts under diversity jurisdiction, the court should use traditional common law methods to resolve the case rather than feeling bound by the authoritative pronouncements of a state court.

Correspondence between Harvard Law School’s Lon Fuller and Yale’s Arthur Corbin—arguably the two greatest Contracts Law professors of the mid-Twentieth Century—reveals widespread ridicule and dismay among commercial lawyers and scholars following Erie. Fuller quotes the great Harvard Constitutional Law scholar as saying the Supreme Court “pulled a brodie” in Erie. This article reviews Erie from the perspective of commercial law, rather than the public law commentary that has dominated discussion of the Erie doctrine since its birth, seeking to understand the depth of contempt for Erie among commercial lawyers in terms of its consequences, reasoning, and jurisprudential approach.

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Financial Regulation & Corporate Governance

Colorado Is Mapping a Dangerous Path on Access to Credit

Popular Media The credit card you used to purchase your latte this morning and to fill your car with gas was probably issued by a bank based . . .

The credit card you used to purchase your latte this morning and to fill your car with gas was probably issued by a bank based in Delaware, South Dakota or some state other than Colorado. Why? Because under a unanimous 1978 decision authored by liberal lion William Brennan, the Supreme Court ruled that banks holding a “national charter” would be governed by the interest rate ceilings of the state in which the bank is based instead of the state of the customer’s residence. This one decision transformed the American economy, unleashing unprecedented competition and putting Visa, Mastercard and other credit cards in the hands of millions of American families who were previously reliant on pawnbrokers, personal finance companies and store credit to make ends meet.

Yet a law set to go into effect in Colorado in July would deprive the most credit-deprived Coloradans of the same access to competitive financial services available to the more well-off and effectively destroy the rapidly growing fintech industry in the state. The consequences to Colorado’s more financially strapped households could be catastrophic. Other states are considering following suit.

Read the full piece here.

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Financial Regulation & Corporate Governance

Posner Meets Hayek: The Elements of an Austrian Law & Economics Research Program

Scholarship Abstract To date, Friedrich Hayek is the only winner of the Nobel Prize in Economics who also holds a law degree. The role of law . . .

Abstract

To date, Friedrich Hayek is the only winner of the Nobel Prize in Economics who also holds a law degree. The role of law is central to Hayek’s work and prominent in the research program of the Austrian School of Economics generally. Although Hayek’s contributions to jurisprudence are manifest, as are the influence of his economics ideas, his influence on the field of law and economics has remained modest. This lecture, delivered as the Keynote Lecture at the 2023 Asian Law & Economics Association Annual Meeting, provides an introduction to the fundamentals of an Austrian Law & Economics research program in contrast to the mainstream, Chicago-school research program that has dominated the field since its early history. Compared to the neoclassical approach, Austrian thinking provides a more insightful approach to many of the key concepts generally associated with the economic analysis of law: the nature and success of the common law as a system of law, the importance of stability and simple rules in the law, and the strong preference for private ordering via contract, personal autonomy, and voluntary exchange exhibited in the common law.

I identify and briefly describe six key distinguishing characteristics of the Austrian school that distinguishes it from neoclassical law and economics: (1) Methodological individualism, (2) utility and costs are subjective, (3) the division of knowledge, (4) spontaneous order, (5) competition as a discovery procedure, and (6) the nature of economic equilibrium. I will also highlight some of the ways in which examining law and economics through an Austrian framework provides valuable insights about law and economics.

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Antitrust & Consumer Protection

The Biden Administration’s Contradictory Disdain for ‘Junk Fees’

Popular Media The White House has declared war on so-called “junk fees,” i.e. add-on fees to transactions that increase complexity and decrease price transparency as opposed to rolling all . . .

The White House has declared war on so-called “junk fees,” i.e. add-on fees to transactions that increase complexity and decrease price transparency as opposed to rolling all relevant costs into one “all-in” price. Regulators such as the Consumer Financial Protection Bureau (CFPB) and Federal Trade Commission have followed with their own rules implementing that command.

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Financial Regulation & Corporate Governance

The FT Misunderstands the Economics of Credit-Card Markets

TOTM In a recent piece for the Financial Times, Brendan Greeley argues that the misnamed Credit Card Competition Act would reduce inflation. In it, Greeley recycles numerous myths about the nature . . .

In a recent piece for the Financial Times, Brendan Greeley argues that the misnamed Credit Card Competition Act would reduce inflation. In it, Greeley recycles numerous myths about the nature of credit-card markets that have long been rebutted by serious economic research. Both theory and ample evidence from the United States and other countries shows that attempting artificially to force down interchange fees is bad for consumers—especially those with lower incomes and those who revolve their balances. Moreover, these interventions simply redistribute the costs of operating the payment-card system; they do not eliminate them. As a result, they won’t reduce inflation, as Greeley imagines.

Read the full piece here.

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Financial Regulation & Corporate Governance