will be attenuated. more generally, to the degree uninsured depositors or other bank creditors expect that they will be protected by the government in the event the bank encounters serious difficulties, those same features of market discipline will again be weakened. this, of course, is the problem of moral hazard associated with too - big - to - fail perceptions, whereby investors or counterparties are willing to extend credit at prices that do not fully reflect the risk associated with the bank. 2 the market discipline traditionally associated with the market for corporate control is also affected by banking regulation and supervision. mergers and acquisitions involving banking organizations are subject to review, and possible disapproval, on a broad range of grounds beyond the antitrust considerations relevant in all industries. these include an assessment of the adequacy of the financial resources of the firms, the “ competence, experience, and integrity ” of the officers and directors, and the impact of the acquisition on systemic risk. 3 moreover, of course, any firm that acquires a commercial bank must be a bank holding company, thereby subject to a range of activity restrictions and other regulatory requirements. there are very good prudential reasons for these constraints upon acquisitions of, and by, banking organizations. but, by screening out transactions that would result in unacceptable increases in risk, either to an institution or to the financial system as a whole, these provisions may in some cases unintentionally limit the salutary disciplining effect on boards and management of the market for corporate control. the third way in which the nature of financial activities and regulation affect the operation of key mechanisms of corporate governance is that the risks associated with financial intermediaries – especially those that are significantly leveraged and that engage in substantial maturity transformation – pose a particular challenge for corporate governance. all firms bear the risk that problems may unexpectedly arise because of, say, product flaws that were unknown to boards of directors and perhaps even senior management. but in the case of financial intermediaries, these problems can be incredibly fast - moving, including runs on funding that can quickly place the very survival of the firm in doubt. these risks have increased during the past 25 years, as many institutions have combined traditional lending activities with capital markets businesses that rely on other funding models. accordingly, for an argument that shareholders who might otherwise press for breakups of financial conglomerates are disincentivized from doing so for too - big - to - fail institutions, see mark j. roe ( 2014 )

or addressed a particular issue. and, of course, the courts would thereby be available as another route for managing the divergence between private and social interests in risk - taking. as i noted at the outset, there is a long history of actual or considered measures to alter the duties or liabilities of those with decisionmaking authority in the corporate governance of banks. a more contemporary variant on these ideas was offered a little over a decade ago by jon macey and maureen o ’ hara, who proposed expanded fiduciary duties for directors of insured banks, including giving bank creditors the right to sue for violations of these duties. 17 in a provocative recent paper, john armour and jeff gordon suggest that the duties of directors of systemically important financial institutions should be modified precisely because diversified shareholders have a strong interest in avoiding risk decisions by these institutions that increase systemic risk. 18 their analysis implies that the customary tension between regulatory and diversified shareholders ’ interests may be considerably mitigated in the case of systemically important firms whose failure could result in financial turbulence and consequent economic loss for the entire economy. a consideration of the merits of these or other such proposals is beyond the scope of my remarks today. obviously, any such changes in corporate law are beyond the authority of the federal reserve. i mention them in the hope and anticipation that corporate law scholars will continue to evaluate such ideas, since whatever one ’ s eventual conclusions on their desirability, the analytic process is sure to yield further insights into the key question of how best to respond to the points of divergence between shareholder and regulatory interests in risk - taking by large financial firms. conclusion in the wake of the financial crisis, the changes in finance, in financial regulation, and in the relationship among government agencies that carry out prudential regulation have created any number of opportunities for financial law scholars to collaborate with their colleagues in other disciplines – from administrative law to constitutional law to bankruptcy law. this collaboration is perhaps natural, since major shocks to the economy, and thus the country, have in the past occasioned legal changes whose implications reached far beyond the original area of reform. as i hope you can tell from my remarks today, i have already found the interaction between corporate and financial law scholarship to have been helpful in thinking through the policies that will shape a safer financial system. i look forward to the fruits of the collaborations encouraged by the event sponsored today. jonathan r. macey and maureen o ’ hara ( 2003 ), “ the corporate governance of