Toward a New Financial Architecture

Recent events have shown how flawed financial transactions can have a devastating impact on global economic welfare. The purpose of this article is to demonstrate, using municipal bond pricing and structuring models, that the way forward from the current financial crisis toward a more stable financial system is to establish a more “organic” financial architecture—that is, an architecture developed “from within outward in harmony with the conditions of its being.” The article describes the difference between innovation and creativity and demonstrates, using concrete examples, that within an organic financial architecture, structural performance is improved through creativity rather than innovation. The article also demonstrates how unthinking adherence to convention severely limits our ability to create efficient and functional financial structures.