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April 2010





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American University, WCL Research Paper 10-22Abstract:This short essay addresses a worry sometimes at the back of the minds of financial lawyers and law-and-finance scholars seeking to intervene in the debate over financial regulation reform in the wake of the financial crisis of 2007-09. As lawyers and law professors, what - if anything - do we have to contribute to the debate? Are the fundamental questions of the financial crisis not economic in a professional and disciplinary sense? Questions that require formal disciplinary skills and training in economics in order to be able formulate positions on the fundamental issues, in which the skills of the lawyer and law professor are, at most, those of scribe seeking clearly to write down policy positions necessarily reached elsewhere? Framed in this way, these questions aim gently to provoke a bit, and exaggerate a bit, in order to ask the still-sensible question: what, if any, is the comparative advantage of lawyers and law professors in arguments over financial regulation reform?This essay began as a talk to law students, and it remains an informal, discursive, and meditative consideration of professional and disciplinary roles. It seeks in a very short space to identify several areas in which lawyers and law professors bring particular insights to the regulatory table. They include not just the ability to read closely and formulate complicated ideas in words that form statutes and regulations - and a professional ability to see unintended consequences in the form of words - but also a particular disciplinary appreciation in the law for the "thick" relationships of agency, fiduciary, loyalty, and care that bind together institutions far more than the simplification of "nexus of contracts" can capture.Moreover, regarding financial markets and instruments, lawyers have a better appreciation than other disciplines of the ways in which financial instruments used in markets as though they were economic equivalents are not actually legal equivalents, if one reads, so to speak, the fine print - fine print that matters particularly when their equivalence is challenged as a matter, unsurprisingly, of law. Additionally, lawyers have a greater sensitivity to the contingencies of processes such as bankruptcy - even when "rule-base" - and the uncertainties that, on efficient market theory, are priced into financial instruments, but - at least the lawyers will wonder - how so and on what actual, rational valuation method, if, after all, the lawyer-experts are themselves are uncertain.

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