The chapter considers money market funds and the shadow banking debate by tracing their evolution from their inception in the 1970s. It focuses particularly on the events of September 2008, when the bankruptcy of Lehman Brothers caused the Reserve Primary Fund to “break the buck” and triggered investors’ redemptions from money market funds. It explains the political interplay among government regulators regarding the need for reform and the ensuing regulations adopted by the SEC. The chapter closes by offering thoughtful observations about the likely structure of the money market fund industry in the future.
Jill E. Fisch
This chapter discusses the unusual pedigree of federal securities fraud litigation. The securities fraud cause of action was created by the federal courts. Although Congress has, in turn, responded, its interventions have been limited in scope and largely deferential to the resulting body of judgemade law. As discussed in this chapter, the collaborative process by which Congress, the courts, and the SEC have developed private securities fraud litigation reflects a lawmaking partnership. The chapter defends this partnership as a normatively desirable approach and identifies distinctive advantages over alternatives such as a more detailed statute or a broad delegation by Congress to the courts or an administrative agency. The chapter concludes that, as a result, the Court should use the existence of a lawmaking partnership as a canon of construction in construing the scope of its own lawmaking authority. Where the Court finds evidence of this type of collaborative process, it should seek to further Congress’s lawmaking objectives rather than limiting its inquiry to the contours of the statutory text.