Dubious legal foundations of modern finance?

I have been reading a 2008 paper by Kenneth C. Kettering (“Securitization and Its Discontents: the Dynamics of Financial Product Development”) arguing that securitization is built on dubious legal foundations – specifically there are possible conflicts with aspects of fraudulent transfer law. Kettering argues that securitization is an example of a financial product that has become so widely used that it cannot be permitted to fail, notwithstanding its dubious legal foundations.

I am not a lawyer (and Kettering’s paper is over 150 pages long) and therefore I am unable to comment on the legal validity of his claims. But, I also recall reading Annelise Riles’s book Collateral Knowledge: Legal Reasoning in the Global Financial Markets (University of Chicago Press, 2011), which makes somewhat similar claims. But her ethnographic study was focused on Japan, and when I read that book, I had assumed that the problems were specific to that country.

Posted at 9:55 pm IST on Sun, 14 Jul 2013         permanent link

Categories: bond markets, derivatives, law

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