International Symposium on risk management and derivatives

Fordham Journal of Corporate & Financial Law, 2003 by Felsenfeld, Carl, Rechtschaffen, Alan N

SYMPOSIUM

WELCOMING REMARKS*

PROF. FELSENFELD: I am Carl Felsenfeld, a professor of law here at the Law School and Director of the Institute on Law and Financial Services, one of your co-hosts for this occasion.

The other co-host is the recently established Center for Corporate, Securities, and Financial Law, which we expect will take a dominant place here at the Law School for corporate, financial, and business functions. It is already producing a number of functions, and you will, I am sure, be hearing about them. The Director of that institute is Professor Jill Fisch, who is one of the panelists.

Our program this morning is focused on corporate governance, although the general subject is derivatives and risk management. This program is in fact the fifth event we have held generally and loosely related to derivatives and risk management. We felt that the proper focus today should be on corporate governance because of the prime position that corporate governance has in all our thoughts now. I do not think this Symposium could have been better timed. We are all concerned, we are all thoughtful, we are all speculative.

We are in an "in between" kind of position as to what is the problem. Is it a pervasive problem? Is it a problem of a few people? Is it a problem of corporate management in general? Is it a problem of lead management of lead corporations? Is it a problem that pervades the whole infrastructure of corporate management, corporate directors, corporate stockholders, banks, regulators? We have not scoped the problem. We have not given it definition. It is through institutes of this sort and discussions of this sort that we will arrive toward a definition of where the problem is and what we should do to solve it.

I had lunch last week with one of the senior bank regulators in the United States. I do not think I will mention his name, although there was no confidentiality in our discussion. He said to me, "The laws of banks have gotten so complex in the last few years-with the Gramm-Leach-Bliley law,1 the Patriot Act,2 the Sarbanes-Oxley Act,3 all of these things-there are so many laws, there are so many regulations. It is now virtually possible to accomplish whatever you want, as long as you get a smart enough lawyer, well attuned to the regulations that he can knit them one against the other and can probably arrive at any conclusion he wants, while advising his corporate client that this is in compliance with law.

"Well," he said, "it is no longer enough that a legal solution be in compliance with law. It is no longer enough that, at least what we used to teach at law school-the law-is honored. It is more important that one steps back at the end of the day, at the conclusion of the search, and say, 'What I have done is right; what I have done is moral; what I have done is proper. I can stand up and defend what I have done as an effort that is consistent with the goals of the United States.' This is the most important thing."

And it starts one wondering: should we go back to the beginning, should we go back to 1789, take a giant eraser and erase all these regulations that fill the library? I am sure that is not good enough.

We have got to find some balance between proper law-what is the percentage that bank capital should be; what is the amount that may be loaned to an individual-and put it together with the morality that that also rules.

We have here at Fordham a strong program in corporate ethics. We have devoted several of our professors almost exclusively to corporate ethics. This is the kind of problem that they are working through: How do we find this mix between law and morality, and how do we come out? Once again, this Institute is part of the continuing goal to find that resolution.

I am reminded of Frank Baum, the great author who wrote all the Oz books. He said there was only one law in the Land of Oz, and that law was "behave yourself." And maybe that should be the dominant law in the United States. Maybe "behave yourself" should be included with "We, the people of the United States." Maybe the leaders of corporations should, when they make a major decision as to their own pocketbooks and the flow of funds to shareholders, the flow of funds to corporate pension holders-behave themselves. Maybe we will keep that in mind in the course of the day.

To start the program going, I am going to introduce Alan Rechtschaffen, my good friend and Co-Director, who is here, who has really taken over the management of this event, the invitation of the speakers, and all the work that has to be done. Alan Rechtschaffen is an Adjunct Professor of Law here at the Law School. He teaches a course in risk management and derivatives. He is also a Partner at the Rechtschaffen Group at Prudential and one of the leading figures in the world of derivatives.

So, Alan, why don't you take over and move our program forward?

PROFESSOR RECHTSCHAFFEN: Thank you, Carl.

Hi. I am Alan Rechtschaffen. I am one of the leading figures in the world of derivatives.