Then a member of the Law School’s governing faculty and an internationally-known administrative law scholar, Baxter says he took the project reluctantly, having found his banking class during his student days “mind-numbing.” As he interviewed officials at U.S. banking agencies, however, he saw a significant economic crisis looming, one that soon came to be known as the “savings and loan” or “thrift” crisis.
“I was going around talking to people at the Federal Deposit Insurance Corporation and the ‘Fed’ and Federal Savings and Loan Insurance Corporation and saying, ‘According to my math, the exposure of the federal government in terms of insured deposits is so many million dollars, but the fund only has this much money in it. What’s going to happen?’ And they all shrugged their shoulders,” recalls Baxter.
While even his Duke colleagues at the time were skeptical of his predictions of a “huge crisis” on the horizon — more than 740 savings and loan associations eventually failed — he was able to use his insights as the basis for cutting-edge courses and scholarship in the area of U.S. and transnational banking regulation. He spent a subsequent summer working for the Senate Banking Committee, helping write key legislation passed in the aftermath of the S & L crisis.
Detour from academia yields deep experience in business, financial sector
Having cemented his interest in banking regulation and the emerging field of derivatives, Baxter decided to experience the business side of the financial sector first-hand. He joined Charlotte, N.C.-based Wachovia Bank in 1995 where he held a number of senior positions over more than a decade, and then worked as an independent business consultant. He rejoined the faculty as a visiting professor of the practice of law earlier this year to teach courses and establish programs in regulatory modernization just as another — bigger — financial crisis was exploding.
“I've now made a promise never to endure a financial crisis without Lawrence being in residence — it’s the only way to fully understand what is happening and what the choices entail,” says James Cox, the Brainerd Currie Professor of Law and an expert in corporate and securities law. “During his earlier tenure at Duke, he was very much in the midst of the thrift crisis and was then a master of the intersections of regulatory theory and the crisis then gripping the economy. Lawrence is back, and the crisis has grown exponentially, but so has his breadth of vision and insights into the arcane workings of the U.S. banking system.”
At Wachovia Bank, Baxter served first as special counsel for strategic development, reporting to the chief financial officer on strategic legal decisions, such as those relating to the deregulation of interstate banking. Then as one of Wachovia’s corporate executive vice presidents, Baxter founded its Emerging Businesses and Insurance Group and eBusiness Group — at a time when online banking was in its infancy — and later served as Wachovia Corporation’s chief eCommerce officer.
Since leaving Wachovia in 2006, Baxter has served as a consultant and adviser to members of the online security industry and various Internet startup businesses in the care-giving, entertainment, social networking, and recruiting sectors. As the board chairman of Charlotte’s McColl Center for Visual Art during that period, he helped establish the center’s highly successful Innovation Institute, where executives learn creative approaches to corporate problem-solving.
Building Wachovia’s online banking platforms gave him in-depth knowledge of the business as well as the legal issues involved in delivery of services based on technology platforms, Baxter says, as well as the costs of delivery. “It gave me much more respect for what the costs of banking reforms being advocated now really are.”
An administrative law scholar comes full circle
By the time he left the academy for the financial sector, Baxter had established himself as a leading legal scholar of administrative law, domestic and global banking regulation, and comparative law, both in the United States and in his native South Africa. While on faculty at the University of Natal, where he held tenure from 1978 to 1984, he effectively re-shaped South African administrative law with a treatise that gave lawyers and judges novel legal avenues against apartheid-era government action.
“That book was, and still is, the leading textbook on administrative law in South Africa, and it's an outstanding work on the subject in general,” notes Donald Horowitz, the James B. Duke Professor of Law and Political Science.
Baxter is quick to credit inspiration for his ground-breaking work to mentors at Cambridge “who were very influential in encouraging British judges to be bold in striking down administrative action in England,” and to a legal giant of the anti-apartheid struggle, John Dugard, who was a visiting scholar at Duke Law during the 2008-09 academic year. “At a conference, [Dugard] suggested that we should mount court challenges to the validity of the homelands the government had created, based on a provision of the South African constitution that said the borders of the provinces could not be changed without their consent,” recalls Baxter. “I naively said that it couldn’t be done. And later, John said to me, ‘Lawrence, if you never try to use the legal process, you may as well give up.’
“[That] was a huge ‘aha’ moment and attitude adjustment. I realized that it was defeatist to take the view that I had, and it changed my whole outlook. So for me, John made the connection between the importance for human rights and administrative law.”
Rethinking federal regulation
Reuniting with Dugard added to Baxter’s delight at rejoining the Duke Law faculty in the spring 2009 semester, an overall experience he calls “a rich, intellectual homecoming.”
Observing that his time in the boardroom has enabled him to “see through a lot of the bull about regulatory reform” coming from both bankers and policymakers, Baxter is sharing his insights with students in such courses as Bank Regulation in the Post-crash Economy and Rethinking Federal Regulation, which he will be teaching with Cox in the Duke in D.C. program during the fall 2009 semester.
“We will review the history of regulation in the 20th century and the deregulatory era, and examine some of the high-profile elements of regulatory dysfunction and what the new fabric of regulation might look like going forward,” Baxter explains. “We think there will be a shift across the whole landscape.” Baxter and Cox have arranged related semester-long externships for students at the Securities and Exchange Commission, the Public Company Accounting Oversight Board, the Institute of International Finance, and the House Financial Services and Senate Banking Committees, among others.
Baxter, who is addressing the international side of bank regulation as the Baker & McKenzie Bond University Fellow in Australia this summer, also is contributing to the public dialogue through frequent media commentary and the organization of a series of panel discussions focused on charting the emerging framework of public policy and regulation; two in the spring 2009 semester examined bank nationalization and systemic-risk regulation.
“We’re not going to throw the market out; we’re not going to go back to command and control regulation just by itself. It’s going to be some sort of balanced model and will involve a period of a few years of working out what that means,” says Baxter.