ABSTRACT
Financial markets and the large complex financial institutions that dominate them span borders and traditional lines of business with seeming ease. The regulators who supervise these markets and the institutions that resolve failures when they occur, do not. This gives rise to two sets of direct problems: ex ante, the multiplicity of regulators and regulatory regimes weakens supervision and may compromise early intervention; ex post, conflict and competition among resolution authorities heightens legal uncertainty and undermines the efficient resolution of financially distressed institutions. Markets and firms respond to these problems constructively by devising mechanisms for reducing legal uncertainties and strengthening the enforceability of their claims. They lobby for widespread adoption of consistent laws governing certain types of contract, make increased use of secured transactions, and structure their contracts defensively. Some firms, however, may find in these problems an opportunity for malfeasance.
