We’re now in the final countdown towards publication of my forthcoming book, Collateral Knowledge: Legal Reasoning in the Global Financial Markets. My publisher just unveiled the cover and I am really honored to have three people whose work I respect tremendously–Howell Jackson at Harvard Law, Bruce Carruthers at Northwestern’s Sociology department and Bill Maurer at UC Irvine’s Law School and Anthropology Department–saying some really nice things about the project on the back cover. The book can now be pre-ordered from Amazon and from the University of Chicago Press.
Someone recently asked me to explain why I picked this title for a book about private global governance. The book takes as its motif the workings of collateral in the financial markets. Participants in the global derivatives markets routinely post collateral with one another as assurance that they will make good on their promises before they trade. The regime of collateral maintenance and collateral calls proved surprisingly robust during the financial crisis, and tweaking the quantities and methods of accounting for collateral remains one of the principal policy proposals for financial regulation going forward.
I call the book Collateral Knowledge because I am interested in all the knowledge work that goes on behind the scenes to make collateral do its job–the computers, the documents, the legal arguments, the industry committees and much more. I argue that all this activity does far more work than first meets the eye. I go so far as to claim that it amounts to a kind of “private constitution”–a set of templates for action and institutional relationships that constrain market participants and govern how they act in ordinary times and in moments of crisis.
But I am really interested in collateral as one example of the role of legal expertise in financial markets. After all, collateral is basically a species of property law, and its management involves teams of legal experts around the world, from bureaucrats to professors to paralegals and practicing lawyers. I argue that law is “collateral knowledge” in the sense that it is often treated as something on the sidelines, under the radar screen, “collateral” to the main action of market transactions. And yet just like collateral in the financial markets, legal expertise turns out to play a very important role in market governance. Understanding how lawyers think–what kinds of problems they see, what kinds of solutions they imagine for their problems, how they work together, how they work with other market players, and how they interpret and react to regulatory efforts, helps us to understand a great deal that goes unnoticed about market governance (and its limitations as currently imagined).
And of course collateral knowledge is also a play on the concept of collateral damage–the notion that there are unintended but often drastic consequences to certain ways of thinking and doing things. Thinking about legal practice in global market governance helps us to think in fresh ways about why so much has gone wrong and what options are available for reform.