Towards a Legal Theory of Finance
AbstractThis paper develops the building blocks for a legal theory of finance. LTF holds that financial markets are legally constructed and as such occupy an essentially hybrid place between state and market, public and private. At the same time, financial markets exhibit dynamics that frequently put them in direct tension with commitments enshrined in law or contracts. This is the case especially in times of financial crises when the full enforcement of legal commitments would result in the self-destruction of the financial system. This law-finance paradox tends to be resolved by suspending the full force of law where the survival of the system is at stake; that is, at its core. Here, power becomes salient. This helps explain why finance is concentrated around ultimate lenders of last resort and why regulating finance’s core has become so elusive. It also holds lessons for future reforms.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 9235.
Date of creation: Nov 2012
Date of revision:
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Find related papers by JEL classification:
- F5 - International Economics - - International Relations, National Security, and International Political Economy
- G01 - Financial Economics - - General - - - Financial Crises
- G2 - Financial Economics - - Financial Institutions and Services
- K0 - Law and Economics - - General
- K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
- N20 - Economic History - - Financial Markets and Institutions - - - General, International, or Comparative
- P1 - Economic Systems - - Capitalist Systems
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-12-22 (All new papers)
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