Timothy M. Kaine *
Writings on the economic collapse that began in 2007 are legion. Analysts take different perspectives on the causes of the recession and on the policies that must be implemented to return to prosperity. And, at the national level, the President and Congress vigorously contend over the appropriate strategies to put in place to both grow the economy and guard against future collapses such as we’ve experienced in recent years.
As part of The University of Richmond Law Review’s annual Allen Chair Symposium, appropriately focused in 2011 on recent policy developments in the area of financial regulation, I offer the perspective of a policymaker who served as a Governor during the most significant economic downturn in America since the 1930s. I was inaugurated in January of 2006 when America still was in the midst of a sustained economic expansion. By late 2006, I was telling the Virginia General Assembly that the economy was softening, driven first by a major slowdown in the real estate market. In late 2008, I gathered in Philadelphia with the nation’s governors to communicate a bipartisan consensus to President-elect Obama that the nation’s economy needed bold steps in order to reform and recover. By the time I left office in January 2010, I had led numerous rounds of budget cuts during an economic collapse that had achieved global proportions. Like many other governors who served at the same time, I am the only Governor in recent Virginia history to leave office with state revenues lower than in the budget I inherited at the start of my term.
* Former Governor of Virginia (2006–2010); Senior Distinguished Lecturer on Law and Leadership Studies, University of Richmond. The author thanks Tricia A. Dunlap for research assistance.
Thomas M. Arnold*
Jerry L. Stevens**
The history of regulation in the U.S. economy shows a cumulative growth of government involvement in private enterprise that has helped business at times and has been at odds with business at other times. The wavering views on how much regulation is warranted change over time and cut across political and philosophical ideologies. For example, in the first two years of President Barack Obama’s administration there was a push for new and large increases in regulation of healthcare and financial markets along with intervention into public markets with massive spending to bailout automakers and financial institutions. Now, in the second half of the Obama term we are seeing a call for regulatory review with an eye on reducing regulatory burdens on economic growth and job creation.
* Thomas M. Arnold, Ph.D., CFA is an Associate Professor of Finance and the F. Carlyle Tiller Chair in Business at the E.C. Robins School of Business at the University of Richmond.
** Jerry L. Stevens, Ph.D., CCM is a Professor of Finance in the E.C. Robins School of Business at the University of Richmond.
The Honorable Samuel L. Bufford*
The Great Recession that began in approximately 2008 brought severe financial difficulties to a large number of homeowners in the United States. With a rise in the unemployment rate from 4.6% to 10%,many lost their jobs and their ability to make their home payments. At the same time, with an average 30.3% reduction in housing values (which in some places has approached nearly 60%), many homes are now worth substantially less than the debt owed on mortgages secured by the homes. Some 5 million homeowners are at least two months behind in their mortgage payments, and RealtyTrac predicts that some 1.2 million homes will be foreclosed on in 2011. The housing crisis continues to get worse, not better.
* Judge Bufford served as a U.S. Bankruptcy Judge in Los Angeles for twenty-five years until his retirement in 2010. He is now a Distinguished Scholar in Residence at Dickinson School of Law, Pennsylvania State University.
Edward J. Estrada *
Following the economic meltdown that began in the spring of 2008, immediate and longer term ramifications began to ripple through all aspects of the economy. Clearly, these tremors have not yet subsided, and continued fallout will be felt in the coming years. Importantly, even those companies and industries that have seemingly passed through the most immediate wave of impacts will be susceptible to the ongoing struggle to achieve sustainable growth. Many such companies may experience future defaults, largely dependent upon the strength and vitality of economic growth in the coming year and their industry performance in that time frame.
* Partner in the Commercial Restructuring and Bankruptcy Group of the New York office of Reed Smith LLP. The author would like to thank Aaron Bourke, an associate in the Commercial Restructuring and Bankruptcy Group of the New York office of Reed Smith LLP, for his contributions to the article.
Hollace T. Cohen *
The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) was enacted on July 21, 2010. A key element of the Dodd-Frank Act is Title II, entitled Orderly Liquidation Authority. Title II of the Dodd-Frank Act is a new insolvency regime intended to end “too big to fail” bailouts by providing the United States government with the ability to appoint the Federal Deposit Insurance Corporation (the “FDIC”) as receiver to administer the orderly liquidation of a nonbank financial company or bank holding company whose failure presents systemic risk to the financial stability of the United States.
* Partner, Troutman Sanders LLP, New York, New York. J.D., New York University. Ms. Cohen’s practice includes the representation of secured and unsecured creditors, including lenders, bondholders, indenture trustees, trade creditors, lessors and lessees of real and personal property, and acquirers of assets in bankruptcy cases and out-of-court restructurings. Ms. Cohen would like to thank Brett Goodman, who also practices at Troutman Sanders, for his assistance with this article and Richard Lieb for his insightful comments.
Clayton D. LaForge *
The nascent Chinese middle class bypassed the “Great Recession” despite China’s global infrastructure investments suffering dire consequences. Wall Street’s toxic tranches stacked atop one another in collateralized debt obligations seemingly comprised the most epidemic and obscure entity in financial history. Media outlets reported China’s second largest commercial bank held over nine billion dollars in U.S. subprime mortgage-backed securities, yet China’s gross domestic product surged as usual by 8.7% in 2009. Members of the middle class marched on, renovating the apartment and following the latest trends.