Regulator Probes BlackRock and Vanguard Over Huge Stakes in U.S. Banks – The WSJ reports that ‘The FDIC is scrutinizing whether the index-fund giants are sticking to passive roles when it comes to their investments in U.S. banks.’
The exemption of passive asset managers from banking rules - such as needing permission when they acquire shares above the 10% threshold - generates measurable risks to the accomplishment of the FDIC's mission.
Responses
Responses weighted by each expert's confidence
| Participant | University | Vote | Confidence | Bio/Vote History |
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 John Campbell |
Harvard | Bio/Vote History | ||
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Passive investors acquire equal proportional shares of all stocks in their indexes (when those indexes are value-weighted), and so their proportional ownership is a mechanical function of their AUM with no implications for bank governance.
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 John Cochrane |
Hoover Institution Stanford | Bio/Vote History | ||
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This kind of proposal seems designed to certify that regulators have a lot of time on their hands and no idea how anything works. They completely missed Silicon Valley Bank, yet think Vanguard owning 10% of a bank without filling out another mountain of paperwork is a danger?
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 Francesca Cornelli |
Northwestern Kellogg | Did Not Answer | Bio/Vote History | |
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 Douglas Diamond |
Chicago Booth | Bio/Vote History | ||
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Passive managers do not vote for control of decisions.
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 Wenxin Du |
HBS | Bio/Vote History | ||
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 Darrell Duffie |
Stanford | Bio/Vote History | ||
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 Janice Eberly |
Northwestern Kellogg | Bio/Vote History | ||
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If investments are passive, and can be verified and maintained as passive, then the rationale for the 10% threshold would not hold.
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 Eugene Fama |
Chicago Booth | Bio/Vote History | ||
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 Xavier Gabaix |
Harvard | Did Not Answer | Bio/Vote History | |
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 Itay Goldstein |
UPenn Wharton | Bio/Vote History | ||
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 John Graham |
Duke Fuqua | Bio/Vote History | ||
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 Campbell R. Harvey |
Duke Fuqua | Bio/Vote History | ||
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The current level of investment by passive managers does not, in my opinion, generate significant risk - even if slightly over 10%. However, this should not be an open-ended exemption. The exemption should have a cap, such as 25%.
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 David Hirshleifer |
USC | Bio/Vote History | ||
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 Harrison Hong |
Columbia | Did Not Answer | Bio/Vote History | |
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 Wei Jiang |
Emory Goizueta | Bio/Vote History | ||
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 Steven Kaplan |
Chicago Booth | Bio/Vote History | ||
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 Anil Kashyap |
Chicago Booth | Bio/Vote History | ||
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the power of the mechanism whereby the asset managers engage management to try to further the mission of the FDIC seems very weak. what examples do we see where this channel is powerful, they certainly won't turn into activists.
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 Ralph Koijen |
Chicago Booth | Did Not Answer | Bio/Vote History | |
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 Camelia Kuhnen |
UNC Kenan-Flagler | Bio/Vote History | ||
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 Andrew Lo |
MIT Sloan | Did Not Answer | Bio/Vote History | |
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 Michelle Lowry |
Drexel LeBow | Bio/Vote History | ||
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A challenge is that it is difficult to monitor / evaluate the ways in which the Big 3 might influence these banks (beyond participating in shareholder voting).
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 Sydney Ludvigson |
NYU | Bio/Vote History | ||
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 Matteo Maggiori |
Stanford GSB | Did Not Answer | Bio/Vote History | |
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 Gregor Matvos |
Northwestern Kellogg | Did Not Answer | Bio/Vote History | |
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 Tobias Moskowitz |
Yale School of Management | Bio/Vote History | ||
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 Stefan Nagel |
Chicago Booth | Bio/Vote History | ||
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I do not see any clear reasons why passive managers' stakes would generate risks for anything that the FDIC should care about according to its mandate.
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 Jonathan Parker |
MIT Sloan | Bio/Vote History | ||
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 Christine Parlour |
Berkeley Haas | Bio/Vote History | ||
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Passive holdings are imputable to observable flows.
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 Thomas Philippon |
NYU Stern | Bio/Vote History | ||
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There might be market power issues but I don't see the financial stability issues. And we usually want banks to raise more equity rather than less.
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 Manju Puri |
Duke Fuqua | Did Not Answer | Bio/Vote History | |
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 Michael R. Roberts |
UPenn Wharton | Bio/Vote History | ||
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 Paola Sapienza |
Northwestern Kellogg | Did Not Answer | Bio/Vote History | |
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 Amit Seru |
Stanford GSB | Bio/Vote History | ||
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 Robert Stambaugh |
UPenn Wharton | Bio/Vote History | ||
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 Laura Starks |
UT Austin McCombs | Bio/Vote History | ||
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 Jeremy Stein |
Harvard | Bio/Vote History | ||
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 Johannes Stroebel |
NYU Stern | Did Not Answer | Bio/Vote History | |
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 Amir Sufi |
Chicago Booth | Did Not Answer | Bio/Vote History | |
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 Sheridan Titman |
UT Austin McCombs | Bio/Vote History | ||
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 Stijn Van Nieuwerburgh |
Columbia Business School | Bio/Vote History | ||
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It is unwise to limit access to a well-diversified equity portfolio for passive investors. Index funds should let their shareholders vote in corporate elections and Abstain as a fallback.
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 Toni Whited |
UMich Ross School | Bio/Vote History | ||
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