January 25, 2012
by Annelise Riles

What is the key debate in financial regulation now?

Most of the chatter about financial regulation in the blogosphere focuses on the issues of the moment. But what are the big questions? What does all the debate about the detail add up to?

To me, the big question is this: What comes after the collapse of the neoliberal consensus? What will be the prevailing common understanding of the proper relationship between governments and markets, and between actors in the market (financial entities, labor, enterprises, and yes, the academy?)

This question has so many dimensions, but it is the big challenge of our day, and most of the fights on the front page of the Financial Times–whether it is about disclosure policy at the Fed or what kind of collateral the ECB should accept–come down to versions of this Big Question.

Here are some possible subparts to this question:

-Is New Governance (peer review, self monitoring, naming and shaming, soft law etc) as now practiced at key international financial organizations such as the Financial Stability Board the answer?

-How do we balance democratic participation with the need for expertise? Can these things be “balanced”? What other models might we have of how democracy and expertise can coexist?

-What new forms of collaboration between the government and the market might be possible?

What do you think is the key question? What do you think about these questions?


January 18, 2012
by Annelise Riles

Broadening the methods for studying financial regulation

In my earlier post I discussed some ways we need to broaden the subject of financial
regulation.  Doing so will also require broadening the methods we use to study
financial markets.  It is exciting to see the proliferation of new methods and approaches to studying financial markets and their regulation in the past few years. Here are just a few thoughts about some ways to do this.
  • We need to begin from empirical realities, whatever those are, and not from existing legal categories. The fact is that the legal categories were produced in response to an earlier time in financial markets and bear increasingly little relationship to the reality of markets today. Yet we persist in teaching, researching and thinking about financial regulation as if, for example, insurance, banking and securities were separate fields.  But if we start with what people in the markets tell us, and what we can observe about regulatory problems on the ground, and reason inductively about regulatory issues, rather than deductively from existing legal categories, we will produce analyses that are much more relevant to problems now.
  • Beginning with empirical realities means doing empirical research–talking to people, observing behavior, gathering every possible kind of data about what is actually happening.  This is tough work. Wouldn’t it be nice if we could just stick to our law books! No such luck.
  • We need as many different methodologies and disciplinary approaches to observing these realities as possible.  Economic data, of course. But also historical research, ethnographic research, sociological studies, even new kinds of theory, from alternative economic models to anthropological theory of exchange to political theories of regulation.
  • If we accept the premise of my previous post that markets by their nature are always combining with new subjects-the environment, politics, international institutions and so on–then I have more bad news: we need to start bringing the insights of other fields of law, from environmental law to international institutions, to bear on financial regulatory questions.  For example how can we make sense of the current boom in energy derivatives if we don’t know anything at all about the energy industry and how it is regulated globally?  Or how can we think about what strategies for international financial regulation will work without engaging with the insights of international law and institutions?  Or how can we evaluate the question of how bonuses should be regulated without engaging with debates in labor and employment law and policy? This probably will require collaborating with colleagues with expertise in these fields.
  • But the good news is that we don’t need to do it all alone.  And this brings me to one fruitful avenue for research: collaboration. For too long, legal thinking has been a fairly lonely exercise. But one approach to doing all of the above might be to find new ways of working collaboratively with practitioners in the markets and in government.  Thinking together about theory and practice can produce kinds of insights and solutions that neither side could imagine alone.  Of course how to do this, when the temporality, the standards of evaluation, and the political pressures of our careers as thinkers in the academy or in government or in the market are so different is not easy. Working through these challenges is its own challenge for our field.

January 11, 2012
by Annelise Riles

The Contract as Machine

Yesterday I spoke about Collateral Knowledge at the Saint Louis University Law School.  One member of the audience, a former general counsel of a hedge fund with extensive experience with ISDA agreements, raised a great question:

Q: You talk about how ISDA agreements create a kind of settled system of private market governance outside the purview of the state. But there is so much that is undecided or in flux about ISDA agreement. All the key terms are in the attached schedules and other negotiable aspects of the agreement and those are left to the parties. So it is not nearly standardized enough.  (The implication of the question for the thesis of the book, then, was that private law beyond the state may be much less effective, or authoritative, than I suggest).

Great question. Here is my answer in a nutshell.

It is absolutely correct that, from the point of view of users of ISDA agreements such as this speaker, all the important stuff is in the schedules and other negotiable portions of the agreement. And that is the very intent of technologies like the master agreement–to draw users’ attention to certain questions, only.  In fact, I found that many users of ISDA master agreements don’t even know what the rest of the document says in much detail–they just focus on the parts that need to be filled out. This is why I describe the contract as a machine (something meant to be used) rather than a text (something meant to be read).

However, your point really just confirms the power of this technology! Because look what it has done–it has convinced you that the only really salient issues, the only important issues, are the ones it intends you to focus on.  But in fact there are many other potentially significant issues that are entirely determined by the boilerplate, and industry practice, effectuated through this document, is to treat those issues as entirely settled and noncontestable.  This is what Gramsci calls hegemony: when something is so much of a given, so generally accepted, that it is unthinkable as a potential source of conflict or contestation. Talk about a tremendous political achievement.

January 9, 2012
by Annelise Riles
1 Comment

Broadening the field of financial regulation

Stock DataThis morning I participated in a fantastic panel at the American Association of Law Schools organized by Anna Gelpern and Eric Gerding on the state of legal scholarship about financial institutions. The question the organizers asked is, what is the most pressing focus for the field today?
I argued that we need to significantly broaden the field–its subject, its methods, and the range of debates it is addressing at the moment.


In this post, I will focus on Broadening the Subject:
  • Research needs to become far more seriously comparative. Dodd Frank is not the only thing happening in the world, people!  Elsewhere, very different solutions, different models of market regulation are being developed–and indeed there are different views of what the key problems are.  American scholars pay lip service to the globalization of financial regulation but too often focus only on US and UK law and assume that issues elsewhere are either pretty much the same, or just behind the US and the UK in development. But the days of US and UK dominance are soon over.  The world is far more complicated and more interesting than this.
  • Research needs to become far more focused on international regulatory problems.  Most regulatory problems are now cross-jurisdictional in some sense or another.  This means that new international regulatory projects–from the Financial Stability Board to efforts to coordinate countries excluded from the Basel consensus–are increasingly important.  Yet how much do most scholars in the field of financial regulation know about international law and institutions? Too often we seem to be reinventing the wheel in that field, without taking advantage of the wealth of knowledge about what works and doesn’t work in international institutions in analogous fields. (Stay tuned for my forthcoming paper on this)
  • We need to pay more attention to forms of regulation outside the purview of traditional state institutions.  As I argue in Collateral Knowledge, most market governance is not state-based. It is initiated and conducted by private parties.  How does this work? When does it work and when does it not? How does it interact with state regulation?
  • We need to focus much more on the politics of market regulation–on the changing political climate in which financial regulation is being produced, the differences in this climate in different jurisdictions, and its impact on the policy options available to regulators, the culture/esprit de corps among regulators, the ability to recruit top talent to the bureaucracy, and indeed the zone of what regulators imagine as possible.  Just as internationalizing the field demands reaching out to international law scholars, politicizing the field means reaching out to political scientists and scholars of law and politics working in other domains of law.
  • We need to pay attention to the ways in which the field of finance is always expanding to include other subjects. For example, markets in energy products bring finance into conversation with environmental law and politics, and financial crises and environmental crises mutually influence each other in many ways.
Tomorrow I will take up how we might broaden the methods we use to study financial regulation and what debates deserve our central attention.
Skip to toolbar