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Hal Scott

  • Who’s Looking Out for Main Street?

    May 18, 2020

    An article by Glen Hubbard and Hal ScottSmall and midsize businesses have been hit hard by the pandemic, but they aren’t getting the help they need. Why, when the Cares Act provides direct assistance to the Treasury to assist these firms? Congress now has a chance to get to the bottom of it. On Tuesday the Senate Banking Committee will hold its first quarterly hearing on the Cares Act. It will hear from Treasury Secretary Steven Mnuchin and Federal Reserve Chairman Jerome Powell. Three questions should frame the hearing: Who is responsible for designing small and midsize business relief programs? The Treasury is required by law to approve any Fed lending facility, which must be adequately collateralized and available only to solvent borrowers...Why is Treasury risking so little money to save Main Street? Congress enacted the Cares Act nearly two months ago. It authorized the Treasury to provide at least $454 billion to back the Fed’s “Main Street” facilities, particularly to lend to small businesses and state and local governments...Why is Treasury making a priority of not losing money? The design of the Main Street facilities makes it extremely difficult for needy small businesses to qualify for loans.

  • Main Street Needs More Fed Help

    April 17, 2020

    An article by Glenn Hubbard and Hal ScottThe U.S. economy is in free fall. Leading economic forecasters predict as much as an 11% year-over-year decline in second-quarter gross domestic product. Small businesses—those with under 500 employees, which constitute 50% of the workforce and 44% of GDP—have closed their doors and are teetering from illiquidity to insolvency. Depression is around the corner. The priority should be to get funds to these firms to avoid disaster. Unfortunately, the Main Street Expanded Loan Facility, designed by the Treasury and Federal Reserve, will fail to do so. It wrongfully prioritizes preventing losses over rescuing the economy. The Treasury needs to allocate much more than $75 billion to this program if it is to succeed. The Main Street Facility is an essential expansion of the $349 billion Congress initially provided to small business through the Cares Act’s Paycheck Protection Program—money that ran out Thursday. Lawmakers rightly prioritized saving small business over the substantial cost involved. Most of the PPP loans won’t be repaid, because the program forgives loans if borrowers spend 75% on retaining employees. Congress is expected to allot another $250 billion to PPP.

  • The Fed Needs to Move Faster

    April 13, 2020

    An article by Hal ScottThe Federal Reserve has become the first responder for the U.S. economy. Normally, the Fed is concerned with the safety of the financial system. But its fate as an independent central bank may turn on whether it can preserve the real economy. To succeed, the Fed needs to put aside normal concerns about credit risk and picking winners and losers. Clearly no moral-hazard issues arise from this virus outbreak. The Fed must move quickly to get cash in the hands of business owners. Small businesses constitute almost 50% of the country’s workforce. Many have only a three- or four-week cash cushion. They need money now. The Fed is the perfect vehicle to save the economy. It’s trusted politically, staffed by skilled professionals, and has the experience of 2008 from which to draw. Most important, it can create money and operate with negative capital. The Fed can always pay its bills.

  • White House Seeks Financial Crisis-Era Powers to Buttress Economy

    March 16, 2020

    Treasury Secretary Steven Mnuchin said on Sunday that he would ask Congress to reinstate powers that were used during the 2008 financial crisis to support the economy as the coronavirus threatens to grind business activity in the United States to a halt. The comments suggest that the White House is bracing for a widespread downturn that could harm sectors well beyond the travel and cruise ship industries, and that the federal government could need to return to the type of crisis-era measures that were ultimately scaled back by lawmakers in the 2010 Dodd-Frank Act...Hal Scott, an emeritus professor at Harvard Law School and the director of the nonprofit Committee on Capital Markets Regulation, said the Fed must restore its ability to be the world’s most powerful lender of last resort. It was unfortunate that such authorities needed to be reinstated amid a crisis, he said. “It would have been better to do it before the crisis,” Mr. Scott said. “When you get into a crisis and you do it, there’s a concern that you’re sending a panic signal — that we’ve got to do this, we need this power.”

  • photo of Hal Scott

    ‘Quid Ita?’: Hal Scott’s Questions and Answers

    January 29, 2019

    Harvard Law Professor Hal S. Scott was in his element, thundering up and down the aisles of a classroom in Wasserstein Hall and challenging each of his 70 Capital Markets Regulation students to match his enthusiasm and curiosity. After 43 years on the HLS faculty, Scott taught his final class at the school before retiring last spring. What is the best process, he asked, for ensuring that regulations for the financial system achieve their intended effect?

  • Dodd-Frank regulations good and bad for financial system… (video)

    September 12, 2018

    Hal Scott, director of the program on International Financial Systems at Harvard Law School, and Sebastian Mallaby, the Paul A. Volcker Senior Fellow for International Economics at the Council on Foreign Relations, discuss what triggered the financial crisis in 2008 and if we are safe from another.

  • Clayton Wants Fiduciary Proposal Out ‘Sooner than Later’

    April 11, 2018

    Securities and Exchange Commission Chairman Jay Clayton said Tuesday that the fiduciary rule remains a priority for the organization he leads, though he didn’t share an exact time frame for its release...Hal Scott, director of the Committee on Capital Markets Regulation and the Nomura Professor at Harvard Law School, noted that overall the market structure was sound, “but just needs to be adjusted.” He highlighted problems with market data, in which his committee recommended that the SEC require all self-regulatory organizations to publicly disclose revenues from proprietary data feeds and operating securities operating processors or SIPs, as well as performance data. Speed is a key metric for data consolidators, Scott said, and a “significantly slower SIP would not survive competitive pressure. This change also would level the playing field between those who rely on SIPs and those who use proprietary data feeds.”

  • Does the U.S. have too many financial regulators?

    March 20, 2018

    How many agencies does it take to regulate a financial system? In United States, about half a dozen at least. And this fragmented system made dealing with the 2008 financial crisis more difficult. Regulators struggled to figure out who had authority to do what, and there was no one figure overseeing the efforts to right the U.S. economy...Who regulates financial institutions depends on their charters. Before you can open up a bank, you must receive a bank charter. But where you go to get that charter depends on what kind of institution you’re operating, said Hal Scott, international financial systems professor at Harvard Law School. “There are just a lot of different regulators, and they overlap in their authorities,” he explained.

  • Is it time to roll back US bank regulation?

    March 1, 2018

    An op-ed by Hal Scott and Lisa Donner. Ten years after the start of the financial crisis, US policymakers are beginning to deal with the stiff regulatory reaction that it spawned, writes Hal Scott. The US Senate will take up the first bipartisan effort to rein in the impact of the Dodd-Frank financial reform bill on smaller banks within weeks. But that should be just one step in reform. The bill would exempt banks with less than $100bn in assets from the Federal Reserve’s annual stress tests and the Federal Deposit Insurance Corporation’s annual living wills requirement that each bank explain how it could be safely wound down in a crisis.

  • SEC Weighs a Big Gift to Companies: Blocking Investor Lawsuits

    January 26, 2018

    In its determination to reverse a two-decade slump in U.S. stock listings, a regulator might offer companies an extreme incentive to go public: the ability to bar aggrieved shareholders from suing. The Securities and Exchange Commission in its long history has never allowed companies to sell shares in initial public offerings while also letting them ban investors from seeking big financial damages through class-action lawsuits...“The question is who is going to be the first company because they’re going to be the lightening rod of criticism,” said Hal Scott, a professor at Harvard Law School who has long argued that shareholder lawsuits should be reined in. “It would definitely be controversial, there’s no doubt about it. But, it’s something they should endure the controversy over because it’s worth it.”

  • James Shipton named chair of Australian Securities and Investments Commission

    James Shipton named chair of Australian Securities and Investments Commission

    January 3, 2018

    James Shipton, the Executive Director of the Program on International Financial Systems at Harvard Law School, has been appointed the Chair to the Australian Securities and Investments Commission (ASIC) for a five-year period.

  • CFTC Talks EP022: Harvard Law Prof. Hal Scott (audio)

    December 18, 2017

    An interview with Hal Scott. This week on CFTC Talks, we bring on Harvard Law Prof. Hal Scott, author of "Connectedness and Contagion." We cover the 2008 financial crisis, what happened and what regulation has done since. Has regulation made the US financial system safer and at what cost? What is the future direction for fin reg?

  • PIFS celebrates 20th anniversary with gala and symposium

    PIFS celebrates symposium’s 20th anniversary with a gala in Japan

    November 16, 2017

    Last month, the Program on International Financial Systems at Harvard Law School held its 20th annual U.S.-Japan symposium, along with a special anniversary gala to celebrate the milestone and look ahead to the future of the program as PIFS director Hal S. Scott transitions to a new role as emeritus professor at Harvard.

  • The SEC Plans to Collect Too Much Information

    October 3, 2017

    An op-ed by Hal Scott and John Gulliver. Is your personal information safe from the Securities and Exchange Commission? The SEC has mandated that U.S. stock exchanges and the Financial Industry Regulatory Authority establish a database by November 2018 that will store the names, birth dates, Social Security numbers and brokerage accounts of tens of millions of U.S. investors as part of the Consolidated Audit Trail. Like Equifax and the SEC’s database of corporate filings, the CAT will be a prime target for cyberthieves. And a breach of the CAT could be even more consequential. Cybersecurity experts have said hackers could use the personal information it will store to make direct withdrawals from investors’ retirement accounts.

  • AIG sheds $150m in costs along with Sifi label

    October 2, 2017

    AIG is poised to save as much as $150m in annual compliance costs after US officials released it from “too big to fail” supervision, a decision that could also help the insurance company expand again after years of post-crisis shrinkage. A team of federal officials who have been stationed within the group to monitor its activities will be heading for the exit after a council led by Treasury secretary Steven Mnuchin ruled AIG’s collapse would no longer pose a threat to the financial system...Hal Scott, professor at Harvard Law School, said he expected regulators to take up Prudential’s case soon. “I’d be shocked if it wasn’t next on the list,” he said.

  • The White House and lawmakers want to reinstate a 1930s law they don’t understand

    July 18, 2017

    An op-ed by Hal Scott. In recent months, the Trump administration and members of Congress have called for reinstating the Glass-Steagall Act, a Depression-era law that separated commercial banking from investment banking. That would be a serious mistake. Instead, Congress should repeal the Dodd-Frank financial reform’s “Hotel California” provision, which prevents large banks from voluntarily separating their commercial and investment banking activities. The biggest problem with the calls for the reinstatement of Glass-Steagall is a lack of understanding about Glass-Steagall itself.

  • Fed’s new banking watchdog likely to ease burden of stress tests

    July 18, 2017

    While Donald Trump once vowed to “do a number” on Dodd-Frank, Washington’s central piece of post-crisis financial legislation, his regulatory appointees will probably prove more effective agents of change than Congress, which remains locked in a legislative logjam. The administration on Tuesday named one of the key figures in its quest to ease the load of regulation, nominating Randal Quarles to be vice-chair for financial supervision at the Federal Reserve...Hal Scott, a Harvard professor who was himself a contender for the Fed post, said the choice of Mr Quarles was an excellent one. But he added: “It is not like he is the Tsar; he is the vice-chair. He has to get the support of the board for whatever he does.” 

  • Harvard’s Scott Says Fed Stress Tests Restricting Growth (video)

    July 5, 2017

    Hal Scott, a Harvard Law School professor, discusses the state of the U.S. banking system with Bloomberg's Scarlet Fu and Julia Chatterley on "Bloomberg Markets."

  • The Trump administration—not the Fed—has it right on bank regulation

    July 5, 2017

    An op-ed by Hal Scott. All 34 of the largest banks in the United States, representing over 75 percent of U.S. banking assets, recently passed the Federal Reserve Board's annual stress tests for the first time since the tests were created in 2011. However, celebration is very premature. The Fed's stress tests require banks to have sufficient capital to withstand levels of losses greater than the losses they suffered in the 2008 crisis. This latest test, based on economic assumptions released in February 2017, assumed that quarterly GDP growth would fall by 10.6 percent and the unemployment rate would hit 10 percent by mid-2017. In actuality, GDP is growing at 2 percent annually and the unemployment rate is under 5 percent.

  • Withdrawal from the euro area: the unsolved issue of external debt

    May 19, 2017

    An op-ed by Hal Scott. A key purpose of an Italian withdrawal from the euro area would, of course, be currency redenomination: providing that contracts and instruments (including sovereign bonds) in euros could be repaid in a new, devalued national currency. The stark reality is that Italy could not successfully do so without the agreement of the EU and other major markets around the world. The process of making redenomination effective within a withdrawing Member State, between Italian debtor and creditors, is relatively straightforward. Italy simply would pass legislation providing that in Italy all contracts specifying payment in euros — from government bonds to commercial loans to home mortgages — were to be satisfied in the new lira.

  • To Spur Small Business, First Free the Banks

    May 15, 2017

    An op-ed by Hal Scott. Somewhere in the United States right now, an entrepreneur is having trouble getting a small-business loan for expansion. The reason? The bank is committed to keeping a large portion of its money in government debt instead. After the financial crisis, the government, in the form of the Federal Reserve, the Comptroller of the Currency and the Federal Deposit Insurance Corporation, imposed liquidity requirements that force American banks with assets over $50 billion to hold huge amounts of government debt as liquid assets...American banks are truly awash in government debt at five times pre-crisis levels. If President Trump wants to follow through on his promise to increase lending to small businesses, he should start by scaling back these requirements.

  • Relax the rules to kickstart the stalled IPO market

    May 15, 2017

    An op-ed by Hal Scott. Over the past 10 years the number of initial public offerings in the US, and the total amount of equity raised by them, are way down on historical averages. If these had held there would have been more than 3,000 new public companies in the past decade. Instead, we have had fewer than half the number of IPOs. Against that, private companies in the US, including the likes of Lyft and SpaceX, are raising a record amount of equity capital in private markets. Private companies raised almost $120bn through private offerings in 2016, according to the Committee on Capital Markets Regulation, a policy group. Last year US IPOs raised $24bn in equity, compared with a historical average of nearly $60bn.

  • Wall Street’s hopes for deregulation switch from laws to watchdogs

    May 8, 2017

    President Trump’s promised bonfire of Obama-era banking legislation is unlikely to happen, according to an emerging consensus among Wall Street bankers, lawmakers and regulators. Instead, bankers are switching their deregulation hopes to a changing of the guard of US bank supervisors, who have considerable scope to loosen the shackles on banks within the bounds of existing law...Hal Scott of Harvard Law School, who was earlier in the running to be the Fed’s new regulatory chief, said that excessively cautious and secretive stress testing was the “binding constraint” on bank capital. “That’s untenable,” he said.

  • Hal Scott on the Rekindling of Trust in Wall Street (video)

    April 28, 2017

    Capital Markets Regulation President Hal Scott discusses U.S. trust for Wall Street and government regulatory positions that need to be filled. He speaks with Tom Keene on "Bloomberg Surveillance."

  • Harvard’s Scott Says U.S. Has Latitude on Bank Reforms (video)

    March 23, 2017

    Hal Scott, Harvard Law School professor and president of Committee on Capital Markets Regulation, discusses the Trump administration's approach to financial regulation and how it relates to the Federal Reserve and monetary policy. Scott is a potential candidate to be the next Vice Chair of the Federal Reserve.

  • Withdrawal of GE’s Nason Leaves Fed Job Up in the Air

    March 9, 2017

    David Nason, a General Electric (GE.N) executive and former Treasury Department official, has told the White House he is no longer interested in serving as the Federal Reserve's bank supervision chief. Nason, who heads GE's Energy Financial Services division, had been seen as a leading candidate for the vice chair for supervision position, a critical role in efforts by the administration of President Donald Trump to revamp financial rules...Harvard Law School professor Hal Scott, whose work has focused on financial firms, regulation and capital markets, is still in the mix for the job, a person familiar with the matter told Reuters. Scott is director of the Committee on Capital Markets Regulation, a research group made up of financial industry representatives and academics that has been critical of financial regulations.

  • Trump Team Broadens Search for Fed Regulatory Post

    February 24, 2017

    The Trump administration has broadened its search for a key regulatory job at the Federal Reserve, according to people familiar with the matter, meeting in recent weeks with at least two people about the post of Fed vice chair in charge of bank oversight. President Donald Trump hasn’t announced who he will nominate to the currently vacant post, and his decision won’t be final until that happens...The administration is still said to be considering David Nason, a former Treasury Department official in the administration of President George W. Bush...President Trump’s team also recently met with Richard Davis, the chief executive of U.S. Bancorp, and Hal Scott, a professor at Harvard Law School, according to people familiar with the matter...Mr. Scott declined to comment.

  • This should be Trump’s top priority on financial reform

    January 26, 2017

    An op-ed by Hal Scott. The Trump administration's top financial regulatory priority should be a review of government-mandated bank capital requirements. In order to achieve economic growth, President Trump should adopt a more market-based approach. According to the Federal Deposit Insurance Corporation, bank capital in the United States stands at a record high of $1.9 trillion, an increase of $630 billion, or 50 percent, over the pre-crisis amount. This increase is almost double the equity raised from all IPOs in the United States since 2008. Academic research shows that high capital requirements reduce bank lending and economic growth.

  • Public Companies’ Unelected Directors

    December 21, 2016

    An op-ed by Hal Scott. Under the Trump Administration we can expect that there will be many changes at the Securities and Exchange Commission. One important area that has gone largely ignored and is ripe for reform is the system of “unelected directors” for public companies. The Committee on Capital Markets Regulation—a policy group with executives from across the financial sector and leading academics—recently studied how boards of directors of public companies respond to unfavorable votes by their shareholders. The Committee’s startling discovery is that, in 85% of cases where a director does not receive a majority of shareholder votes, the director will continue to serve on the board for at least two more years.

  • Trump wants to unshackle Main Street banks

    December 6, 2016

    Main Street banks believe they've been unfairly swept up by the tsunami of regulation triggered by the 2008 Wall Street meltdown. But President-elect Donald Trump and his allies have signaled a desire to reverse rules that are seen as burdensome for community banks, freeing them up to give more loans...But Hal Scott, director of a Wall Street-funded nonprofit called the Committee on Capital Markets, complained that Dodd-Frank "lumps in all other banks" beneath that "super level" of regulation. Scott, a Harvard Law School professor, said there is "growing consensus that the regulatory burden should be relieved for small community banks."

  • Professor Hal Scott

    Program on International Financial Systems celebrates 30 years of research and influence on global financial policy

    October 19, 2016

    In October, The Program on International Financial Systems (PIFS) at Harvard Law School celebrated its 30th anniversary by holding the kind of symposium it has been hosting for three decades — convening financial leaders, high-ranking government officials, and distinguished academics from around the world to discuss the most pressing issues in international finance.

  • How One Goldman Sachs Trader Made More Than $100 Million

    October 19, 2016

    One junk-bond trader at Goldman Sachs Group Inc. earned more than $100 million in trading profits for the firm earlier this year, an unusual gain at a time when new regulations have pushed Wall Street to take fewer risks. The gains were the work of Tom Malafronte, a managing director on the bank’s high-yield-bond desk in New York. The 34-year-old trader bought billions of dollars in junk corporate debt on the cheap starting in January, then locked in profits as prices recovered, according to people familiar with the matter...It is difficult—if not impossible—to define clearly the difference between trades made to meet clients’ demands and those conducted just to make money, said Hal Scott, a professor with Harvard Law School who has testified before Congress about efforts to regulate the banking industry. “No one has been able to distinguish between market making and prop trading,” Mr. Scott said.

  • This proposed investing rule would be a ‘dangerous mistake’

    October 17, 2016

    An op-ed by Hal S. Scott and John Gulliver. A new Securities and Exchange Commission rule goes into effect Friday that can restrict investors from withdrawing their cash from the money-market funds that were at the heart of the 2008 financial crisis. If the G-20's international regulator (the Financial Stability Board) has anything to say about it then a similar rule will soon apply to the $16 trillion invested in all U.S. mutual funds. This would be a dangerous mistake. The FSB's proposal is to charge investors' penalty fees if they try and sell their mutual-fund investment during a crisis and would even include a complete prohibition of such sales in extreme circumstances. It is expected to finalize its proposal later this year and then the SEC, U.S. Treasury and Federal Reserve are expected to promptly implement them in the U.S.

  • Most people will have forgotten Wells Fargo scandal a year from now, analyst says

    October 14, 2016

    Wells Fargo...has come under fire for deceptive sales practices that led to the opening of about 2 million accounts without customer authorization. After facing a grilling on Capitol Hill, CEO John Stumpf retired effective immediately on Wednesday...For Hal Scott, Harvard Law professor and author of "Connectedness and Contagion," the black mark on Wall Street could have serious repercussions. "It really affects the ability of the federal government, and in particular the Fed, to be a lender of last resort to Wall Street if we go into another crisis," he said. "The more unpopular Wall Street becomes, the less possible it is for the Fed to support it in a crisis."

  • Deutsche Bank as Next Lehman Brothers: Far-Fetched but Not Unthinkable

    October 7, 2016

    All it took was the threat of a $14 billion fine against Deutsche Bank for the word “contagion” to rear its ugly head. Global markets have been shaken up in recent weeks over fears that Deutsche Bank, a symbol of German financial might and Europe’s fourth-largest biggest bank by assets, cannot absorb a fine of that magnitude. The German government said flatly that it would not bail out the bank, leading to what some called market “panic” that Deutsche Bank could face a messy Lehman Brothers-style collapse and set off a global financial crisis...Those fears seem wildly overblown. “The bottom line is, I think the Deutsche Bank issues will be resolved and there won’t be any contagion episode,” said Hal S. Scott, a professor at Harvard Law School and the author of the recent book “Connectedness and Contagion.” “But it’s a wake-up call. Are we prepared if this ever happens again? The answer is ‘no.’” Professor Scott defines “contagion” as “an indiscriminate run by short-term creditors of financial institutions that can render otherwise solvent institutions insolvent because of the fire sale of assets that are necessary to fund withdrawals and the resulting decline in asset prices triggered by such sales.” He calls such contagion “the most virulent and systemic risk still facing the financial system today.”

  • James Shipton named chair of Australian Securities and Investments Commission

    James Shipton named executive director of Program on International Financial Systems

    September 30, 2016

    Program on International Financial Systems Executive Director James Shipton. Harvard Law School’s Program on International Financial Systems (PIFS) has named James Shipton its new executive director.

  • Are We Safer 8 Years After the Financial Crisis and Collapse of Lehman Brothers? (video)

    September 19, 2016

    Harvard University Professor Hal Scott doesn't think financial markets are safer eight years after the 2008 financial crisis. He said the government has a limited ability to bail out banks, something that saved the financial system from further turmoil in 2008. He also comments on the effectiveness of the extra capital banks are required to hold.

  • The Fed’s Stress Tests Need to Be Transparent

    September 19, 2016

    An op-ed by Hal Scott and John Gulliver. The stress tests that big American banks face each year are about to get more stressful. The Fed is planning to substantially increase—by an average of 57%, we calculate—the regulatory capital that the eight largest banks in the U.S. need to pass the annual tests. Had these expected higher capital levels been in effect this year, it is likely that the country’s four largest banks ( J.P. Morgan Chase, Bank of America, Wells Fargo and Citigroup ) all would have failed the test. As a consequence, they would have been barred from remitting more profits to their shareholders. The higher capital requirements will diminish these banks’ ability to lend, potentially affecting economic growth. That isn’t all: The Fed’s secretive process for designing stress tests might well be illegal. It likely violates the Administrative Procedure Act of 1946, requiring government agencies to be transparent and publicly accountable.

  • Fed’s Stress Tests May Be Illegal: Report

    September 16, 2016

    A new report out Thursday by a top group of executives at some of the country’s largest financial institutions finds the Federal Reserve may be engaging in illegal activity as it tries to regulate the banking sector. The Committee on Capital Markets Regulation, which includes executives from J.P. Morgan (JPM), Citigroup (C) and Goldman Sachs (GS), explains that it is the Fed’s "stress tests" on big banks that may be against the law...“This law makes clear that if an agency wants to do something that affects a large number of institutions, they must tell you [and] put it up for comment,” says Hal Scott, director of the Committee on Capital Markets Regulation and professor at Harvard Law School.

  • Banking Group Finds Fed Stress Tests Likely Illegal

    September 15, 2016

    A group that represents executives from some of the largest U.S. banks concluded in a paper that the Federal Reserve likely acted illegally in adopting central parts of its annual stress tests, the latest evidence that some in the banking industry are contemplating a potential lawsuit. The Committee on Capital Markets Regulation, a nonprofit organization of academics and financial executives, was set to release the paper Thursday, and The Wall Street Journal reviewed a copy. The groups’ members include senior executives at big banks J.P. Morgan Chase & Co., Citigroup Inc., Goldman Sachs Group Inc., Wells Fargo & Co., and State Street Corp...The Committee on Capital Markets Regulation is funded by its members. Hal Scott, director of the committee and a Harvard Law School professor and director of the school’s Program on International Financial Systems, said he wrote the paper along with the committee’s staff. Mr. Scott said in an interview that work on the paper began about six months ago after discussions with members of the group, and that the group approved it. He said the paper has “absolutely no connection” to industry discussions about potential litigation against the Fed, and that he was unaware of those discussions before the Journal reported them.

  • GOP leaves questions on financial reform

    July 18, 2016

    If drafts of the Republican Party platform are any indication, banking -- specifically, reshaping financial regulation -- would be a big priority under a Trump administration...Hal Scott, professor of law at Harvard Law School and director of the Committee on Capital Markets Regulation, sees the platform as a positive step toward paring back regulation he says is stifling the economy. "Some people have had their heads in the sand in thinking that overregulation doesn't have any negative impact on growth," Scott says.

  • Bank jobs: Dublin may gain while post-Brexit London loses

    June 27, 2016

    London's position as one of the world's premiere financial centers is bound to change in the wake of a vote to leave the European Union. In coming years, it's highly possible that major companies in London will no longer have unfettered access to the EU — and many firms have voiced a need to move employees elsewhere. That's where Dublin comes in...Ireland's economic growth soared from the mid 1990's until the financial crisis. The tax system was a big part of both the boom and the recovery, according to Hal Scott, professor of international financial systems at Harvard Law School. "They made a big comeback after the crisis. Ireland was very inviting," Scott said. "They're doing very well again." Ireland opened itself as a sort of a back office to banks and operations that can be done from anywhere, like clearing of settlements, he said. It's likely to ramp up similar business post-Brexit.

  • Brexit blues or boom? (video)

    June 23, 2016

    Clyde Prestowitz, Economic Strategy Institute, and Hal Scott, Harvard Law School, discuss the potential outcomes should the U.K. vote to leave the European Union.

  • Brexit Could Be a Massive Event for Markets, Warns Harvard Professor (video)

    June 20, 2016

    A UK departure from the European Union could trigger a massive panic for financial markets, similar to what took place after the collapse of Lehman Brothers in September 2008, according to one expert. "It could be [a Lehman event]," said Hal Scott, a professor at Harvard Law School and author of "Connectedness and Contagion: Protecting the Financial System from Panics." "I don't think we will see that, but there's not an insignificant possibility that would happen -- we need to be worried about that." Scott said a Brexit could prompt investors to ditch short-term bonds in favor of safer, longer-term Treasuries and cut off liquidity to banks and nonbanks, including money market funds and broker-dealers. "In 2008, that's what we saw after the Lehman collapse," he added. "That was part of the panic -- a run on the financial system."

  • Why the possibility of ‘Brexit’ has markets shuddering

    June 20, 2016

    Already the pound is dropping, money is moving into bonds, London stocks are declining, and central banks in the U.S. and Europe are looking at contingency plans to stave off market shocks if Britain votes Thursday to leave the European Union....“What I’m concerned about is the unpredictable,” said Hal Scott, a Harvard law professor and expert on international finance and securities regulations. His biggest worry about a Brexit is the possibility that it could set off a panic that leads to a global financial crisis, something akin to what happened in 2008 after the Wall Street firm Lehman Bros. filed for bankruptcy. Big banks may be better capitalized than a decade ago, but Scott argues that the U.S. is less equipped today to respond to a run on the financial system. That’s because the Dodd-Frank financial reform legislation, adopted in part to prevent future bailouts of big financial firms, would prevent some of the moves government officials had available in 2008 to rescue broker dealers, hedge funds, insurance firms and other so-called non-banks, which are vital to the stability of the financial sector.

  • Publish the Secret Rules for Banks’ Living Wills

    June 10, 2016

    An op-ed by Hal Scott. The Federal Reserve and the Federal Deposit Insurance Corp. recently determined that five of America’s largest banks do not have credible plans to go through bankruptcy without relying on extraordinary government support. If these five firms— J.P. Morgan Chase, Bank of America, Wells Fargo, Bank of New York Mellon and State Street—can’t develop “living wills” that satisfy regulators, then the Dodd-Frank Act authorizes the government to break them up as soon as 2018. What led to their failing grades on living wills? It can’t be lack of effort: Every year, American banks can each spend more than $100 million and one million hours preparing them, according to the Government Accountability Office (GAO). The real reason for failure is that the banking regulators have not disclosed enough details about how they assess the credibility of a living will. This opaqueness casts serious doubt on the legality of the determinations—and the threat to break up the banks.

  • Containing Contagion hero image

    Containing Contagion

    May 4, 2016

    According to HLS Professor Hal Scott, nearly eight years after the 2008 crisis, the U.S. financial system is inadequately protected and more at risk than ever. He sounds the alarm in a new book, “Connectedness and Contagion: Protecting the Financial System from Panics,” forthcoming early this summer from MIT Press.