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67 Vand. L. Rev. 1247 (2014)
Regulation by Hypothetical

handle is hein.journals/vanlr67 and id is 1281 raw text is: VANDERBILT LAW REVIEW
VOLUME 67                       OCTOBER 2014                       NUMBER 5
Regulation by Hypothetical
Mehrsa Baradaran*
A new paradigm is afoot in banking regulation-and it involves a turn
toward the more speculative. Previous regulatory instruments have included
geographic restrictions, activity restrictions, disclosure mandates, capital
requirements, and risk management oversight to ensure the safety of the
banking system. This Article describes and contextualizes these regulatory
tools and shows how and why they were formed to deal with industry change.
The financial crisis of 2008 exposed the shortcomings in each of these regimes.
In important ways, the Wall Street Reform and Consumer Protection Act of
2010 ('Dodd-Frank') departs from these past regimes and proposes something
new: Call it Regulation by Hypothetical.
Regulation by hypothetical refers to rules duly promulgated under
appropriate statutory and regulatory mechanisms that require banks and their
regulators today to make predictions about sources of crisis and weakness
tomorrow. Those predictions-which, by their very definition, are conjectural
*   Assistant Professor, University of Georgia School of Law. I would like to thank workshop
and conference participants at the University of Georgia, the University of Connecticut Financial
Scholar's Conference, the Association of American Law Schools Annual Conference, the
Southeastern Law Schools Association Annual Conference, and Law & Society Annual
Conference. I would also like to thank Saule Omarova, Dan Coenen, Bo Rutledge, Usha
Rodriguez, Elizabeth Pollman, Anita Krug, Cliff Rossi, Julie Hill, Kent Barnett, and Jared Bybee
for their helpful comments on earlier versions of this draft. Special thanks to Peter Conti-Brown
for his invaluable guidance in the early stages of this article as well as his help with the title. I
would also like to thank my research assistants: Heather Percival, Ricardo Lopez, and Maria

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