Connecting About Interconnectedness
Committee on Capital Markets Regulation offers students the chance to whisper in the Treasury secretary’s ear
Photographs by Webb Chappell
Since the financial crisis hit, HLS Professor Hal Scott and the Committee on Capital Markets Regulation, an independent research organization which he directs, have been working double time making recommendations on financial regulatory reform through white papers, major reports and testimony before Congress. Supporting Scott and the committee is a team of dedicated student research assistants. For some of those students, the work has been an education in its own right—and one that couldn’t be more relevant to their past or future careers.
Peter Zuckerman ’12 came to law school after two years at Deutsche Bank.
In his 1L year, he contacted Scott about working for the committee: “As someone who traded derivatives, I thought I could be of some use,” he says. He researched that subject last year. This year he has been focused on the Lehman Brothers bankruptcy and issues of interconnectedness.
“What interests me now is that we are in a time when a lot of the rules for the financial system are being rewritten. So the committee has a very important role.”
The Committee on Capital Markets Regulation was originally formed in 2006, by then-Treasury Secretary Henry Paulson, to focus on competitiveness—how to reform the rules so that U.S. pre-eminence in the capital markets was not lost. In addition to Scott, who is a strong critic of overregulation, it includes major figures from regulation, financial services and academia. But since 2008, its focus—and much of Scott’s—has been directly related to the financial crisis, first through regulatory recommendations leading up to the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act and now through advising on its implementation.
For Max Jenkins ’11, who worked in investment banking at Lazard before coming to HLS, “the massive, massive shift toward reform” encapsulated in Dodd-Frank is of deep intellectual interest. He says it’s been a “riveting experience” to get to work with the committee and in particular with Scott: “It has markedly shaped my time at the law school.”
Jenkins, like Zuckerman, is working this year on a study related to interconnectedness and contagion: “the idea that failure in one part of the financial system provokes panic behavior somewhere else in the system that is not directly connected.”
Conor Tochilin J.D./M.B.A. ’12 also came to HLS just as the crisis was breaking, after several years in finance (most recently at a hedge fund). When he began researching for the committee, “regulatory and policy issues were really front of mind,” he says. “It was the most interesting possible time to be working on these issues.” His many projects include “recommendations about structural improvements to the financial regulatory architecture, in conjunction with Dodd-Frank.” He calls his work with the committee “a great experience—one of the best things I’ve done in graduate school.”
Scott says since the committee was formed, he has employed more than 50 research assistants to help with its work. “At Harvard Law, you always see students who have unbelievable capabilities in the areas that they are interested in,” he says. But he calls the three who came to him directly from Wall Street “phenomenal.”
He adds that one of the pleasures of working on the committee is engaging with such students and pushing them to take their research further.
Says Zuckerman: “Hal is … the sort of guy who wants to make sure that he understands everything, and he pushes you until you get to the bottom of whatever question you are working on.”
Zuckerman gave the example of the question of structured notes called “minibonds” that were central to the Lehman Brothers bankruptcy. “Hal wanted to get to the bottom of what was going on with these things. It was very complicated, … and that was the very point. No one did understand what was going on with them, and that’s why they lost a lot of money.” But after much back and forth, he was able to give Scott an explanation.
Tochilin and Jenkins told similar stories. “Hal is unremittingly interested in drilling down on a subject. Any explanation you offer is always subject to a deeper level of inquiry from him,” says Jenkins. “That’s what’s fun about it,” he added. “You can always go deeper in your understanding.”
Another part of the appeal for the research assistants is that the issues they are working on have such real-world significance, says Zuckerman, who came to law school to learn more about the emerging rules that are going to govern the financial world, where he plans to spend his career. (He, like Jenkins and Tochilin, is likely to return to Wall Street after law school.)
“It’s not just academic,” says Scott. “This is a situation where I tell them I need a memo, and it’s going to result in a recommendation that the secretary of the Treasury Department is likely to pay some attention to.”
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