In areas of complexity, people often rely on heuristics — by which we broadly mean simplifications of reality that allow us to make decisions in spite of our limited ability to process information. When this reliance becomes routine and widespread within a community, it can develop into a...

To open an international conference on “Rethinking Financial Markets,” this address seeks to frame that inquiry from the perspectives of scholars in the fields of law, economics, finance, and accounting. In attempting to identify what it is about financial markets that is worth rethinking,...

This essay, which is based in part on the keynote speech I delivered in October at the European Central Bank conference on regulation of financial services, examines how the law can help to control financial chaos. The essay argues that any regulatory framework for achieving that goal will be...

In Re: Defining Securitization, Professor Jonathan Lipson attempts to define a “true” securitization transaction. My article engages Lipson's, exploring how securitization should be legally defined. As a starting point, even a normative approach to defining a financial concept should be...

Although shadow banking is said to be huge, estimated at over $60 trillion, it is not well defined. This short and accessible paper attempts to define shadow banking by identifying its overall scope and its basic characteristics. Based on the definition derived, the paper also conceptually...

In this Lecture, I examine how complex securitization transactions may have created a “protection gap,” the conundrum that transaction parties may be unable to purchase or might not want to pay the price for full protection. As a result, they sometimes choose or are forced to assume the good...

We briefly introduce the financial crisis and the role played by mortgage-backed securities. Then we describe the controversy at issue: whether, in order to own and enforce the mortgage loans backing those securities, a special-purpose vehicle “purchasing” mortgage loans must take physical...

This accessible analysis of systemic risk regulation was delivered as the keynote speech at an October 20, 2011 European Central Bank conference on regulation of financial services. Many regulatory responses, like the Dodd-Frank Act in the United States, consist largely of politically motivated...

States increasingly are raising financing indirectly through special-purpose entities (SPEs), variously referred to as authorities, special authorities, or public authorities. Notwithstanding their long history and increasingly widespread use, relatively little is known or has been written about...

The recent financial woes of Greece, Ireland, Portugal, and other nations have reinvigorated the debate over whether to bail out defaulting countries or, instead, restructure their debt. Bailouts are expensive, both for residents of the nation being bailed out and for parties providing the...