169-468: The Emergency Economic Stabilization Act of 2008 , also known as the " bank bailout of 2008 " or the " Wall Street bailout ", was a United States federal law enacted during the Great Recession , which created federal programs to "bail out" failing financial institutions and banks . The bill was proposed by Treasury Secretary Henry Paulson , passed by the 110th United States Congress , and
338-482: A Wall Street Journal opinion piece, Senator Hillary Clinton advocated addressing the rate of mortgage defaults and foreclosures that ignited this crisis, not just bailing out Wall Street firms: "If we do not take action to address the crisis facing borrowers, we'll never solve the crisis facing lenders." She proposed a new Home Owners' Loan Corporation (HOLC), similar to that used after the Depression and which
507-644: A federal system (as in Australia, Germany or the United States) or different voting configuration in a unitary system (as in France). In the UK the upper house is appointed by the government as a house of review . One criticism of bicameral systems with two elected chambers is that the upper and lower houses may simply mirror one another. The traditional justification of bicameralism is that an upper chamber acts as
676-417: A parliamentary system , as with Britain, Italy, Germany, India, and Japan, the executive is known as the cabinet, and composed of members of the legislature. The executive is led by the head of government , whose office holds power under the confidence of the legislature. Because popular elections appoint political parties to govern, the leader of a party can change in between elections. The head of state
845-688: A ruler ') is a set of ordinances and regulations made by ecclesiastical authority , for the government of a Christian organisation or church and its members. It is the internal ecclesiastical law governing the Catholic Church , the Eastern Orthodox Church , the Oriental Orthodox Churches , and the individual national churches within the Anglican Communion . The way that such church law
1014-409: A science and as the art of justice. State-enforced laws can be made by a legislature , resulting in statutes ; by the executive through decrees and regulations ; or by judges' decisions, which form precedent in common law jurisdictions. An autocrat may exercise those functions within their realm. The creation of laws themselves may be influenced by a constitution , written or tacit, and
1183-460: A "classic simplifier, making theoretically possible something that seemed impossibly complex." It created a relatively simple path by which bail-in could be implemented under the existing Dodd–Frank powers. Powell explained: Under single point of entry, the FDIC will be appointed receiver of only the top-tier parent holding company of the failed financial group. Promptly after the parent holding company
1352-440: A "common law" developed during the reign of Henry II during the late 12th century, when Henry appointed judges who had the authority to create an institutionalised and unified system of law common to the country. The next major step in the evolution of the common law came when King John was forced by his barons to sign a document limiting his authority to pass laws. This "great charter" or Magna Carta of 1215 also required that
1521-572: A Senate debate on Wednesday. In an early morning news conference, on Monday September 29, President George W. Bush expressed confidence that the bill would pass Congress, and that it would provide relief to the U.S. economy. A number of House Republicans remained opposed to the deal and intended to vote against it. That same day, the legislation for the bailout was put before the United States House of Representatives and failed 205–228, with one not voting. Democrats voted 140–95 in favor of
1690-410: A bail-in a disorderly event. The existence of buffers of "bail-inable" assets is therefore essential. In the case of Cyprus, one peculiarity was the fact that these assets were actually quite limited by comparison with the size of the banks'/assets. Furthermore, the absence of ex ante rules gives the impression of an ad hoc approach in such situations. In 2016, Cyprus completed its bailout program, which
1859-633: A banking union. In a first step, the European Central Bank will fully assume supervision of the 18-nation currency bloc's lenders in November 2014. The deal needed formal approval by the European Parliament and by national governments. The resolution fund would be paid for by the banks themselves and will gradually merge national resolution funds into a common European one until it hits the €55 billion target of funding. See
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#17327732637592028-644: A clearing house institution or a stock exchange could in theory be affected if such an institution needed to be bailed in. The cross-border elements of the resolution of globally significant banking institutions (G-SIFIs) were a topic of a joint paper by the Federal Reserve and the Bank of England in 2012. Outgoing Deputy Director of the Bank of England Paul Tucker chose to open his academic career at Harvard with an October 2013 address in Washington to
2197-469: A crisis from happening again. Former Federal Reserve Chairman Alan Greenspan supported the Paulson plan. Investor Warren Buffett says he could put in $ 10B plus $ 90B nonrecourse debt ; that is, without having to repay beyond $ 10B if mortgages did not repay. (This is 10 to 1 leverage , 10 times upside with 1 times downside.) He also said that the government should pay market price, which may be below
2366-488: A higher court or the legislature. Religious law is in use in some religious communities and states, and has historically influenced secular law. The scope of law can be divided into two domains: public law concerns government and society, including constitutional law , administrative law , and criminal law ; while private law deals with legal disputes between parties in areas such as contracts , property , torts , delicts and commercial law . This distinction
2535-442: A house of review. This can minimise arbitrariness and injustice in governmental action. To pass legislation, a majority of the members of a legislature must vote for a bill (proposed law) in each house. Normally there will be several readings and amendments proposed by the different political factions. If a country has an entrenched constitution, a special majority for changes to the constitution may be required, making changes to
2704-570: A large bank: A quite different, and rather more profound approach would be to deploy a super special resolution framework that permitted the authorities, on a rapid timetable, to haircut uninsured creditors in a going concern. By October 2011, the FSB Working Group had developed this thinking considerably and published the "Key Attributes of Effective Resolution Regimes for Financial Institutions." The document set out core principles to be adopted by all participating jurisdictions, including
2873-546: A loss when adjusted for inflation. After the freeing up of world capital markets in the 1970s and the repeal of the Glass–Steagall Act in 1999, banking practices (mostly Greenspan -inspired "self-regulation") and monetized subprime mortgages sold as low risk investments reached a critical stage during September 2008, characterized by severely contracted liquidity in the global credit markets and insolvency threats to investment banks and other institutions. In response,
3042-648: A plan under which the U.S. Treasury would acquire up to $ 700 billion worth of mortgage-backed securities. The plan was immediately backed by President George W. Bush and negotiations began with leaders in the U.S. Congress to draft appropriate legislation. Paulson and Chair of the Federal Reserve Ben Bernanke had a dramatic meeting on Thursday, September 18, 2008, with Congressional leaders, to whom Bernanke reportedly said: "If we don't do this, we may not have an economy on Monday". Consultations among Treasury Secretary Henry Paulson, Chairman of
3211-601: A process of reform, at least in terms of economic, if not social and political, rights. A new contract code in 1999 represented a move away from administrative domination. Furthermore, after negotiations lasting fifteen years, in 2001 China joined the World Trade Organization . In general, legal systems can be split between civil law and common law systems. Modern scholars argue that the significance of this distinction has progressively declined. The numerous legal transplants , typical of modern law, result in
3380-460: A profit to taxpayers. The separate bailout of Fannie Mae and Freddie Mac , which insure mortgages, totaled $ 135 billion by October 2010. The issue of federal bailouts of the banks and big corporations has become a major issue in elections, with the Tea Party movement in particular focusing its attack on bailouts. Bailout capitalism occurs when the economy is so far out of equilibrium that
3549-521: A risky investment, as opposed to an expense. The MBS within the scope of the purchase program have rights to the cash flows from the underlying mortgages. As such, the initial outflow of government funds to purchase the MBS would be offset by ongoing cash inflows represented by the monthly mortgage payments. Further, the government eventually may be able to sell the assets, though whether at a gain or loss will remain to be seen. While incremental borrowing to obtain
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#17327732637593718-478: A sudden disorderly collapse or fire sale, as seen in the Lehman failure. Management would be fired and shareholders would be displaced by the bailed-in bondholders, but the franchise, employees and core services could continue, supported by the newly converted capital. Around the same time, the Bank of England was developing similar architecture, given the pressing need for a better tool to handle failing banks in
3887-516: A wealthy philanthropist reinvents an unprofitable fast food company into a non-profit food distribution network. However, the common use of the phrase occurs where government resources are used to support a failing company typically to prevent a greater problem or financial contagion to other parts of the economy. For example, the US government assumes transportation to be critical to the country's general economic prosperity. As such, it has sometimes been
4056-462: Is legislated , interpreted and at times adjudicated varies widely among these three bodies of churches. In all three traditions, a canon was originally a rule adopted by a church council ; these canons formed the foundation of canon law. The Catholic Church has the oldest continuously functioning legal system in the western world , predating the evolution of modern European civil law and common law systems. The 1983 Code of Canon Law governs
4225-499: Is a code of Jewish law that summarizes some of the Talmud's interpretations. A number of countries are sharia jurisdictions. Israeli law allows litigants to use religious laws only if they choose. Canon law is only in use by members of the Catholic Church , the Eastern Orthodox Church and the Anglican Communion . Canon law ( Ancient Greek : κανών , romanized : kanon , lit. 'a straight measuring rod;
4394-458: Is a system of rules, divided into primary (rules of conduct) and secondary ones (rules addressed to officials to administer primary rules). Secondary rules are further divided into rules of adjudication (to resolve legal disputes), rules of change (allowing laws to be varied) and the rule of recognition (allowing laws to be identified as valid). Two of Hart's students continued the debate: In his book Law's Empire , Ronald Dworkin attacked Hart and
4563-472: Is an "authority" to mediate people's interests. Oliver Wendell Holmes defined law as "the prophecies of what the courts will do in fact, and nothing more pretentious." In his Treatise on Law , Thomas Aquinas argues that law is a rational ordering of things, which concern the common good, that is promulgated by whoever is charged with the care of the community. This definition has both positivist and naturalist elements. Definitions of law often raise
4732-553: Is an open item. On February 10, 2009, the newly confirmed Secretary of the Treasury Timothy Geithner outlined his plan to use the $ 300 billion (~$ 414 billion in 2023) or so dollars remaining in the TARP funds. He mentioned that the U.S. Treasury and Federal Reserve wanted to help fund private investors to buy toxic assets from banks, but few details have yet been released. There is still some skepticism about
4901-733: Is apart from the executive, and symbolically enacts laws and acts as representative of the nation. Examples include the President of Germany (appointed by members of federal and state legislatures ), the Queen of the United Kingdom (an hereditary office ), and the President of Austria (elected by popular vote). The other important model is the presidential system , found in the United States and in Brazil . In presidential systems,
5070-513: Is authority, identifiable purely through social sources and without reference to moral reasoning. In his view, any categorisation of rules beyond their role as authoritative instruments in mediation is best left to sociology , rather than jurisprudence. The history of law links closely to the development of civilization . Ancient Egyptian law, dating as far back as 3000 BC, was based on the concept of Ma'at and characterised by tradition, rhetorical speech, social equality and impartiality. By
5239-692: Is available in the Bipartisan Policy Center report "Too Big to Fail: The Path to a Solution". The Canadian government clarified its rules for bail-ins in the "Economic Action Plan 2013", at pages 144-145 "to reduce the risk for taxpayers." The Eurogroup proposed on 27 June 2013 that after 2018, bank shareholders would be first in line to assume the losses of a failed bank before bondholders and certain large depositors. Insured deposits under £85,000 (€100,000) would be exempt and, with specific exemptions, uninsured deposits of individuals and small companies would be given preferred status in
Emergency Economic Stabilization Act of 2008 - Misplaced Pages Continue
5408-509: Is implementing the bail-in regime) and "Financial Market Infrastructures (FMIs)" like clearing houses. The inclusion of FMIs in potential bail-ins is in itself a major departure. The FSB defines those market infrastructures to include multilateral securities and derivatives clearing and settlement systems and a whole host of exchange and transaction systems, such as payment systems, central securities depositories, and trade depositories. That would mean that an unsecured creditor claim to, for example,
5577-467: Is law?" There have been several attempts to produce "a universally acceptable definition of law". In 1972, Baron Hampstead suggested that no such definition could be produced. McCoubrey and White said that the question "what is law?" has no simple answer. Glanville Williams said that the meaning of the word "law" depends on the context in which that word is used. He said that, for example, " early customary law " and " municipal law " were contexts where
5746-401: Is placed into receivership, the FDIC will transfer the assets of the parent company (primarily its investments in subsidiaries) to a bridge holding company. Equity claims of the failed parent company's shareholders will be wiped out, and claims of its unsecured debt holders will be written down as necessary to reflect any losses in the receivership that the shareholders cannot cover. To capitalize
5915-577: Is seen to pose "serious and adverse effects on financial stability in the United States", as determined by the Secretary of the Treasury, together with two thirds Federal Reserve Board and two thirds of the FDIC board. Like Title I, it would force shareholders and creditors to bear the losses of the failed financial company, "removing management that was responsible for the financial condition of
6084-543: Is stronger in civil law countries, particularly those with a separate system of administrative courts ; by contrast, the public-private law divide is less pronounced in common law jurisdictions. Law provides a source of scholarly inquiry into legal history , philosophy , economic analysis and sociology . Law also raises important and complex issues concerning equality, fairness, and justice . The word law , attested in Old English as lagu , comes from
6253-592: Is supposed to be good for our economy is beyond me. ... It won't work. It can't work. ... It is obvious to most Americans that we need to reject corporate cronyism, and allow the natural regulations and incentives of the free market to pick the winners and losers in our economy, not the whims of bureaucrats and politicians." In 2000, the World Bank reported that banking bailouts cost an average of 12.8% of GDP per event: Governments and, thus ultimately taxpayers, [ sic ] have largely shouldered
6422-441: Is that law is a system of rules and guidelines which are enforced through social institutions to govern behaviour. In The Concept of Law , H. L. A. Hart argued that law is a "system of rules"; John Austin said law was "the command of a sovereign, backed by the threat of a sanction"; Ronald Dworkin describes law as an "interpretive concept" to achieve justice in his text titled Law's Empire ; and Joseph Raz argues law
6591-1060: Is the Supreme Court ; in Australia, the High Court ; in India, the Supreme Court of India ; in the UK, the Supreme Court ; in Germany, the Bundesverfassungsgericht ; and in France, the Cour de Cassation . For most European countries the European Court of Justice in Luxembourg can overrule national law, when EU law is relevant. The European Court of Human Rights in Strasbourg allows citizens of
6760-490: Is the legal systems in communist states such as the former Soviet Union and the People's Republic of China . Academic opinion is divided on whether it is a separate system from civil law, given major deviations based on Marxist–Leninist ideology, such as subordinating the judiciary to the executive ruling party. There are distinguished methods of legal reasoning (applying the law) and methods of interpreting (construing)
6929-496: Is the opposite of a bail-out because it does not rely on external parties, especially government capital support. A bail-in creates new capital to rescue a failing firm through an internal recapitalization and forces the borrower's creditors to bear the burden by having part of the debt they are owed written off or converted into equity. (For example, in the case of the Cyprus banks in 2013, the creditors in question were bondholders, and
Emergency Economic Stabilization Act of 2008 - Misplaced Pages Continue
7098-424: Is the provision of financial help to a corporation or country which otherwise would be on the brink of bankruptcy . A bailout differs from the term bail-in (coined in 2010) under which the bondholders or depositors of global systemically important financial institutions (G-SIFIs) are forced to participate in the recapitalization process but taxpayers are not. Some governments also have the power to participate in
7267-567: Is to make laws, since they are acts of the general will ; nor whether the prince is above the law, since he is a member of the State; nor whether the law can be unjust, since no one is unjust to himself; nor how we can be both free and subject to the laws, since they are but registers of our wills. Jean-Jacques Rousseau, The Social Contract , II, 6. The philosophy of law is commonly known as jurisprudence. Normative jurisprudence asks "what should law be?", while analytic jurisprudence asks "what
7436-701: The Manusmriti (c. 100–300 AD) were foundational treatises in India, and comprise texts considered authoritative legal guidance. Manu's central philosophy was tolerance and pluralism , and was cited across Southeast Asia. During the Muslim conquests in the Indian subcontinent , sharia was established by the Muslim sultanates and empires, most notably Mughal Empire 's Fatawa-e-Alamgiri , compiled by emperor Aurangzeb and various scholars of Islam. In India,
7605-459: The "is" and what "ought to be" problem. Bentham and Austin argued for law's positivism ; that real law is entirely separate from "morality". Kant was also criticised by Friedrich Nietzsche , who rejected the principle of equality, and believed that law emanates from the will to power , and cannot be labeled as "moral" or "immoral". In 1934, the Austrian philosopher Hans Kelsen continued
7774-470: The 2007–2008 financial crisis included: mortgage assistance proposals try to increase the value of the asset base while limiting the disruption of foreclosure; bank recapitalization through equity investment by the government; asset liquidity approaches to engage market mechanisms for valuing troubled assets; and financial market reforms promoting transparency and conservatism to restore trust by market investors. This process consisted of nationalizing most of
7943-629: The 2012–2013 Cypriot financial crisis , the Cypriot economy came to near-collapse as the Greek financial crisis (to which Cypriot banks were heavily exposed) threatened Cyprus's banks, causing a financial panic , bank runs , and a downgrade of government bonds to "junk" status. In March 2013, a €10 billion bailout was announced by the European troika , a loose coalition of the European Union ,
8112-504: The Codex Hammurabi . The most intact copy of these stelae was discovered in the 19th century by British Assyriologists , and has since been fully transliterated and translated into various languages, including English, Italian, German, and French. The Old Testament dates back to 1280 BC and takes the form of moral imperatives as recommendations for a good society. The small Greek city-state, ancient Athens , from about
8281-611: The Council of Europe member states to bring cases relating to human rights issues before it. Some countries allow their highest judicial authority to overrule legislation they determine to be unconstitutional . For example, in Brown v. Board of Education , the United States Supreme Court nullified many state statutes that had established racially segregated schools, finding such statutes to be incompatible with
8450-554: The Dow Jones Industrial Average dropped more than 700 points and fell below 10,000 for the first time in four years. The same day, CNN reported these worldwide stock market events: Britain's FTSE 100 Index was down 7.9%; Germany's DAX down 7.1%; France's CAC 40 dropping 9%; In Russia, trading in shares was suspended after the RTS stock index fell more than 20%; Iceland halted trading in six bank stocks while
8619-486: The Early Middle Ages , Roman law was rediscovered around the 11th century when medieval legal scholars began to research Roman codes and adapt their concepts to the canon law , giving birth to the jus commune . Latin legal maxims (called brocards ) were compiled for guidance. In medieval England, royal courts developed a body of precedent which later became the common law . A Europe-wide Law Merchant
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#17327732637598788-577: The English Court of Common Pleas had five. This powerful and tight-knit judiciary gave rise to a systematised process of developing common law. As time went on, many felt that the common law was overly systematised and inflexible, and increasing numbers of citizens petitioned the King to override the common law. On the King's behalf, the Lord Chancellor started giving judgments to do what
8957-1251: The Enlightenment . Then, in the 19th century, both France, with the Code Civil , and Germany, with the Bürgerliches Gesetzbuch , modernised their legal codes. Both these codes heavily influenced not only the law systems of the countries in continental Europe but also the Japanese and Korean legal traditions. Today, countries that have civil law systems range from Russia and Turkey to most of Central and Latin America . In common law legal systems, decisions by courts are explicitly acknowledged as "law" on equal footing with legislative statutes and executive regulations . The "doctrine of precedent", or stare decisis (Latin for "to stand by decisions") means that decisions by higher courts bind lower courts to assure that similar cases reach similar results. In contrast , in civil law systems, legislative statutes are typically more detailed, and judicial decisions are shorter and less detailed because
9126-551: The European Central Bank and the International Monetary Fund , in return for Cyprus agreeing to close its second largest bank, the Cyprus Popular Bank , also known as Laiki Bank. The Cypriots had to agree to levy all uninsured deposits there and possibly around 40% of uninsured deposits in the Bank of Cyprus , the island's largest commercial bank. After an initial proposal was replaced with
9295-571: The Fourteenth Amendment to the United States Constitution . A judiciary is theoretically bound by the constitution, just as all other government bodies are. In most countries judges may only interpret the constitution and all other laws. But in common law countries, where matters are not constitutional, the judiciary may also create law under the doctrine of precedent . The UK, Finland and New Zealand assert
9464-668: The French , but mostly the German Civil Code. This partly reflected Germany's status as a rising power in the late 19th century. Similarly, traditional Chinese law gave way to westernisation towards the final years of the Qing Dynasty in the form of six private law codes based mainly on the Japanese model of German law. Today Taiwanese law retains the closest affinity to the codifications from that period, because of
9633-538: The Hindu legal tradition, along with Islamic law, were both supplanted by common law when India became part of the British Empire . Malaysia, Brunei, Singapore and Hong Kong also adopted the common law system. The Eastern Asia legal tradition reflects a unique blend of secular and religious influences. Japan was the first country to begin modernising its legal system along Western lines, by importing parts of
9802-536: The Institute of International Finance in which he argued that resolution had advanced enough in several countries that bailouts would not be required and so would be bailed-in, notably the US G-SIBs. Although they were still large, they were no longer too big to fail because of the improvements in resolution technology. In a similar vein, a GAO report in 2014 determined that the market expectation of bailouts for
9971-679: The Latin Church sui juris . The Eastern Catholic Churches, which developed different disciplines and practices, are governed by the Code of Canons of the Eastern Churches . The canon law of the Catholic Church influenced the common law during the medieval period through its preservation of Roman law doctrine such as the presumption of innocence . Roman Catholic canon law is a fully developed legal system, with all
10140-479: The Old Norse word lǫg . The singular form lag meant ' something laid or fixed ' while its plural meant ' law ' . But what, after all, is a law? [...] When I say that the object of laws is always general, I mean that law considers subjects en masse and actions in the abstract, and never a particular person or action. [...] On this view, we at once see that it can no longer be asked whose business it
10309-622: The Quran has some law, and it acts as a source of further law through interpretation, Qiyas (reasoning by analogy), Ijma (consensus) and precedent . This is mainly contained in a body of law and jurisprudence known as Sharia and Fiqh respectively. Another example is the Torah or Old Testament , in the Pentateuch or Five Books of Moses. This contains the basic code of Jewish law, which some Israeli communities choose to use. The Halakha
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#173277326375910478-500: The Resolution Trust Corporation took during the savings and loan crisis of the 1980s: "What we did, we took over the bank, nationalized it, fired the management, took out the bad assets and put a good bank back in the system." In hindsight, economists generally agree that unemployment would have been significantly higher without the program. Suggested alternative approaches to address the issues underlying
10647-407: The United States House of Representatives , with the purpose of purchasing bad assets, reducing uncertainty regarding the worth of the remaining assets, and restoring confidence in the credit markets . The bill was then expanded and put forth as an amendment to H.R. 3997 . The amendment was rejected via a vote of the House of Representatives on September 29, 2008, voting 205–228. Supporters of
10816-626: The absolutist theory of Thomas Hobbes ' Leviathan . Sun Yat-sen 's Five Power Constitution for the Republic of China took the separation of powers further by having two additional branches of government—a Control Yuan for auditing oversight and an Examination Yuan to manage the employment of public officials. Max Weber and others reshaped thinking on the extension of state. Modern military, policing and bureaucratic power over ordinary citizens' daily lives pose special problems for accountability that earlier writers such as Locke or Montesquieu could not have foreseen. The custom and practice of
10985-421: The failing auto industry in the United States . Those against it, like pro- free market radio personality Hugh Hewitt , saw the bailout as unacceptable. He argued that the companies should be dismantled organically by the free-market forces so that entrepreneurs may arise from the ashes; that the bailout signals lower business standards for giant companies by incentivizing risk, creating moral hazard through
11154-496: The rights encoded therein. The law shapes politics , economics , history and society in various ways and also serves as a mediator of relations between people. Legal systems vary between jurisdictions , with their differences analysed in comparative law . In civil law jurisdictions, a legislature or other central body codifies and consolidates the law. In common law systems, judges may make binding case law through precedent, although on occasion this may be overturned by
11323-597: The "basic pattern of legal reasoning is reasoning by example"—that is, reasoning by comparing outcomes in cases resolving similar legal questions. In a U.S. Supreme Court case regarding procedural efforts taken by a debt collection company to avoid errors, Justice Sotomayor cautioned that "legal reasoning is not a mechanical or strictly linear process". Jurimetrics is the formal application of quantitative methods, especially probability and statistics , to legal questions. The use of statistical methods in court cases and law review articles has grown massively in importance in
11492-424: The 22nd century BC, the ancient Sumerian ruler Ur-Nammu had formulated the first law code , which consisted of casuistic statements ("if … then ..."). Around 1760 BC, King Hammurabi further developed Babylonian law , by codifying and inscribing it in stone. Hammurabi placed several copies of his law code throughout the kingdom of Babylon as stelae , for the entire public to see; this became known as
11661-411: The 6th century, which were rediscovered by 11th century Italy. Roman law in the days of the Roman Republic and Empire was heavily procedural, and lacked a professional legal class. Instead a lay magistrate , iudex , was chosen to adjudicate. Decisions were not published in any systematic way, so any case law that developed was disguised and almost unrecognised. Each case was to be decided afresh from
11830-431: The 8th century BC was the first society to be based on broad inclusion of its citizenry, excluding women and enslaved people . However, Athens had no legal science or single word for "law", relying instead on the three-way distinction between divine law ( thémis ), human decree ( nomos ) and custom ( díkē ). Yet Ancient Greek law contained major constitutional innovations in the development of democracy . Roman law
11999-419: The Co-op bank in the UK (2013) has been described as a voluntary or negotiated bail-in. The Dodd–Frank Act legislates bank resolution procedures for the United States under Title I and Title II. Title I refers to the preferred route, which is to resolve a bank under bankruptcy procedures aided by extensive pre-planning (a "living will"). Title II establishes additional powers that can be used if bankruptcy
12168-525: The EC FAQ on the SRM. The legislative item was split into three initiatives by Internal Market and Services Commissioner Michel Barnier : Bank Recovery and Resolution Directive, DGS and SRM. A form of bail-in was used in small Danish institutions (such as Amagerbanken) as early as 2011. The Dutch authorities converted the junior debt of SNS REAAL in 2013, as part of a privately funded recapitalization. During
12337-534: The EU financial community symposium on the "Future of Banking in Europe" (December 2013) was attended by Irish Finance Minister Michael Noonan , who proposed a bail-in scheme in light of the banking union that was under discussion at the event. Deputy BoE Director Jon Cunliffe suggested in a March 2014 speech at Chatham House that the domestic banks were too big to fail, but instead of the nationalisation process used in
12506-400: The Federal Reserve Ben Bernanke , U.S. Securities and Exchange Commission chairman Christopher Cox , congressional leaders, and President Bush, moved forward efforts to draft a proposal for a comprehensive solution to the problems created by illiquid assets . News of the coming plan resulted in some stock, bond, and currency markets stability on September 19, 2008. The proposal called for
12675-716: The House put the resulting effort, the Emergency Economic Stabilization Act of 2008, to a vote. It did not pass. US stock markets dropped 8 percent, the largest percentage drop since Black Monday in 1987 . Congressional leaders, including both presidential candidates, started working with the Bush Administration and the Treasury department on key negotiation points as they worked to finalize the plan. Key items under discussion included: Just after midnight Sunday, September 28, leaders of
12844-493: The King's entourage of judges hold their courts and judgments at "a certain place" rather than dispensing autocratic justice in unpredictable places about the country. A concentrated and elite group of judges acquired a dominant role in law-making under this system, and compared to its European counterparts the English judiciary became highly centralised. In 1297, for instance, while the highest court in France had fifty-one judges,
13013-469: The October contract session were forced to purchase oil in large batches to cover themselves, adding to the surge in prices. Further out, oil futures contracts rose by about $ 5 (~$ 7.00 in 2023) per barrel. Mortgage rates increased following the news of the bailout plan. The 30-year fixed-rate mortgage averaged 5.78% in the week before the plan was announced; for the week ending September 25, the average rate
13182-466: The Paulson proposal states: "Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency." This provision was not included in the final version. In his testimony before the U.S. Senate, Treasury Secretary Henry Paulson summarized the rationale for the $ 700 billion (~$ 973 billion in 2023) bailout: In his testimony before
13351-510: The Quran as its constitution , and is governed on the basis of Islamic law. Iran has also witnessed a reiteration of Islamic law into its legal system after 1979. During the last few decades, one of the fundamental features of the movement of Islamic resurgence has been the call to restore the Sharia, which has generated a vast amount of literature and affected world politics . Socialist law
13520-481: The Senate and House, along with Treasury Secretary Paulson, announced a tentative deal had been reached to permit the government purchase of up to $ 700 billion in mortgage backed securities to provide liquidity to the security holders, and to stabilize U.S. financial firms and markets. The bill was made final later that Monday morning. A debate and vote was scheduled for the House for Monday, September 29, to be followed by
13689-529: The Senate forced passage of the unpopular version through the opposing house by " sweetening " the bailout package. On October 1, 2008, the Senate debated and voted on an amendment to H.R. 1424 , which substituted a newly revised version of the Emergency Economic Stabilization Act of 2008 for the language of H.R. 1424. The Senate accepted the amendment and passed the entire amended bill, voting 74–25. Additional unrelated provisions added an estimated $ 150 billion to
13858-1289: The Sharia: the Supreme Constitutional Court of Egypt may invalidate such laws, and in Iran the Guardian Council ensures the compatibility of the legislation with the "criteria of Islam". Prominent examples of legislatures are the Houses of Parliament in London, the Congress in Washington, D.C., the Bundestag in Berlin, the Duma in Moscow, the Parlamento Italiano in Rome and the Assemblée nationale in Paris. By
14027-752: The TARP program while he had a multimillion-dollar investment in the Bank of America. Protests opposing the bailout occurred in over 100 cities across the United States on Thursday September 25. Grassroots group TrueMajority said its members organized over 251 events in more than 41 states. The largest gathering has been in New York City , where more than 1,000 protesters gathered near the New York Stock Exchange along with labor union members organized by New York Central Labor Council. Other grassroots groups have planned rallies to protest against
14196-488: The Treasury Henry Paulson directed two of his aides, Neel Kashkari and Phillip Swagel , to write a plan to recapitalize the U.S. financial system in case of total collapse. The plan, which was also presented to Federal Reserve Chairman Ben Bernanke , called for the U.S. government to purchase about $ 500 billion in distressed assets from financial institutions. The original proposal was submitted to
14365-415: The Treasury to be a patsy ." Mr. Buffett's company owns financial companies which will benefit directly or indirectly. Investor George Soros opposed the original Paulson plan: "Mr Paulson's proposal to purchase distressed mortgage-related securities poses a classic problem of asymmetric information. The securities are hard to value but the sellers know more about them than the buyer: in any auction process
14534-414: The Treasury would end up with the dregs. The proposal is also rife with latent conflict of interest issues. Unless the Treasury overpays for the securities, the scheme would not bring relief." – but called Barack Obama 's list of conditions for the plan "the right principles". Other critics included Carl Icahn Jim Rogers , and William Seidman . Seidman compared the bailout with action he and his team at
14703-430: The U.S. , the two systems were merged . In developing the common law, academic writings have always played an important part, both to collect overarching principles from dispersed case law and to argue for change. William Blackstone , from around 1760, was the first scholar to collect, describe, and teach the common law. But merely in describing, scholars who sought explanations and underlying structures slowly changed
14872-576: The U.S. Senate on September 23, 2008, Fed Chairman Ben Bernanke also summarized the rationale for the $ 700 billion (~$ 973 billion in 2023) bailout: Regarding the $ 700 billion number, Forbes.com quoted a Treasury spokeswoman: "It's not based on any particular data point. We just wanted to choose a really large number." According to CNBC commentator Jim Cramer , large corporations, institutions, and wealthy investors were pulling their money out of bank money market funds, in favor of government-backed Treasury bills . Cramer called it "an invisible run on
15041-423: The U.S. government announced a series of comprehensive steps to address the problems, following a series of "one-off" or "case-by-case" decisions to intervene or not, such as the $ 85 billion liquidity facility for American International Group on September 16, the federal takeover of Fannie Mae and Freddie Mac , and the bankruptcy of Lehman Brothers . The legislation had its origin in early 2008 when Secretary of
15210-576: The adjudicator is only writing to decide the single case, rather than to set out reasoning that will guide future courts. Common law originated from England and has been inherited by almost every country once tied to the British Empire (except Malta, Scotland , the U.S. state of Louisiana , and the Canadian province of Quebec ). In medieval England during the Norman conquest , the law varied shire-to-shire based on disparate tribal customs. The concept of
15379-402: The assurance of safety nets that ought not be but unfortunately are considered in business equations; and that a bailout promotes centralized bureaucracy by allowing government powers to choose the terms of the bailout. Furthermore, government bailouts are criticized as corporate welfare , which encourages corporate irresponsibility. Others, such as economist Jeffrey Sachs , have characterized
15548-668: The bail-in pecking order for taking losses. That agreement formalised the practice seen earlier in Cyprus. Under the proposal, all unsecured bondholders would be hit for losses before a bank was allowed to receive capital injections directly from the European Stability Mechanism . A tool known as the Single Resolution Mechanism , which was agreed by Eurogroup members on 20 March 2014, was part of an EU effort to prevent future financial crises by pooling responsibility for eurozone banks, known as
15717-621: The bail-in was of depositors with more than €100,000 in their accounts. ) The bail-in was first proposed publicly in an Economist Op-Ed "From Bail-out to Bail-in" in January 2010, by Paul Calello and Wilson Ervin. It was described as a new alternative between "taxpayer bail-outs (bad) and systemic financial collapse (probably worse)." It envisioned a high-speed recapitalization financed by "bailing-in" (converting) bondholder debt into fresh equity. The new capital would absorb losses and provide new capital to support critical activities, thereby avoiding
15886-492: The bailout, while outraged citizens continue to express their opposition online through blogs and dedicated web sites. Supporters of the plan included presidential candidates Barack Obama and John McCain , and British Prime Minister Gordon Brown . Critics included Senator Bernie Sanders , Former Arkansas Governor Mike Huckabee , Congressman Ron Paul , Libertarian presidential candidate Bob Barr , and Senators Christopher Dodd , Richard Shelby , and Jim Bunning . In
16055-429: The bailout. Furthermore, the original proposal exempted Paulson from judicial oversight . Thus, there was concern that former illegal activity by a financial institution or its executives might be hidden. The Treasury staff member responsible for administering the bailout funds was Neel Kashkari , a former vice-president at Goldman Sachs . In the Senate, Senator Judd Gregg (R-NH) was the leading Republican author of
16224-478: The banks," one that has no lines in the lobby but pushes banks to the breaking point nonetheless. As a bank's capital reserve of deposits evaporate, so too does its ability to lend and correspondingly make money. "The lack of confidence inspired by Lehman's demise, the general poor health of many banks, this is going to turn this into an intractable moment," Cramer said, "if someone in the government doesn't start pushing for more deposit insurance." Skepticism regarding
16393-490: The bridge holding company and the operating subsidiaries, and to permit transfer of ownership and control of the bridge company back to private hands, the FDIC will exchange the remaining claims of unsecured creditors of the parent for equity and/or debt claims of the bridge company. If necessary, the FDIC would provide temporary liquidity to the bridge company until the 'bail-in' of the failed parent company's creditors can be accomplished. A comprehensive overview of this strategy
16562-437: The carry value. Buffett says "I would think they might insist on the directors of the institutions that participate in this program waiving all director's fees for a couple of years. They should, maybe, eliminate bonuses." Buffett says "if someone wants to sell a hundred billion of these instruments to the Treasury, let them sell two or three billion in the market and then have the Treasury match that, ... . You don't want
16731-528: The case of HBOS , RBS and threatened for Barclays (all in late 2008), those banks could henceforth be bailed in. A form of bail-in was used in small Danish institutions (such as Amagerbanken) as early as 2011, as well as the later conversion of junior debt at the Dutch Bank SNS REALL. However, the process did not receive extensive global attention until the bail-in of the main banks of Cyprus during 2013, discussed below. The restructuring of
16900-438: The company." The procedures also establish certain protections for creditors, such as by setting a requirement for the payout to claimants to ve at least as much as the claimants would have received under a bankruptcy liquidation. The FDIC has drawn attention to the problem of post-resolution governance and suggested that a new CEO and Board of Directors should be installed under FDIC receivership guidance. Claims are paid in
17069-503: The cost of the package and increased the length of the bill to 451 pages. ( See Public Law 110-343 for details on the added provisions.) The amended version of H.R. 1424 was sent to the House for consideration, and on October 3, the House voted 263–171 to enact the bill into law. President George W. Bush signed the bill into law within hours of its congressional enactment, creating the $ 700 billion Troubled Asset Relief Program (TARP) to purchase failing bank assets. On Monday, October 6,
17238-602: The crisis struck. The post-2008 Irish economic downturn was also unusually steep. The impact on Irish government credit was so severe that it was forced to seek assistance from the European Union and the IMF. In 1991 and 1992, a housing bubble in Sweden deflated, resulting in a severe credit crunch and widespread bank insolvency. The causes were similar to those of the subprime mortgage crisis of 2007–2008. In response,
17407-586: The defining features of any legal system. Civil law is the legal system used in most countries around the world today. In civil law the sources recognised as authoritative are, primarily, legislation —especially codifications in constitutions or statutes passed by government—and custom . Codifications date back millennia, with one early example being the Babylonian Codex Hammurabi . Modern civil law systems essentially derive from legal codes issued by Byzantine Emperor Justinian I in
17576-510: The direct costs of banking system collapses. These costs have been large: in our sample of 40 countries governments spent on average 12.8 percent of national GDP to clean up their financial systems. The Irish banking crisis of 2008 has similarities to other banking crisis, but it was unique in that it was the first banking crisis in a country that was a member of the eurozone. That made the Irish government and central bank have unique constraints when
17745-543: The eight U.S. G-SIFIs. In the UK, the Bank of England has set out the TLAC requirements for its largest banks, described as MREL, at between 25.2% and 29.3% of risk-weighted assets . Switzerland has imposed requirements on its two G-SIFIs of 28.6% of risk-weighted assets. The EU is currently debating how best to implement the FSB requirements across its banking system and what the appropriate size of that requirement should be. From
17914-406: The executive acts as both head of state and head of government, and has power to appoint an unelected cabinet. Under a presidential system, the executive branch is separate from the legislature to which it is not accountable. Although the role of the executive varies from country to country, usually it will propose the majority of legislation, and propose government agenda. In presidential systems,
18083-441: The executive often has the power to veto legislation. Most executives in both systems are responsible for foreign relations , the military and police, and the bureaucracy. Ministers or other officials head a country's public offices, such as a foreign ministry or defence ministry . The election of a different executive is therefore capable of revolutionising an entire country's approach to government. Bailout A bailout
18252-471: The federal government to buy up to US$ 700 billion of illiquid mortgage-backed securities with the intent to increase the liquidity of the secondary mortgage markets and reduce potential losses encountered by financial institutions owning the securities. The draft proposal was received favorably by investors in the stock market, but caused the U.S. dollar to fall against gold , the Euro , and petroleum . The plan
18421-412: The final proposal, no insured deposit of €100,000 or less was to be affected. The levy of deposits that exceeded €100,000 was termed a "bail-in" to differentiate it from a government-backed bailout. The Bank of Cyprus executed the bail-in on 28 April 2013. There were some controversial elements, especially with respect to the initial plan, which included a contribution from insured depositors, which
18590-547: The financial bailouts of 2008, explaining that most policymakers considered bailouts to be the lesser of two evils, given the lack of effective resolution options at the time. In the financial crisis of 2007–2008 , large amounts of government support were used to protect the financial system, and many of those actions were attacked as bailouts. Over $ 1 trillion of government support was deployed in this period and "voters were furious." The US Troubled Asset Relief Program authorized up to $ 700bn of government support of which $ 426bn
18759-463: The following order, and any deficit to the government must be recouped by assessments on the financial industry: A number of strategies were explored early on to determine how Title I and Title II powers could be best used to resolve a large failing bank, including "Purchase and Assumption" and "Loss Sharing". Over time, the preferred approach evolved to a bail-in strategy, which is more direct, as it does not require an acquisition party. That approach
18928-427: The funds necessary to purchase the MBS may add to the United States public debt , the net effect will be considerably less as the incremental debt will be offset to a large extent by the MBS assets. A key challenge would be valuing the purchase price of the MBS, which is a complex exercise subject to a multitude of variables related to the housing market and the credit quality of the underlying mortgages. The ability of
19097-902: The golden age of Roman law and aimed to restore it to the peak it had reached three centuries before." The Justinian Code remained in force in the East until the fall of the Byzantine Empire . Western Europe, meanwhile, relied on a mix of the Theodosian Code and Germanic customary law until the Justinian Code was rediscovered in the 11th century, which scholars at the University of Bologna used to interpret their own laws. Civil law codifications based closely on Roman law, alongside some influences from religious laws such as canon law , continued to spread throughout Europe until
19266-490: The government drafted a crisis plan . On October 8, the British announced their bank rescue package consisting of funding, debt guarantees and infusing capital into banks via preferred stock. This model was closely followed by the rest of Europe, as well as the U.S Government, who on October 14 announced a $ 250bn (£143bn) Capital Purchase Program to buy stakes in a wide variety of banks in an effort to restore confidence in
19435-409: The government prevents their resources from being liquidated and made available to other companies that can put them to better, more productive use. An essential element of a healthy free market is that both success and failure must be permitted to happen when they are earned. But instead with a bailout, the rewards are reversed – the proceeds from successful entities are given to failing ones. How this
19604-466: The government to offset the purchase price (through mortgage collections over the long-run) depends on the valuation assigned to the MBS at the time of purchase. For example, Merrill Lynch wrote down the value of its MBS to approximately 22 cents on the dollar in Q2 2008. Whether the government is ultimately able to resell the assets above the purchase price or will continue to merely collect the mortgage payments
19773-473: The government took the following actions: The bailout initially cost about 4% of Sweden's GDP, later lowered to 0–2% of GDP, depending on the various assumptions if the value of stock that was sold when the nationalized banks were privatized. In the late 1980s and the early 1990s, over 1000 thrift institutions failed as part of the savings and loan crisis . In response, the US established the Resolution Trust Corporation (RTC) in 1989. The cost of this bailout
19942-530: The idea of the rule of law because he did not accept the primacy of abstract normative principles over concrete political positions and decisions. Therefore, Schmitt advocated a jurisprudence of the exception ( state of emergency ), which denied that legal norms could encompass all of the political experience. Later in the 20th century, H. L. A. Hart attacked Austin for his simplifications and Kelsen for his fiction in The Concept of Law . Hart argued law
20111-428: The ideal of parliamentary sovereignty , whereby the unelected judiciary may not overturn law passed by a democratic legislature. In communist states , such as China, the courts are often regarded as parts of the executive, or subservient to the legislature; governmental institutions and actors exert thus various forms of influence on the judiciary. In Muslim countries, courts often examine whether state laws adhere to
20280-584: The insolvency process; for instance, the U.S. government intervened in the General Motors bailout of 2009–2013. A bailout can, but does not necessarily, avoid an insolvency process. The term bailout is maritime in origin and describes the act of removing water from a sinking vessel using a bucket. A bailout could be done for profit motives, such as when a new investor resurrects a floundering company by buying its shares at firesale prices, or for social objectives, such as when, hypothetically speaking,
20449-503: The largest "too big to fail" banks had been largely eliminated by the reforms. That was determined by various methods, especially by comparing the funding cost of the biggest banks with smaller banks that are subject to ordinary FDIC resolution. That differential, which had been large in the crisis, had been reduced to roughly zero by the advance of reform, but the GAO also cautioned that the results should be interpreted with caution. In Europe,
20618-564: The last few decades. It is a real unity of them all in one and the same person, made by covenant of every man with every man, in such manner as if every man should say to every man: I authorise and give up my right of governing myself to this man, or to this assembly of men, on this condition; that thou givest up, thy right to him, and authorise all his actions in like manner. Thomas Hobbes, Leviathan , XVII The main institutions of law in industrialised countries are independent courts , representative parliaments, an accountable executive,
20787-450: The law more difficult. A government usually leads the process, which can be formed from Members of Parliament (e.g. the UK or Germany). However, in a presidential system, the government is usually formed by an executive and his or her appointed cabinet officials (e.g. the United States or Brazil). The executive in a legal system serves as the centre of political authority of the State . In
20956-686: The law. The former are legal syllogism , which holds sway in civil law legal systems, analogy , which is present in common law legal systems, especially in the US, and argumentative theories that occur in both systems. The latter are different rules (directives) of legal interpretation such as directives of linguistic interpretation, teleological interpretation or systemic interpretation as well as more specific rules, for instance, golden rule or mischief rule . There are also many other arguments and cannons of interpretation which altogether make statutory interpretation possible. Law professor and former United States Attorney General Edward H. Levi noted that
21125-597: The laws of the State, which mirrors the (theoretical) unimportance of judges' decisions for future cases in civil law systems today. From 529 to 534 AD the Byzantine Emperor Justinian I codified and consolidated Roman law up until that point, so that what remained was one-twentieth of the mass of legal texts from before. This became known as the Corpus Juris Civilis . As one legal historian wrote, "Justinian consciously looked back to
21294-399: The legal and operational capability for such a super special resolution regime (now known as "bail-in"). The scope of the planned resolution regime was not limited to large domestic banks. In addition to "systemically significant or critical" financial institutions, the scope also applies to two further categories of institutions Global SIFIs (banks incorporated domestically in a country that
21463-426: The legal profession is an important part of people's access to justice , whilst civil society is a term used to refer to the social institutions, communities and partnerships that form law's political basis. A judiciary is a number of judges mediating disputes to determine outcome. Most countries have systems of appeal courts, with an apex court as the ultimate judicial authority. In the United States, this authority
21632-439: The legislation, while Republicans voted 133–65 against it. During the legislative session, at the conclusion of the vote, the presiding chair declared the measure, HR3997, to be unfinished business. Law Law is a set of rules that are created and are enforceable by social or governmental institutions to regulate behavior, with its precise definition a matter of longstanding debate. It has been variously described as
21801-415: The many bailouts over the course of the 20th century, certain principles and lessons have emerged that are consistent: On November 24, 2008, American Republican Representative Ron Paul (R–TX) wrote, "In bailing out failing companies, they are confiscating money from productive members of the economy and giving it to failing ones. By sustaining companies with obsolete or unsustainable business models,
21970-472: The mid-1940s, efforts have been made, in country after country, to bring Sharia law more into line with modern conditions and conceptions. In modern times, the legal systems of many Muslim countries draw upon both civil and common law traditions as well as Islamic law and custom. The constitutions of certain Muslim states, such as Egypt and Afghanistan, recognise Islam as the religion of the state, obliging legislature to adhere to Sharia. Saudi Arabia recognises
22139-520: The military and police, bureaucratic organisation, the legal profession and civil society itself. John Locke, in his Two Treatises of Government , and Baron de Montesquieu in The Spirit of the Laws , advocated for a separation of powers between the political, legislature and executive bodies. Their principle was that no person should be able to usurp all powers of the state , in contrast to
22308-408: The month. The value of the U.S. dollar dropped compared to other world currencies after the plan was announced. The front end oil futures contract spiked more than $ 25 a barrel during the day Monday September 22, ending the day up over $ 16. This was a record for the biggest one-day gain. However, there are other factors that caused the massive spike in oil prices. Traders who got "caught" at the end of
22477-676: The most influential. In contrast to English common law, which consists of enormous tomes of case law, codes in small books are easy to export and easy for judges to apply. However, today there are signs that civil and common law are converging. EU law is codified in treaties, but develops through de facto precedent laid down by the European Court of Justice . Ancient India and China represent distinct traditions of law, and have historically had independent schools of legal theory and practice. The Arthashastra , probably compiled around 100 AD (although it contains older material), and
22646-512: The necessary elements: courts , lawyers , judges, a fully articulated legal code, principles of legal interpretation, and coercive penalties, though it lacks civilly-binding force in most secular jurisdictions. Until the 18th century, Sharia law was practiced throughout the Muslim world in a non-codified form, with the Ottoman Empire 's Mecelle code in the 19th century being a first attempt at codifying elements of Sharia law. Since
22815-538: The notion of justice, and re-entered the mainstream of Western culture through the writings of Thomas Aquinas , notably his Treatise on Law . Hugo Grotius , the founder of a purely rationalistic system of natural law, argued that law arises from both a social impulse—as Aristotle had indicated—and reason. Immanuel Kant believed a moral imperative requires laws "be chosen as though they should hold as universal laws of nature". Jeremy Bentham and his student Austin, following David Hume , believed that this conflated
22984-523: The only way to stabilize the system is through government support to businesses and households. By keeping the economy afloat through such artificial means the Schumpeterian creative destruction is circumvented and inefficient firms taking excessive risks remain in operation, thereby denying one of the main elements of normal capitalist development. The support can come in form of purchase of toxic assets as in 2008 and through money creation as in
23153-477: The particular bailout as a necessary evil and have argued in 2008 that the probable incompetence in management of the car companies is an insufficient reason to let them fail completely and to risk disturbing the delicate economic state of the United States, as up to three million jobs rested on the solvency of the Big Three and things were bleak enough as they were. Randall D. Guynn noted similar arguments for
23322-446: The plan argued that the market intervention called for by the plan was vital to prevent further erosion of confidence in the U.S. credit markets and that failure to act could lead to an economic depression . Opponents objected to the plan's cost and rapidity, pointing to polls that showed little support among the public for "bailing out" Wall Street investment banks, claimed that better alternatives were not considered, and claimed that
23491-519: The plan occurred early on in the House. Many members of Congress , including the House of Representatives, did not support the plan initially, mainly conservative free-market Republicans and liberal anti-corporate Democrats. Alabama Republican Spencer Bachus has called the proposal "a gun to our head." On September 19, 2008, when news of the bailout proposal emerged, the U.S. stock market rose by 3%. Foreign stock markets also surged, and foreign currencies corrected slightly, after having dropped earlier in
23660-560: The policy of the US government to protect major US companies responsible for transportation (aircraft manufacturers, train companies, automobile companies, etc.) from failure by subsidies and low-interest loans. Such companies, among others, are deemed " too big to fail " because their goods and services are considered by the government to be constant universal necessities in maintaining the nation's welfare and often, indirectly, its security. Emergency-type government bailouts can be controversial. Debates raged in 2008 over if and how to bail out
23829-570: The positivist tradition in his book the Pure Theory of Law . Kelsen believed that although law is separate from morality, it is endowed with "normativity", meaning we ought to obey it. While laws are positive "is" statements (e.g. the fine for reversing on a highway is €500); law tells us what we "should" do. Thus, each legal system can be hypothesised to have a ' basic norm ' ( German : Grundnorm ) instructing us to obey. Kelsen's major opponent, Carl Schmitt , rejected both positivism and
23998-490: The positivists for their refusal to treat law as a moral issue. Dworkin argues that law is an " interpretive concept" that requires judges to find the best fitting and most just solution to a legal dispute, given their Anglo-American constitutional traditions. Joseph Raz , on the other hand, defended the positivist outlook and criticised Hart's "soft social thesis" approach in The Authority of Law . Raz argues that law
24167-412: The premise that taxpayers can buy troubled assets without having to overpay. Oppenheimer & Company analyst Meridith Whitney argues that banks will not sell bad assets at fair market values because they are reluctant to take asset write downs. Removing toxic assets would also reduce the volatility of banks' stock prices. Because stock is a call option on a firm's assets, this lost volatility will hurt
24336-416: The principle of representative government people vote for politicians to carry out their wishes. Although countries like Israel, Greece, Sweden and China are unicameral , most countries are bicameral , meaning they have two separately appointed legislative houses. In the 'lower house' politicians are elected to represent smaller constituencies . The 'upper house' is usually elected to represent states in
24505-410: The private industries. The short-term effects were evidently costly, but the beneficiary repercussions were vastly favorable to a sustainable economic future. According to Jon Daemon, the proposal was dismissed by bureaucrats and lobbyist in accordance to the private banks and federal reserve dispatchers. Over the weekend (September 27–28), Congress continued to develop the proposal. That next Monday,
24674-405: The proposal is the federal government's plan to buy up to $ 700 billion of illiquid mortgage-backed securities (MBS) with the intent to increase the liquidity of the secondary mortgage markets and reduce potential losses encountered by financial institutions owning the securities. The draft proposal of the plan was received favorably by investors in the stock market. This plan can be described as
24843-469: The question of the extent to which law incorporates morality. John Austin 's utilitarian answer was that law is "commands, backed by threat of sanctions, from a sovereign, to whom people have a habit of obedience". Natural lawyers , on the other hand, such as Jean-Jacques Rousseau , argue that law reflects essentially moral and unchangeable laws of nature. The concept of "natural law" emerged in ancient Greek philosophy concurrently and in connection with
25012-442: The sector. The money came from the $ 700bn Troubled Asset Relief Program. Over the next six months, TARP was dwarfed by other guarantees and lending limits; analysis by Bloomberg found the Federal Reserve had, by March 2009, committed $ 7.77 trillion (~$ 10.7 trillion in 2023) to rescuing the financial system, more than half the value of everything produced in the U.S. that year. U.S. Treasury Secretary Henry Paulson proposed
25181-402: The sharing of many features traditionally considered typical of either common law or civil law. The third type of legal system is religious law, based on scriptures . The specific system that a country is ruled by is often determined by its history, connections with other countries, or its adherence to international standards. The sources that jurisdictions adopt as authoritatively binding are
25350-458: The split between Chiang Kai-shek 's nationalists, who fled there, and Mao Zedong 's communists who won control of the mainland in 1949. The current legal infrastructure in the People's Republic of China was heavily influenced by Soviet Socialist law , which essentially prioritises administrative law at the expense of private law rights. Due to rapid industrialisation, today China is undergoing
25519-673: The stock price of distressed banks. Therefore, such banks will only sell toxic assets at above market prices. On April 6, 2008, the State Foreclosure Prevention Working Group reported that the pace of foreclosures exceeded the capacity of homeowner rescue programs, such as the Hope Now Alliance , in the first quarter of 2008. The original plan would have granted the Secretary of the Treasury unlimited power to spend, proofing their actions against congressional or judicial review. Section 8 of
25688-561: The usefulness of targeted asset purchases. The 2007–2008 financial crisis developed partly due to the subprime mortgage crisis , causing the failure or near-failure of major financial institutions like Lehman Brothers and American International Group . Seeking to prevent the collapse of the financial system , Secretary of the Treasury Paulson called for the U.S. government to purchase several hundred billion dollars in distressed assets from financial institutions. His proposal
25857-478: The wake of the financial crisis. The first official discussion of bail-in was set out in a speech by Paul Tucker , who chaired the Financial Stability Board (FSB) Working Group on Cross Border Crisis Management and was also deputy governor for Financial Stability at the Bank of England. In March 2010, Tucker began to outline the properties of a new "bail-in" strategy to handle the failure of
26026-621: The way the law actually worked. Religious law is explicitly based on religious precepts. Examples include the Jewish Halakha and Islamic Sharia —both of which translate as the "path to follow". Christian canon law also survives in some church communities. Often the implication of religion for law is unalterability because the word of God cannot be amended or legislated against by judges or governments. Nonetheless, most religious jurisdictions rely on further human elaboration to provide for thorough and detailed legal systems. For instance,
26195-418: The word "law" had two different and irreconcilable meanings. Thurman Arnold said that it is obvious that it is impossible to define the word "law" and that it is also equally obvious that the struggle to define that word should not ever be abandoned. It is possible to take the view that there is no need to define the word "law" (e.g. "let's forget about generalities and get down to cases "). One definition
26364-401: Was 6.09%, still far below the average rate during the early 1990s recession , when it topped 9.0%. There was concern that the current plan created a conflict of interest for Paulson. Paulson was a former CEO of Goldman Sachs , which stood to benefit from the bailout. Paulson had hired Goldman executives as advisors and Paulson's former advisors had joined banks that were also to benefit from
26533-446: Was described as "not smart" by ECB President Mario Draghi . The proposal was amended the following day to affect only uninsured depositors and creditors. In a broader review of the events of Cyprus, Draghi addressed some of the criticism of this event in a press conference: A bail-in in itself is not a problem: it is the lack of ex ante rules known to all parties and the lack of capital buffers or other "bail-inable" assets that may make
26702-619: Was developed under the FDIC Office of Complex Financial Institutions group led by James R. Wigand. The approach is described in a slide deck from January 2012 as well as in Congressional testimony. The specific strategy for implementing a bail-in under the Dodd–Frank Act requirements has been described as the "Single Point of Entry mechanism". The innovative FDIC strategy was described by Federal Reserve Governor Jerome Powell as
26871-472: Was equitable in a case. From the time of Sir Thomas More , the first lawyer to be appointed as Lord Chancellor, a systematic body of equity grew up alongside the rigid common law, and developed its own Court of Chancery . At first, equity was often criticised as erratic. Over time, courts of equity developed solid principles , especially under Lord Eldon . In the 19th century in England, and in 1937 in
27040-646: Was estimated at $ 132.1bn to taxpayers. In 2008 and 2009 the US Treasury and the Federal Reserve System bailed out numerous huge banks and insurance companies as well as General Motors and Chrysler . Congress, at the urgent request of US President George W. Bush , passed the Troubled Asset Relief Program (TARP), authorized at $ 700 billion. The bank sectors repaid the money by December 2009, and TARP actually returned
27209-496: Was formed so that merchants could trade with common standards of practice rather than with the many splintered facets of local laws. The Law Merchant, a precursor to modern commercial law, emphasised the freedom to contract and alienability of property. As nationalism grew in the 18th and 19th centuries, the Law Merchant was incorporated into countries' local law under new civil codes. The Napoleonic and German Codes became
27378-467: Was heavily influenced by Greek philosophy, but its detailed rules were developed by professional jurists and were highly sophisticated. Over the centuries between the rise and decline of the Roman Empire , law was adapted to cope with the changing social situations and underwent major codification under Theodosius II and Justinian I . Although codes were replaced by custom and case law during
27547-427: Was initially rejected by Congress, but the bankruptcy of Lehman Brothers and lobbying by President Bush ultimately convinced Congress to enact the proposal as part of Public Law 110-343 . Early estimates for the bailout's risk cost were as much as $ 700 billion; however, TARP recovered $ 441.7 billion from $ 426.4 billion invested, earning a $ 15.3 billion profit (an annualized rate of return of 0.6%), which may have been
27716-640: Was introduced on September 20, by Paulson. Named the Troubled Asset Relief Program, but also known as the Paulson Proposal or Paulson Plan, it should not be confused with Paulson's earlier 212-page plan, the Blueprint for a Modernized Financial Regulatory Reform , that was released on March 31, 2008. The proposal was only three pages long, intentionally short on details to facilitate quick passage by Congress. A key part of
27885-670: Was invested in banks, American International Group , automakers, and other assets. TARP recovered funds totalling $ 441.7 billion from $ 426.4 billion invested, earning a $ 15.3 billion profit. In the United Kingdom, the bank rescue package was even larger, totaling some £500bn. Controversial bailouts occurred in other countries as well, such as Germany (the SoFFin rescue fund), Switzerland (the rescue of UBS), Ireland (the "blanket guarantee" of Irish domestic banks issued in September 2008), and several other countries in Europe. A bail-in
28054-492: Was launched in 1933. The new HOLC was to administer a national program to help homeowners refinance their mortgages. She also called for a moratorium on foreclosures and freezing of rate hikes in adjustable-rate mortgages. Barack Obama , the Democratic presidential candidate, said that any bailout had to include plans to recover the money, protect working families and big financial institutions, and be crafted to prevent such
28223-413: Was not immediately approved by Congress; debate and amendments were seen as likely before the plan was to receive legislative enactment. Throughout the week of September 20, 2008, there was contentious wrangling among members of Congress over the terms and scope of the bailout, amplified by continued failures of institutions like Washington Mutual , and the upcoming November 4 national election. The plan
28392-484: Was signed into law by President George W. Bush . It became law as part of Public Law 110-343 on October 3, 2008. It created the $ 700 billion Troubled Asset Relief Program (TARP), which utilized congressionally appropriated taxpayer funds to purchase toxic assets from failing banks. The funds were mostly redirected to inject capital into banks and other financial institutions while the Treasury continued to examine
28561-578: Was successfully implemented. About 30 percent of the country's overall bailout funds were never tapped. In recent years, considerable effort has been made to ensure that a large supply of bail-inable liabilities is in place for the largest banks. The rules for "Total Loss Absorption Capacity" (TLAC) in the US have led the eight US G-SIFIs to issue approximately $ 1.0 trillion of long-term holding company liabilities, which could be used for this purpose. Combined with equity and other capital securities, that establishes an aggregate TLAC of roughly $ 2 trillion for
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