Henry T. C. Hu
- Allan Shivers Chair in the Law of Banking and Finance
- JD Yale
- MA Yale
- BS Yale
Areas of Specialty
Professor Henry T. C. Hu holds the Allan Shivers Chair in the Law of Banking and Finance at the University of Texas Law School. Hu is best known for his writings and public service relating to the law and economics of capital markets, corporate governance, and systemic risk, especially as to the corporate objective, disclosure, financial innovation, financial institutions, mutual funds, retirement, and risk management. The writings have appeared in law reviews (e.g., Columbia Law Review, University of Pennsylvania Law Review, and Yale Law Journal), finance and specialist journals (e.g., Annual Review of Financial Economics, European Financial Management, and Risk), and newspapers (e.g., Financial Times, New York Times, and Wall Street Journal). A 1989 article showed how financial innovation would undermine the 1988 Basel Accord on bank capital adequacy, the pioneering international effort to address systemic risk. A 1993 article was the first work to show how cognitive biases, compensation structures, the nature of financial modeling and science, and other factors could cause “sophisticated” financial institutions to take excessive risks and make mistakes as to derivatives. In recognition of a 1995 article on corporate risk management and a new conceptual framework for the corporate objective, an exchange-traded index derivative introduced in 1996 was assigned the ticker symbol of "HUI”. Today, the “HUI” (NYSE Arca Gold BUGS Index) lives on as one of the world’s two leading indexes for gold mining stocks. A series of sole- and lead-authored articles in 2006-2009 offered the first systematic analysis of “decoupling,” a derivatives-related phenomenon undermining the foundational mechanisms of corporate and debt governance. These articles developed an analytical framework and coined terms (such as “empty voter” and “empty creditor”) now used worldwide by academics, bankers, corporate executives, hedge funds, judges, legislators, and regulators. The decoupling research was featured in a lead front-page story in the Wall Street Journal and stories in the Economist, the Financial Times, and the New York Times. Articles in 2012 and 2014 offer a fundamental rethinking of the classic approach to public disclosure relied on by the Securities and Exchange Commission (SEC) and other regulators, show the approach’s inadequacies in conveying the complex risks associated with certain financial innovations (including certain asset-backed securities and derivatives) and with many “too big to fail” banks. As a predicate for reform, the articles offer a new conceptual framework for “information.” The 2014 article is also the first work to systematically analyze the new morphology of mandatory public information -- a morphology that, in the case of major banks, now spans two parallel regulatory universes with divergent ends and means. Hu received the Massey Prize for Research in Law, Innovation, and Capital Markets for his scholarly body of work, as recognized at an international symposium in honor of the prize on September 26, 2014.
As for public service, Hu served as the inaugural Director of the SEC's Division of Risk, Strategy, and Financial Innovation (2009-2011) (now called the Division of Economic and Risk Analysis). The first new Division in 37 years, the SEC’s “think tank” was created to provide sophisticated, interdisciplinary analysis across the entire spectrum of SEC activities. The Division also worked extensively on matters relating to the enactment and implementation of the 2010 Dodd-Frank Act, the statute that, among other things, brought the then $450 trillion OTC derivatives market into the regulatory fold. See, e.g., (1) Kara Scannell, At SEC, Scholar Who Saw It Coming, Wall Street Journal, Jan. 25, 2010, at page C1; and (2) CNBC's "Squawk Box" - Feb. 23, 2011 (as the "guest host"): Fmr. SEC 'Risk Czar' Speaks Out, http://www.nbcnews.com/video/cnbc/41733267. He has been chair of the Business Associations Section of the Association of American Law Schools and a member of the Legal Advisory Board of the NASD (now FINRA), the NASD and NASDAQ Market Regulation Committees, and the Board of Trustees of the Center for American and International Law. He is on the Editorial Board of Oxford University Press’s Capital Markets Law Journal. In 2010, the National Association of Corporate Directors named him as one of the 100 most influential people in corporate governance (“Directorship 100”). Hu has given many talks worldwide at major universities and at a wide range of non-academic venues. He has testified before Congress as an academic, and on behalf of the SEC on landmark derivatives legislation. He has consulted for U.S. and non-U.S. law firms and governmental authorities on seminal matters.
Hu teaches corporate law, modern finance and governance, 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 holds a B.S. (Molecular Biophysics and Biochemistry), M.A. (Economics), and J.D., all from Yale. Sample Writings: 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); 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); Darrell Duffie and Henry T. C. Hu, Competing for a Share of Global Derivatives Markets: Trends and Policy Choices for the United States, 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); Henry T. C. Hu, 'Empty Creditors' and the Crisis--How Goldman's $7 billion was 'not material', Wall Street Journal, Apr. 10, 2009, at A13; Henry T. C. Hu and Terrance Odean, Paying for Old Age, New York Times, Feb. 26, 2011, at A19; Henry T. C. Hu, Too Complex to Depict? Innovation, "Pure Information," and the SEC Disclosure Paradigm, 90 Texas Law Review 1601-1715 (2012); Henry T. C. Hu, Efficient Markets and the Law: A Predictable Past and an Uncertain Future, 4 Annual Review of Financial Economics 179-214 (2012); ; Henry T. C. Hu, Disclosure Universes and Modes of Information: Banks, Innovation, and Divergent Regulatory Quests, 31 Yale Journal on Regulation 565-666 (2014).
- Financial Innovation and Governance Mechanisms: The Evolution of Decoupling and Transparency [Symposium: Massey Prize for Research in Law, Innovation, and Capital Markets], 70 Business Lawyer 347 (2015). Available at <http://ssrn.com/abstract=2588052>.
- Disclosure Universes and Modes of Information: Banks, Innovation, and Divergent Regulatory Quests, 31 Yale Journal on Regulation 565 (2014). Available at <http://ssrn.com/abstract=2442092 > [discussed in Gretchen Morgenson, The Week that Shook the Fed, New York Times, November 23, 2014, Business Section, at 1, web version available at <http://www.nytimes.com/2014/11/23/business/the-week-that-shook-the-fed.html?_r=0>].
- Systemic Risk and Financial Innovation: Towards a “Unified” Approach, in Quantifying Systemic Risk at 11 (Joseph G. Haubrich & Andrew W. Lo eds., 2013).