Volume 100

Consciously Decoupling: A Response to Professors Barry, Hatfield, and Kominers

On Derivatives Markets and Social Welfare: A Theory of Empty Voting and Hidden Ownership represents a compelling addition to the still burgeoning discussion of the bifurcation of voting rights and ownership interests. The practice of decoupling the long-fused voting rights of shareholders from their underlying economic interests has become all too common with the explosive growth of financial derivatives. Decoupling challenges assumptions embedded in our capital markets, tests our system of corporate governance, and strains a regulatory regime based on disclosure. 

This short Response attempts to persuade the reader that decoupling is, by its very nature, more upsetting to the natural order than the authors concede. And, its persistence threatens the predictability and stability of the overall market. Regardless of whether a “core outcome model” suggested by the authors becomes generally accepted, any desirable regulatory framework must begin with an ironclad mandate for full and fair disclosure not easily side-stepped by derivatives. In addition, focus on a desirable explanatory model should not siphon attention from efforts underway to improve the quality and depth of the information available to market participants.

Glass Versus Steagall: The Fight over Federalism and American Banking

In 1933, Congress passed the Glass-Steagall Act as a response to the Great Crash of 1929. Two basic responses to the banking crisis were on the table in the weeks prior to the Act’s passage: unification of the national banking system under federal control or preservation of the state unit banking system augmented by a full federal guarantee of deposits made in every American bank. The conflict between these two alternatives represented the final episode in the nearly 150-year-long struggle between state and federal authorities for control over the banking system.

The competition dated back to 1791 and posed the question of how the values and structure of American republican federalism should be engrafted onto the banking system. This Note begins by arguing that the answer, in 1791, was competitive dual federalism. It frames this federal-versus-state competition and then presents the two broad ideologies that drove the struggle, typified by Senator Carter Glass and Representative Henry Steagall. Next, this Note presents the so-called Vandenberg Amendment—adopted as part of the Glass-Steagall Act—as representative of a long-overlooked model of cooperative federalism for banking.

This Note concludes by suggesting that, contrary to the traditional scholarly account, the Glass-Steagall Act as shaped by the Vandenberg Amendment represented a fundamental change to the existing American banking structure, reversing the choice made in 1791 by rejecting a competitive dual federalism model in favor of a cooperative federalism one.

Concurrent Damages

In areas as diverse as copyright, pollution, consumer protection, and electronic privacy, statutory damages have become a familiar form of civil remedy. Yet judges are discovering that these formulaic awards can swing by orders of magnitude for arbitrary reasons—resulting in windfalls for some but little relief for others—due to the rigidly linear way in which the awards stack up, count by count. The irony is that too much structure, rather than too little, is what generates such capricious outcomes.

This Article proposes a solution: allow courts to run damages concurrently. As with concurrent criminal sentencing, the judge would recognize every act of violation, and yet group the nominal counts so that the effective penalties do not stack up arbitrarily. This simple option enables judges to tailor the structure of damages to match more closely how the harms actually add up (“Should the copyright damages accumulate per song, per album, per artist, or per playlist—in this case?”). Moreover, it can displace the troubling fudges—such as fictional awards—that some courts use when bound by the rigidity of statutory damages. Creating a concurrent damages option may thus make possible not only more accurate and consistent compensation but also clearer, truer signals for future actors and future courts.

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