This edition incorporates developments in bank and financial services legislation and regulation that have occurred through June 2021, including the Trump administration’s regulatory initiatives in respect of the Dodd-Frank Act. The sixth edition organizes the chapters into three thematic Parts to help focus classroom discussion. Part One surveys the depository bank business model, the dual banking system, and its layered regulatory structure, including the role of financial holding companies, bank subsidiaries, and nonbank affiliates active across financial markets. The materials emphasize that though the majority of depository institutions are thrifts, credit unions, and community banks, consolidation and conglomeration have left the lion’s share of bank assets in the hands of a few large banking organizations that dominate national and global markets, presenting unique regulatory challenges.
Part Two focuses on prudential supervision of banks and their holding companies, which reflects the distinctive demands created by deposit-taking, credit creation, and liquidity intermediation. Post-crisis reforms have dramatically changed this aspect of regulation. The materials emphasize the different ways in which banks finance their activities, including by accepting insured deposits, borrowing at market rates from wholesale lenders, using government funds available only to banks, and raising equity capital from investors. The discussion makes clear how, in addition to meeting market capital requirements that apply to all businesses, banks contend with complex regulatory standards that encourage liquidity, limit leverage, and promote the ability to absorb unexpected losses.
Part Three surveys the range of specialized financial services performed by banks and their holding companies beyond their depository functions. The materials illustrate how banks underwrite debt and equity securities, manage investment portfolios, advise investors, make markets for financial products, act as both principal and agent in derivative transactions (including credit default swaps and interest rate derivatives such as options, futures, and forwards), and provide fiduciary services as trustees, including by managing retirement and collective investment funds, offering custody for financial assets, and competing with mutual funds. The book pays special attention to consumer lending — through mortgage finance, educational debt, and credit card loans — an area that has grown in importance due to the CFPB.
To avoid the need for students to buy additional books, this edition comes with a digital statutory supplement containing links to relevant statutes and regulations for each chapter. The supplement also includes an expanded Student’s Guide to banking law statutes and regulations, which lets students convert the original section numbers of major statutes into their codified sections in the United States Code.
Q. Why this book, and why now?
Since the Great Financial Crisis of 2007-2009, the banking sector and its regulation have changed in important ways that deserve focused attention.
Q. Who should read this book?
Anyone who wants to acquire a comprehensive and nuanced understanding of the banking industry and its regulation would benefit from this book.
Q. What is the most important takeaway you hope your readers gain from this book?
Because it is flexible and supported by the federal government, the depository bank business model can always adapt to new market structures.
José Gabilondo is a prolific, nationally recognized scholar and proven classroom teacher in the fields of corporate finance, banking, commodities trading, and securities regulation. His publications have been cited in over six hundred law review articles and in numerous judicial opinions, including several federal district and appellate courts, as well as the Supreme Court of the United States. Markham came to Florida International University College of Law from the University of North Carolina where he was a tenured member of the law faculty for 12 years. Before that, he served for 10 years as an adjunct professor at the Georgetown University School of Law.
In addition to numerous law journal articles, Markham is the author of a three-volume financial history of the United States that was selected as a Choice Outstanding Academic Title in 2002. He also published a book on the Enron era scandals, and has published a two-volume work on the subprime crisis that shook the nation in 2008. Most recently he has published a book on manipulation of stock and commodity prices and is the co-editor of a handbook on securities regulation.
Markham has co-authored five casebooks on corporate law and banking regulation. He also has published a two-volume treatise and a history book on the law of commodity futures regulation, and was the principal coauthor of a two-volume treatise on broker-dealer regulation.
Before his move to academia, Professor Markham served as secretary and counsel, Chicago Board Options Exchange, Inc.; chief counsel, Division of Enforcement, United States Commodity Futures Trading Commission; attorney, United States Securities and Exchange Commission; and a partner with the international firm of Rogers & Wells (now Clifford Chance) in Washington, D.C. In law school, he served as Editor-in-Chief of the Kentucky Law Journal and was named to the Order of the Coif.