SCHOOL OF LAW

Henry T Hu

Allan Shivers Chair in the Law of Banking and Finance

JD Yale
MA Yale
BS Yale

Henry T. C. Hu holds the Allan Shivers Chair in the Law of Banking and Finance at the University of Texas Law School. (In September 2009, U.S. Securities and Exchange Commission Chairman Mary Schapiro announced the appointment of Professor Hu as the inaugural Director of the newly-established Division of Risk, Strategy, and Financial Innovation. See, e.g., Kara Scannell, At SEC, Scholar Who Saw It Coming, Wall Street Journal, January 25, 2010, at C1 http://online.wsj.com/article/SB10001424052748703415804575023402762491286.html.) Interested in law and modern finance, he has written on asset allocation, the regulation of banks, derivatives, hedge funds, and mutual funds, corporate governance, the "decoupling" of debt and equity rights from economic interests, financial rationality and sophistication, the global "competitiveness" of U.S. derivatives markets, model risk, risk management, swaps and other financial innovations, time diversification, and Warren Buffett. The writings have appeared in law reviews (e.g., Columbia Law Review, University of Pennsylvania Law Review, and Yale Law Journal), specialist journals (e.g., European Financial Management, Journal of Applied Corporate Finance, and Risk), and newspapers (e.g., The Financial Times, The New York Times, and The Wall Street Journal). A 1989 article argued that the 1988 Basel bank capital adequacy accord, in failing to properly consider modern financial innovation, posed systemic risk concerns. A 1993 article suggested that "sophisticated" financial institutions and their rocket scientists can misunderstand (or behave as if they misunderstand) derivatives because of cognitive biases (such as the tendency to ignore low probability-catastrophic events), compensation structures, and other factors, and proposed possible responses (such as an informational clearinghouse) to the systemic risks and other problems thereby created. In recognition of a 1995 derivatives/corporate governance article, an exchange-traded index derivative was introduced with the ticker symbol of "HUI" in 1996. Today, the "HUI" and the "XAU" are the two most closely watched indices of gold mining stocks in the world. A March 2000 article questioned typical investor beliefs as to stocks and "time diversification," as well the then stock market valuations. This 2000 article, and related articles in 1996 and 2005, suggested reconceptualizing a longstanding disclosure framework in order to better educate and protect mutual fund and other ordinary investors. A 2006 article offered the first systematic analysis of "equity decoupling" and coined the terms "empty voting" and "hidden (morphable) ownership." In 2007, he coined the term "empty creditor." A 2008 article offered the first systematic analysis of "debt decoupling" (via, e.g., credit default swaps and mortgage-backed securities) and showed how this phenomenon can undermine the soundness of individual corporations and the overall financial system. This "decoupling" research has attracted attention, including a lead front-page story in The Wall Street Journal and stories in The Economist, The Financial Times, and The New York Times. On August 1, 2009, what are sometimes referred to as the "empty voting" amendments to the Delaware General Corporation Law will become effective.

Professor Hu teaches subjects such as corporate law and securities regulation. He has also taught them at Harvard Law School, where he was the Bruce W. Nichols Visiting Professor of Law for the 1997-98 academic year. He was elected to the American Law Institute in 1991, was elected chair of the Association of American Law Schools' Business Associations Section for 1996, and was appointed to the Legal Advisory Board of the National Association of Securities Dealers (now "Financial Industry Regulatory Authority" or "FINRA") in 2000, the NASD's e-Brokerage Committee in 2001, the NASD's Market Regulation Committee in 2006, and the NASDAQ Market Regulation Committee in 2007. In May 2007, he was appointed to the Editorial Board of the Oxford University Press's Capital Markets Law Journal. In September 2008, he was elected to the Board of Trustees of the Center for American and International Law. He has testified before Congress on the regulation of over-the-counter derivatives, on the role of credit default swaps in our financial crisis, on the New York Stock Exchange's going public, and on the collapse of Long Term Capital Management. He has also testified before the SEC on cash-settled equity swaps and 13D disclosure. Professor Hu holds a B.S. (Molecular Biophysics and Biochemistry), M.A. (Economics), and J.D., all from Yale.

Sample Writings and Presentations: Henry T. C. Hu, Misunderstood Derivatives: The Causes of Informational Failure and the Promise of Regulatory Incrementalism, 102 Yale Law Journal 1457-1513 (1993); Henry T. C. Hu and Jay Lawrence Westbrook, Abolition of the Corporate Duty to Creditors, 107 Columbia Law Review 1321-1403 (2007), http://ssrn.com/abstract=977582; Henry T. C. Hu and Bernard Black, Equity and Debt Decoupling and Empty Voting II: Importance and Extensions, 156 University of Pennsylvania Law Review 625-739 (2008), http://ssrn.com/abstract=1030721; Darrell Duffie and Henry T. C. Hu, Competing for a Share of Global Derivatives Markets: Trends and Policy Choices for the United States, a draft at http://ssrn.com/abstract=1140869 (2008); Henry T. C. Hu and Bernard Black, Debt, Equity, and Hybrid Decoupling: Governance and Systemic Risk Implications, 14 European Financial Management 663-709 (2008), a draft at http://ssrn.com/abstract=1084075; Henry T. C. Hu, 'Empty Creditors' and the Crisis - How Goldman's $7 billion was not 'material', Wall Street Journal, April 10, 2009, at A13, online version at http://online.wsj.com/article/SB123933166470307811.html; "Financial Innovation and International Financial Stability" (May 6, 2008 broadcast to the World Bank's Conference on "Secured Transactions and Insolvency"): http://streaming3.worldbank.org/asxgen/LEG/253529/253529.wmv (Copyright (c) 2008 by Henry T. C. Hu. All rights reserved.); "Models and Mayhem: The Current Financial Crisis" (Sept. 29, 2008): http://realaudio.cc.utexas.edu:8080/asxgen/law/depts/media/Reels/EconomicCrisis.wmv.