November 15, 2009
The Role of Boredom in Financial Crises
Posted by Erik Gerding

Many of you won't read this post until Monday morning, which is the ideal time to consider the role that boredom may play in financial crises.

Consider asset-backed securities.  Many transactional lawyers considered securitization work something to avoid at all cost in their careers.  Why?  In part, because it was extremely technical and involved math.

How many of you with practice experience were shocked that these instruments now appear at the heart of the crisis?

Consider the role that risk management based on complex mathematical models also played in the crisis.  Unless you are like me, not particularly sexy stuff.

Now recall what Enron was all about -- off-balance sheet securitizations and accounting rules.

I tell my students that there is a lot of money to be made if you are a transactional lawyer who is not afraid of math and understands some finance and accounting.  On the flip side, if you are scared of math, someone will take your lunch money in a negotiation and you won't even realize it.  This goes for litigators and settlement agreements too.

Moreover, this lesson on technical expertise applies to regulators and scholars too.  Shying away from the technical and "boring" stuff can have grave consequences.

Financial Crisis, Law Schools/Lawyering, Legal Scholarship | Bookmark

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