Since the 2008 financial crisis, policymakers and scholars have fixated on the problem of "too-big-to-fail" banks. This fixation, however, overlooks the historically dominant pattern in banking crises: the contemporaneous failure of many small institutions. We call this blind spot the "too-many-to-fail" problem and document how its neglect has skewed the past decade of financial regulation. In particular, we argue that, for socalled community banks, there has been a pronounced and unjustifiable shift toward deregulation, culminating in sweeping regulatory rollbacks in the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018. As this Article demonstrates, this deregulatory trend rests on three myths. First, that community banks do not contribute to systemic risk and were not central to the 2008 crisis. Second, that the Dodd-Frank Act imposed regulatory burdens that threaten the survival of the community bank sector. And third, that community banks cannot remain viable without special subsidies or regulatory advantages. While these claims have gained nearuniversal acceptance among legal scholars and policymakers, none of them withstands scrutiny. Contrary to the conventional wisdom, community banks were key participants in the 2008 crisis, were not uniquely burdened by postcrisis reforms, and continue to thrive economically. Dispelling these myths about the community bank sector leads to the conclusion that diligent oversight of community banks is necessary to preserve financial stability. Accordingly, this Article recommends a reversal of the community bank deregulatory trend and proposes affirmative reforms, including enhanced supervision and macroprudential stress tests, that would help mitigate systemic risks in the community bank sector.
This article analyzes a significant Supreme Court securities law decision from the 2020 term, Goldman Sachs v. Arkansas Teachers Retirement System (Goldman). Goldman was a blockbuster class action, brought by shareholders seeking $13 billion in damages from Goldman Sachs based on claims that date back to the 2008 financial crisis. This article proceeds by taking an in‐depth look at the case history of Goldman from start to finish. In the process, it shows that the Supreme Court's recent decision was more impactful than has been widely appreciated. Rather than being a recap of existing precedents, the Court's holding in Goldman made significant changes to some of the core doctrines in securities law that were first set forth in 1988 when the modern securities class action was created by Basic v. Levinson. This article also looks beyond doctrinal categories to assess how the Goldman decision can be understood as the latest chapter in the Supreme Court's longstanding role as a leading policy maker in the law of securities class actions. Lastly, the article explains how the precedent set in Goldman will affect securities litigation on the ground going forward. As a result of Goldman, it will be argued, the class certification stage in shareholder securities fraud suits has been moved closer to an open‐ended totality of the circumstances test, in which the federal courts have an increasing number of tools to act as gatekeepers on the merits of a litigation.
This Article concerns the recent Supreme Court case, Leidos, Inc. v. Indiana Public Retirement System (Leidos), and examines the broader issues that it raised for securities law. The consensus among scholars and practitioners is that Leidos presented a direct conflict among the circuit courts over a core question of securities law-when a failure to comply with the SEC's disclosure requirements can constitute fraud under Rule 10b-5. This Article provides a much different interpretation of the case. It begins by demonstrating that the circuit split which is presumed to have brought Leidos to the Supreme Court does not in fact exist. It then shows that, rather than being riddled with disagreement, the leading judicial analysis in this area of the law instead reflects a shared set of misconceptions about how the securities regulation architecture works. By unraveling the underlying sources of the Leidos mix-up, this Article makes three contributions. First, it identifies overlooked aspects of the disclosure rules at issue in Leidos, and provides a novel analysis of how the case should have been decided. Second, it explains how errors in leading interpretations of the legal authorities implicated in Leidos carry over to other prominent portions of the regulatory framework, namely Sections 11 and 12 of the 1933 Securities Act. Third, it demonstrates that a central yet
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