• M Konrad Borowicz

Who wants to be a macro lawyer?

LinkedIn will occasionally send me an email with job picks tailored to my profile. Recently, one grabbed my attention—Barclays is looking for a “macro lawyer.” Here’s the ad:

As a Barclays Macro Lawyer you will provide legal support and legal and reputational risk management to the Macro (Rates and FX) business units in EME. You will be responsible for legal coverage for the Macro businesses (and associated workstreams) and you will manage and co-ordinate interactions with other Markets lawyers / product expects (as applicable) for the purposes of leveraging their product experience and expertise.

I posted about this ad on Twitter. Someone who worked in a similar capacity suggested this was just a position for a regulatory lawyer dealing with currency derivatives. Barclays recently combined its European rates and currency business into a new “Macro Hedging” unit, so it made sense to call the legal role at this unit a Macro Legal role.

But should the term ‘Macro Lawyer’ be confined to regulatory lawyers dealing with currency derivatives? Or can we think of Barclays’ ad as a harbinger of a growing demand for Macro Lawyers? The way banks think about their business affects how their law firms think about theirs. In the future, I would not be surprised to see more LinkedIn ads for Regulatory Lawyers dealing with currency derivatives replaced with ads for Macro Lawyers. But then, I do not think that’s likely.

Here, I am more interested in whether it makes sense to use the label to refer to a broader group of lawyers? Who would that cover? One way to answer this question is to say who the label would not apply to – let’s call them Micro Lawyers. Micro Lawyers are lawyers who would benefit from elementary knowledge of microeconomics in their work. For example, antitrust lawyers are Micro Lawyers! You cannot do antitrust law without an elementary understanding of microeconomics.

Transactional lawyers are micro lawyers, too, even though they probably do not think about themselves as such. Years ago, Ronald Gilson and Rainer Kraakman called lawyers “transaction cost engineers.” It’s a good term for Micro Lawyers! They engineer transaction costs when they advise their clients on how to structure their business. Tax optimization would be part of transaction cost engineering. Lawyers also engineer transaction costs by developing and working with standardized contracts. A regulatory lawyer dealing with currency derivatives will rely on standardized contracts, such as the ISDA Master Agreement. To my mind, such a lawyer is a Micro Lawyer. She’s a micro lawyer in the sense that the knowledge of macroeconomics would not help her that much in her work!

But then, there are some lawyers for whom it would be helpful to have such knowledge. I will refer to such lawyers as ‘Macro Lawyers.’ An excellent example of a lawyer who would benefit from a good knowledge of macroeconomics is… Christine Lagarde? She’s a lawyer! She was the managing partner at Baker McKenzie in Paris before becoming the Managing Director of the IMF. Now she is the president of the European Central Bank.

How about Jerome Powell, the chairman of the Board of the Federal Reserve? People know about his investment banking career, but Powell is a lawyer by training, obtained his J.D. from Georgetown and clerked for a federal judge in the Second Circuit. He later worked at Davis Polk and the Treasury under Nicholas Brady, the author of the famous Brady plan of debt-reduction for developing countries. Between 2010 and 2012, Powell was also a visiting scholar at the Bipartisan Policy Center, a think tank in Washington, D.C., where he worked on getting Congress to raise the debt ceiling during the debt-ceiling crisis of 2011. This all sounds very macro, does it not?

Sure, Lagarde and Powell are outliers – few lawyers will end up having such prolific careers in macro. But less prolific macro careers are also possible! I would argue that all legal practitioners that have something to do with money and credit should be thought of as macro lawyers. This would include lawyers involved in central banking, macroprudential supervision, sovereign debt and international trade and capital flows. Typically, lawyers working in those areas, at institutions such as the ECB, the Fed, the IMF, WTO tend to perform legal tasks isolated from policy, but that is a mistake? Macroeconomic policymakers would benefit tremendously from a better understanding of the institutional structure of the financial system and the economy. Lawyers are uniquely equipped to convey such knowledge to them.

Onur Özgöde, a sociologist studying finance, recently made an interesting point on twitter, noting

Nobody saw 2008 coming bc our governing institutions believed there was no need to understanding the institutional structure of the financial system on which econ depended. One Fed economist told me he wanted to study the mortgage market in 06 but wasn’t allowed.

I think this is exactly right, even though things changed a little after 2008. The debate about repo and derivatives safe harbors, which bankruptcy lawyers largely initiated, is an example of Macro Lawyers' potential influence on macroeconomic policymakers. The debate was among the rare instances in which central bank economists showed an interest in the law even though the debate never translated into meaningful reforms.

The research conducted at the IMF’s Monetary and FX division under the directorship of Peter Stella is another excellent example. Stella gave the green light to several economic researchers to focus their work on things like collateral. The work by Manmohan Singh that came out of this mandate is cutting edge and underappreciated. I highly recommend it.

The examples of macroeconomists interested in the law are few, but examples of lawyers interested in macroeconomics are many. Suffices to mention the pioneering work on law and macroeconomics done by Yair Listokin, the scholarly contributions of Morgan Ricks, Robert Hockett, Anna Gelpern, Rohan Grey, Lev Manad and so many others, which, collectively, are indicative of a growing academic recognition of the utility (sic!) of thinking about the law like a macroeconomist (of sorts).

Law students also benefit from exposure to macroeconomic theories (of various kinds). Katharina Pistor, professor at Columbia Law School, perhaps the leading macro lawyer of our time, made that point nicely in her recent provocative interview with my local newspaper, De Groene Amsterdamer (in Dutch). Pistor observes that in contemporary transactional and regulatory practice in her area of interest, finance, the lawyer’s role has increasingly become that of insulating investors from liability, a quintessential microeconomic consideration. No one in transactional or regulatory practice is concerned with the macroeconomic consequences of overleveraged households.

Of course, it would be naïve to think that lawyers active in transactional or even regulatory practice could somehow, through their knowledge of macroeconomics, bring macroeconomic considerations into the view of the parties involved. At the end of the day, we should not particularly care about who staffs finance deals or, for that matter, the legal desk of the Macro Hedging division at Barclays. But we should not be indifferent to the macroeconomic competencies of lawyers active in policymaking, regulation, advocacy, and judiciary.

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