Volume 99

On Derivatives Markets and Social Welfare: A Theory of Empty Voting and Hidden Ownership

In the past twenty-five years, derivatives markets have grown exponentially. Large, modern derivatives markets increasingly enable in- vestors to hold economic interests in corporations without owning voting rights, and vice versa. This leads to both empty voters—investors whose voting rights in a corporation exceed their economic interests— and hidden owners—investors whose economic interests exceed their voting rights.

We present formal analysis that shows how, when financial markets are opaque, empty voting and hidden ownership can render financial markets unpredictable, unstable, and inefficient. By contrast, we show that when financial markets are transparent, empty voting and hidden ownership have dramatically different effects: they follow predictable patterns, encourage stable outcomes, and promote efficiency. Our analysis lends insight into the operation of securities markets in general and derivatives markets in particular. It also provides a new justification for a robust mandatory disclosure regime and facilitates analysis of proposed substantive securities regulations. 

United States v. Windsor And The Role Of State Law In Defining Rights Claims

The Supreme Court’s recent decision in United States v. Windsor is best understood from a Legal Process perspective. Windsor struck down Section 3 of the federal Defense of Marriage Act (“DOMA”), which defined marriage as exclusively between a man and a woman for purposes of federal law. Much early commentary, including Professor Neomi Rao’s essay in these pages, has found Justice Kennedy’s opinion for the Court to be “muddled” and unclear as to its actual rationale. But the trouble with Windsor is not that the opinion is muddled or vague; the rationale is actually quite evident on the face of Justice Kennedy’s opinion. The trouble is simply that it is not the rationale that many observers expected or wanted.

 

Against Religious Institutionalism

The idea that religious institutions should play a central role in understanding the First Amendment has become increasingly prominent in recent years. Litigation over the application of civil rights laws to ministers and the requirement that religious employers provide contraception coverage to their employees have elicited calls for a doctrine of church sovereignty based on an institutional conception of the Religion Clauses. In this Article, we present grounds for skepticism about this new religious institutionalism, especially the concept of “freedom of the church,” which we distinguish from the seemingly related but importantly distinct idea of church autonomy. We further explain why individual rights of conscience are sufficient to protect the free exercise and anti-establishment values of the First Amendment. Our argument, contrary to some recent scholarship, is that religious institutions do not give rise to a special set of rights, autonomy, or sovereignty, and that what might be called institutional or church autonomy is ultimately derived from individual rights of conscience. Indeed, for purposes of understanding religious liberty, we contend that any notion of institutional autonomy — to the extent it exists — can come from nowhere else.

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