Though the information in the working paper is useful, the banking regulators seem overly focused on risks posed by securities-lending transactions relative to other substantial risks to the economy. For that reason, the OFR should broaden its scope. Here are two closely related areas for the OFR to examine: (i) state and municipal insolvency (Puerto Rico is not the end of the story), and (ii) public and private pension obligations (e.g., what are the combined risks of underfunding…

The SEC's Director of Enforcement believes that improper practices concerning fee arrangements and disclosures are common in the private equity industry (and, one might add, in the collection of brokerage fees by firms not registered as broker-dealers). For that reason, every private equity adviser should consider all of its expense allocation and fee arrangements in order to ensure that the arrangements were made correctly and have been disclosed fully. Firms that fail to examine the…

Several articles in the Economic Policy Review take the position that the cultural (and other organizational and management) issues that arise at banks are not fundamentally different from those that arise at other large institutions (including governments), but may be different in degree. In an article that is worth reading, Ohio State University Banking and Business Professor Rene M. Stulz frames the position in the following terms: "One might be tempted to conclude…

The question that the case raises is not whether the strategy of avoiding a buy-in of a failed short delivery is legal - the SEC had previously established that it viewed the "buy [stock]-write [put option]" strategy, which is not inherently illegal, as improper when used as a device to evade, or in this case, to abet the evasion of, the requirement to buy-in failures to deliver on short sale trades. The question rather is who has responsibility to…