Legal Documents as Means of Financial Abstraction: How Bankers’ Lawyers Constructed Swaps and Changed Finance

Finance rests on a process of abstraction, based on various material devices that have been studied by economic sociologists in recent years. The fact that many of those devices are legal in nature has not attracted much attention, even though financial instruments are typically embodied in legal do...

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Bibliographic Details
Published inArchives européennes de sociologie. European journal of sociology. Vol. 62; no. 2; pp. 309 - 335
Main Author Cornut St-Pierre, Pascale
Format Journal Article
LanguageEnglish
Published Cambridge, UK Cambridge University Press 01.08.2021
Subjects
Attorneys
Capitalism
Case studies
Contracts
Debt
Finance
Financial instruments
Fringes
Institutional investments
Interest rates
Legal documents
Markets
Positioning
Power
Regulated industries
Regulation
Securities markets
Social studies
Financial Derivatives’ Legal History
Financial Regulation and Categorization
Legal Work and Financial Innovation
Financialization
Law and Finance
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Summary:Finance rests on a process of abstraction, based on various material devices that have been studied by economic sociologists in recent years. The fact that many of those devices are legal in nature has not attracted much attention, even though financial instruments are typically embodied in legal documents. This paper argues that interactions involving legal documents shape both financial markets and their regulation, by specifying the contextual elements that will be deemed relevant in interpreting financial commitments. It takes as a case study the emergence of swaps since the 1980s. Through their work in standardizing, commenting, and litigating swaps contracts, bankers’ lawyers were able to recast obligations between banks and their clients in more abstract terms, discarding all references to specific business projects. Such abstraction simultaneously allowed the spectacular development of swaps markets, their positioning on the fringes of regulations, and the strengthening of bankers’ prerogatives against their clients.
ISSN:0003-9756
1474-0583
DOI:10.1017/S0003975621000084