Christina Parajon Skinner

Christina Skinner (2021), Central Bank Activism, Duke Law Journal , 71 (), p. 247.

Abstract: Today, the Federal Reserve is at a critical juncture in its evolution. Unlike any prior period in U.S. history, the Fed now faces increasing demands to expand its policy objectives to tackle a wide range of social and political problems—including climate change, income and racial inequality, and foreign and small business aid. This Article develops a framework for recognizing, and identifying the problems with, “central bank activism.” It refers to central bank activism as situations in which immediate public policy problems push central banks to aggrandize their power beyond the text and purpose of their legal mandates, which Congress has established. To illustrate, the Article provides in-depth exploration of both contemporary and historic episodes of central bank activism, thus clarifying the indicia of central bank activism and drawing out the lessons that past episodes should teach us going forward. The Article urges that, while activism may be expedient in the near term, there are long-term social costs. Activism undermines the legitimacy of central bank authority, erodes its political independence, and ultimately renders a weaker central bank. In the end, the Article issues an urgent call to resist the allure of activism. And it places front and center the need for vibrant public discourse on the role of a central bank in American political and economic life today.

Christina Skinner (2021), Central Banks and Climate Change, Vanderbilt Law Review, 75 (), p. 1301.

Abstract: Central banks are increasingly called upon to address climate change. Proposals for central bank action on climate change range from programs of “green” quantitative easing to increases in risk-based capital requirements meant to deter banks from lending to climate-unfriendly business. Politicians and academics alike have urged climate risk as both macroeconomic and financial stability risk. Relative to counterparts abroad, the U.S. central bank—the Federal Reserve—has been more measured in its response. This Article offers a legal explanation why. It urges that, despite the substantive importance of climate change, the U.S. Federal Reserve presently has relatively limited legal authority to address that problem head-on. Drawing on insights from corporate finance and macroeconomics, the Article constructs a legal framework—stitching together a variety of Fed laws, regulations, and precedents of practice—to discern why many aspects of climate change sit outside the Fed’s legal remit today. Ultimately, the Article tackles one of the most pressing rule-of-law questions facing the Fed today: What are the limits of the Fed’s mandates to address climate change and how far can the Fed press beyond those mandates to make the economy greener? In doing so, the Article prompts reflection on the ideal role of the Fed vis-à-vis the fiscal authority of the Treasury, the political actors in Congress, and the Chief Executive.

Sarah E. Light and Christina Skinner (2021), Banks and Climate Governance, Columbia Law Review, 121 (), pp. 1895-1956.

Abstract: Major banks in the United States and globally have begun to assert an active role in the transition to a low-carbon economy and the reduction of climate risk through private environmental and climate governance. This Essay situates these actions within historical and economic contexts: It explains how the legal foundations of banks’ sense of social purpose intersect with their economic incentives to finance major structural tran­sitions in society. In doing so, this Essay sheds light on the reasons why we can expect banks to be at the center of this contemporary transition. This Essay then considers how banks have taken up this role to date. It proposes a novel taxonomy of the various forms of private environmental and climate governance emerging in the U.S. banking sector today. Fi­nally, this Essay offers a set of factors against which to normatively assess the value of these actions. While many scholars have focused on the role of shareholders and equity in private environmental and climate govern­ance, this Essay is the first to position these steps taken by banks within that larger context.

Christina Skinner (2020), Presidential Pendulums in Finance, Columbia Business Law Review, 2020 (), p. 101.

Abstract: This Article explores the role of the executive branch, when driven by the President, in deregulating the financial system. While administrative law formally requires that financial regulation derive from notice-and-comment rulemaking, Presidents of the past two administrations have made novel use of an array of executive branch tools to effectively regulate and deregulate the financial services industry. This Article claims that such a shift away from formal administrative law rule-making processes toward presidentially driven deregulation has implications for the overall stability of the financial system. Specifically, this Article suggests that a President’s ability to unilaterally and informally deregulate (and, by extension, regulate) the financial sector can make regulatory cycles more frequent. In turn, the financial cycle may become shorter, steeper, and more severe. If Presidents push and pull on the financial sector, the pendulum of economic activity can swing sharper and faster than it has before—with accompanying re-percussions for businesses and households in the real economy.

Christina Skinner (2020), Executive Override of Central Banks: A Comparison of the Legal Frameworks in the United States and the United Kingdom, Georgetown Law Journal, 108 (), p. 905.

Abstract: This Article examines executive branch powers to “override” the decisions of an independent central bank. It focuses in particular on the power and authority of a nation’s executive branch to direct its central bank, thereby circumscribing canonical central bank independence. To investigate this issue, this Article compares two types of executive over- rides: those found in the United States, exercised by the U.S. Treasury (Treasury) over the U.S. Federal Reserve (the Fed), and those in the United Kingdom, exercised by Her Majesty’s Treasury (HM Treasury) over the Bank of England (the Bank). This Article finds that in the former, the power is informal and subject to minimal formal oversight, whereas in the latter, there are legal powers of executive override within an established and transparent legal framework. This Article is the first piece of scholarship to undertake comparative analysis of the legal powers of executive override over these two leading central banks. The comparison is indeed striking—it juxtaposes the express, but limited, legal powers of HM Treasury to direct the Bank of England with the ad hoc and informal conventions of Treasury or presidential control of the Federal Reserve. The comparative analysis begs a paradoxical question in the conception of central bank independence: could a narrowly tailored set of override powers that authorize a treasury, with oversight from the legislature, to direct a central bank in exigent circumstances yield a sturdier form of central bank independence than a system which establishes few or limited legal mechanisms of executive override? Ultimately, this analysis prompts renewed examination of the way in which the law structures the Fed’s independence vis-a`-vis the Treasury and the President, informed by lessons from the U.K. design.

Christina Skinner (2019), Bank Disclosures of Cyber Exposure, Iowa Law Review, 105 (), p. 239.

Abstract: Financial institutions are increasingly subject to cyber incidents and attacks. Cyber intrusions threaten these institutions’ balance-sheets and reputations, and can undermine their resilience. From a societal perspective, cyber risk is particularly concerning as it regards systemically important financial institutions, like the largest internationally active banks. This is because the stability of the financial system as a whole—and thus the real economy—depends on these banks’ resilience to stressful events, including cyber attacks. To date, the SEC has taken the lead among the financial regulators in addressing cyber risk, chiefly through an emphasis on disclosure. This Article critically examines the existing design of that mandatory disclosure regime by reviewing the content of nearly 900 SEC filings made by the seven systemically important U.S. bank holding companies over a three-year period. That review suggests that the current trajectory of SEC rules and guidance is in some ways overbroad as applied to these institutions; but in other ways, the rules and guidance remain inadequate to address the various public and private interests at stake. The Article urges the SEC to design a more nuanced set of rules for cyber disclosure, which would be better tailored for systemically important banks.

Christina Skinner (2019), Nonbank Credit, Harvard Business Law Review, 19 (), p. 149.

Abstract: Investment funds increasingly substitute for banks in supplying credit to the real economy. Regulators have paid considerable attention to the potential financial stability risks of this migration to nonbank credit. This Article, however, argues that certain private investment funds (and the asset management institutions that house them) can enhance financial stability by promoting economic resilience. Specifically, it argues that certain private funds are incentivized and structured to supply the economy with a countercyclical source of credit — turning on their credit spigots precisely when banks are likely to turn theirs off. In doing so, these private funds have the potential to keep the economy buoyant in periods of economic downturn or distress. Drawing from that descriptive claim, the Article presents a normative argument that legal and regulatory frameworks should facilitate the flow of capital into the nonbank market for credit, in order to augment the supply of countercyclical credit. In particular, the Article urges some departure from the current securities law framework by suggesting that retail investors — not only sophisticated and accredited investors — should be eligible to invest in private debt funds. It also provides a blueprint for how relevant law and regulation might be re-designed to safely allow for this new form of retail investing in private funds.

Christina Skinner (2017), Regulating Nonbanks, Georgetown Law Journal, 105 (), p. 1379.

Abstract: This Article examines a relatively recent addition to the institutional architecture of financial regulation in the United States: the Financial Stability Oversight Council (FSOC). In particular, it draws attention to a flaw in the design of the Council’s power to designate nonbank financial companies as “systemically important financial institutions,” commonly known as “SIFIs.” Specifically, the Article argues that the binary nature of the designation power has underappreciated costs, which make the SIFI designation system less effective and efficient than it otherwise could be. The Article makes both positive and normative claims. First, it draws attention to the ways in which a binary designation power incentivizes certain financial institution behavior, such as litigation and restructuring. A binary designation power can also influence regulatory behavior by creating an opportunity for politicized decision making. The Article highlights the social and economic costs of these behaviors, which include the potential for underinclusive supervisory scope, increased information asymmetries, and distorted business decisions. Such costs can undermine the SIFI stability agenda as well as financial institution efficiency. Second, in teasing out the normative implications of that cost analysis, the Article argues for a more marginal — nuanced — apparatus for regulating nonbank financial institutions. In doing so, the Article also probes the broader question of whether the entity-based paradigm is the most effective regulatory strategy for appraising and addressing systemic risk in the nonbank arena. Ultimately, by exploring how SIFI policy should be revised to reflect these normative insights, the Article develops a broader theory about post-crisis regulatory design — that regulators have undervalued supervision, and the information it produces, as a tool for systemic risk management outside the traditional banking system.

Christina Skinner (2016), Misconduct Risk, Fordham Law Review, 84 (), p. 1559.

Abstract: Financial misconduct and systemic risk are two critical issues in financial regulation today. However, for the past several years, financial misconduct and systemic risk have received markedly different treatment. After the global financial crisis, regulators responded to the traditional quantitative risks that banks pose — those found on their balance sheets and in their business models — with sweeping reforms on an internationally coordinated scale. Meanwhile, with respect to misconduct, regulators have reacted with a traditional enforcement approach — imposing fines and, in some cases, prosecuting individual malefactors. Yet misconduct is not only an isolated or idiosyncratic risk that can be spot treated with enforcement: misconduct can also be a significant source of risk to the financial system, particularly when it arises on an industry-wide basis. This Article creates a framework for understanding how and under what circumstances misconduct imposes such broad social and economic costs: “misconduct risk.” This Article explores three features of the banking industry that, in combination, can give rise to misconduct risk — deficient accountability systems, performance-based compensation, and a fluid and transient labor market. Drawing on this conceptual foundation, this Article argues that misconduct risk requires a holistic and preventive approach on par with regulators’ efforts to reduce classic balance sheet risks. Specifically, this Article urges bank supervisors to design regulatory tools that proactively target these contagion mechanisms in order to combat misconduct risk. This Article proposes a novel supervisory tool — “compliance stress testing” — and suggests how this tool can be incorporated into the existing international framework for regulating global banks.

Christina Skinner (2016), Whistleblowers and Financial Innovation, North Carolina Law Review, 94 (), p. 861.

Abstract: This Article critically examines post-financial crisis whistleblower regimes and their impact on contemporary financial markets. In particular, the Dodd-Frank whistleblower program, as implemented by the United States Securities and Exchange Commission, has received significant attention in legal, political, and popular quarters. Some praise the whistleblower program as essential to aiding the government’s efforts in overcoming enforcement challenges, while others remain wary of the program’s unintended effects. This Article advances the debate — in favor of whistleblowers — by offering an updated analysis of the program’s benefits and costs, in light of recent trends in complexity and innovation that have made financial activity much more diffuse. By weighing the program’s utility in the postcrisis financial landscape, together with its benefits and costs, this Article argues that the SEC whistleblower program is, on balance, desirable: not only because whistleblower solutions can be effective at detecting financial misconduct in complex financial spaces, but also because they serve other valuable social and economic goals. Overall, the aim of this Article is to prompt further conversation about whistleblower programs by critically examining the crux of regulators’ need for whistleblowers in the financial services arena, revisiting a conceptual cost-benefit analysis of the program, and suggesting certain aspects of the SEC program that are ripe for revaluation and, potentially, redesign.