SOMETHING FOR NOTHING

A leading financial economist attempts to counterbalance “the impression that modern finance is at best ‘ethically challenged’ or at worst fatally flawed,” a perception bolstered by the “constant barrage of financial scandals.”

This is no apologia for the current state of market finance. O’Hara (Finance/Johnson Graduate School of Management/Cornell Univ.; Market Microstructure Theory, 1995, etc.), whose qualifications and contributions are recognized in the world of finance as well as academia, is concerned with exploring the gray areas between an ethical approach to financial transactions and behavior sanctioned by law. Identifying where such lines are drawn opens the door to a provocative and stimulating discussion of the kinds of ambiguous situations that arise almost daily in the financial sector, as well as the economy at large. Are there different kinds of harm caused, she asks pointedly, by acting on something or not acting on it? Among the author’s illustrative examples are Goldman Sachs’ conduct in a series of transactions in the early 2000s that helped Greece qualify for entry in the European Union by making it appear as if its government did not carry so much debt, as well as the company’s notorious bets against real estate finance. O’Hara investigates a host of complications that can surface in transactions, including one party’s obligations to inform another and the counter-party’s duty to exert due diligence on its own behalf. This fine-grained attention to detail requires a familiarity with both recent developments in the financial world and an acquaintance with major schools of ethics. Regarding the former, the author provides an overview of how synthetic products are created and proliferate; regarding the latter, a discussion of different approaches helps support her discussion. She also looks at controversial developments in new algorithmic technology.

A clearly presented book that effectively “reduce[s] the confusion surrounding financial activities.”