Law, Bubbles, and Financial Regulation [Paperback]

Financial regulation can fail when it is needed the most. The dynamics of asset price bubbles weaken financial regulation just as financial markets begin to overheat and the risk of crisis spikes. At the same time, the failure of financial regulations adds further fuel to a bubble.

This book examines the interaction of bubbles and financial regulation. It explores the ways in which bubbles lead to the failure of financial regulation by outlining five dynamics, which it collectively labels the Regulatory Instability Hypothesis. .

The book concludes by outlining approaches to make financial regulation more resilient to these dynamics that undermine law.

Introduction: The Regulatory Instability Hypothesis  Part 1: The Economics and Legal History of Bubbles  1. The Economics of Bubbles  2.  A Legal History of Bubbles  Part II: The Regulatory Instability Hypothesis  3. Boom, Bust, and the Regulatory Stimulus Cycle in Financial Markets  4. Epidemics of Fraud and Compliance Rot  5. Regulatory Arbitrage Frenzies and the Hydraulics of Investor Demand  6. Deregulation and Regulatory Arbitrage Spirals: a Dance for Two  7. Procyclical Regulation & Herd-Promoting Regulation  Part III: Fighting Bubbles, Feeding Bubbles  8. Anti-bubble Laws  9. Credit and Leverage: The Monetary Dimension of Financial Regulation  Part IV: The Panic of 2007-2008 as Master Class in Regulatory Instability: The Shadow Banking Bubble  10. The Shadow Banking System: a Thumbnail Sketch  11. ' Lawyers, Runs, and Money : The Rise and Collapse of Shadow Banking  Part V: Lessons and Solutions:12. Conclusion: Adaptive Laws and Channeling Politics: Designing Robul3E