Category: Book Reviews

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B Corps for Bankers

Claire Hill and Richard Painter’s new Better Bankers, Better Banks aims to find a way forward by looking backward – and by casting a few sidelong glances as well. It is valuable for what it has to say about the view in all directions.

Begin from where we are – the point from which Hill and Painter would like to see forward movement. Where we are now is a world in which, even seven years out from the crash of ’08, banking scandal is near boring in its ubiquity. From Libor in 2012 to Euribor, forex, commodity and precious metal cornering thereafter, the story of financial markets of late seems an unending parade of horribles.

How do we get out of this seeming cesspool? Here is where Hill and Painter look backward and sideways.

First let’s look back. Time was when ‘bankers’ – Hill and Painter employ the term broadly to cover all folk who hold ‘other folks’ money’ – invested not only our money, but their money too. By organizing as general partnerships whose partners were jointly and severally liable for losses, they kept, as the current idiom has it, ‘skin in the game.’ This of course aligned their interests with client and institutional interests – to some extent, anyway. (Names like ‘Jay Gould’ should remind us that ‘some extent’ wasn’t the ‘full extent.’) And so there were limits on how much by way of other folks’ money the bankers were likely to fritter away.

Now let’s look sideways. There appears to be growing consensus, in the face of such scandals as those just rehearsed, that our regulatory and law enforcement regimes’ penchant for penalizing banks rather than bankers just isn’t cutting it. Compared to the gains to be had from wrongful behavior unlikely to be caught, even five or twelve billion dollar settlements between banks and their regulators are chump change. Oughtn’t we, then, focus our efforts upon the human agents through whom the banks act? After all, five billion – or five years in jail – are more likely to pinch if you’re human.

Hill and Painter like what they see in both directions. They find limitations, however, in how effective the enforcement of finance-regulatory provisions can be. These, they believe, are just too easy to game – a fact that might partly account for regulators’ going after the banks rather than the bankers in the first place. Why not, then, take yet another sidelong glance in another direction – that of contemporary moves to simulate better regulation through private ordering? Are there not means, for example, of appealing to socially responsible investors by committing to operate as a socially responsible business – e.g., as a ‘B Corp’ or ‘Benefit Corp’?

Indeed there are, and though they do not discuss these new business forms, Hill and Painter valuably adapt, in effect, the idea behind them to financial firms. Herewith the authors’ novel suggestion to introduce a practice of what they call ‘Covenant Banking.’ The idea is for financial firms whose owners or managers are comfortable with the idea to undertake ‘skin in the game’ commitments on the part of their managers. Managers would voluntarily assume some liability for losses, thereby partly replicating the ancien regime of pre-corporate partnership banking. Investors could then choose between what kinds of institutions through which they invest – the more risk-averse perhaps working through covenant banks, the more risk-cavalier working through today’s more familiar casinoish firms.

It would be hard not to like this proposal. What’s not to like? Like recent proposals for Wall Street voluntarily to maintain ‘naughty lists‘ of bankers who have gotten themselves into trouble, it imposes nothing, yet offers something – the prospect of ‘better bankers,’ hence ‘better banks,’ for at least some investors. It simply expands the field of choice, and who in these times doesn’t like choice?

If I have any reservations about Hill and Painter’s proposal or their brief in its favor, they have to do with the prospect of some people’s possibly taking the authors to claim or to promise more than they actually intend.

To begin with, we should note that wrongs such as those alleged in connection with Libor, Euribor, forex, and commodity and precious metal cornering are not wrongs of excessive risk-taking. They are wrongs of sheer fraud and manipulation. It isn’t the case that ‘skin in the game’ on the part of the relevant fraudsters in these cases ‘would’ have helped; the ‘skin’ seems to have been at the core of the ‘game’ from the start, and was indeed part of the problem – the fraudsters profited precisely by illicitly betting their own money on what they controlled. Hill and Painter, then, should not be taken to be targeting this form of market abuse through their proposal.

A distinct but related point has to do with the lead-up, not to 2012 and after, but to 2008. It is still common to hear that year’s cataclysm blamed upon venal behavior or ‘excessive risk-taking’ by ‘bankers.’ And such behavior clearly occurred – it always does. But a very strong case can be made – I think I and others have made it – that the principal causes of 2008 were more radical than mere vice or recklessness on the part of some bankers. They are endemic to capitalism itself absent serious and sustained effort on the part of the polity to distribute capital’s returns – or capital itself – far more equitably than we’d managed before 1929 or between 1970 and 2008. ‘Better bankers’ would certainly be better than worse bankers; better still would be better distributions of that with which bankers bank.

Finally, there is a danger in underselling what proper law enforcement, adequately funded and staffed, can do where finance-regulation is concerned. When Wall Street contributes more to political campaigns than most other industries, when DOJ officials openly admit to having feared to prosecute bankers for fear of rattling markets, and when regulators like the CFTC and the SEC are chronically understaffed and underfunded, we should be skeptical of suggestions that ‘gameability’ of the rules is the sole – or even principal – reason for old fashioned law enforcement’s not having eradicated rulebreaking by financiers. Indeed, as Hill and Painter themselves note, a rule change at the NYSE in 1970 played a critical role in the move from partnership to incorporated form among Wall Street investment banks. If that is so, could a legal re-imposition of some variant of the old rule not itself make for ‘better bankers’?

None of these caveats should be taken as more than what they are – mere caveats. There is much, much to be learned from a reading of Hill and Painter, and much is quite plausibly promised by their Covenant Banking. And since, as before noted, their proposal is made in effect to the banks rather than the polity, it seems to be all upside, no down. Let, then, those bankers intrigued by the Hill/Painter proposal give it a go. One might even imagine some funds offering their services in A and B flavors, so to speak – in Covenant and Noncovenant forms. In such case consistently better performance by one kind over the other might in future foment a stampede to the winning kind, and with it a privately worked transformation.

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Better Bankers Symposium, June Carbone

Thanks to everyone who participated in the Better Bankers Symposium.

My two cents worth it that the current system does not just reward “greed,” it create a Gresham’s dynamic where those most motivated not just by self-interest, but a preference for short term financial rewards, drive out others who see their self-interest defined in other ways.  Market discipline may produce boom and bust cycles that put firms like Lehman Brothers out of existence, but the corrections of the market often either overcorrect (Akerlof’s references to lemons’ markets) or do so at very high cost (the financial crisis).  This is because greedy individuals (those motivated by short term gains) have managed to create an opaque system in which market responses kick in only after individuals have a chance to leave the companies they undermined, with their outsized individual bonuses intact.

Better Bankers thinks more creatively about how self-interest can be marshalled to police such activities before they get out of control.  It seeks to restore the identity of interests between bankers and banks.  It thus seeks to create a system in which self-interest includes interests broader than short term financial incentives, and in which private market mechanisms can become more effective.  The old joke is “how many economists does it take to change a lightbulb?  None, the market will do it if it needs to be done.”  Hill and Painter’s answer is that it requires a design and it requires the will to create the conditions where the more intelligent design is likely to be adopted because it advances the common good at the expense of individuals who would like to be able to continue to game the system.  Let’s hope their proposal finds fertile ground.
JUNE CARBONE
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The Arc of Covenant Banking: Hill & Painter’s Better Bankers, Better Banks

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University of Minnesota law professors Claire Hill and Richard Painter do a great service in their new book, Better Bankers, Better Banks, by focusing concretely on an issue that many have discussed but few have offered to change: how to align the incentives of bankers and banks.

They argue that “bankers [should] be personally liable from their own assets for some of their banks’ debts” for money owed due to insolvency, fines, or fraud-based liability. Thus, they propose formal, liability-creating contracts—which they call “covenants”—between banks and bankers: “Covenant banking operates directly on bankers’ monetary rewards” because, under their proposal, “highly paid bankers would bear some personal liability if their banks become insolvent, are fined by regulators, or are found liable in civil cases involving fraud. The liability would not be unlimited, but should potentially adversely affect the banker’s standard of living.”

The Hill/Painter proposal is valuable and interesting both in its own right, and for the harder questions that it raises.

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Better Bankers Book Symposium – Is the Problem Bankers, Rather Than Banks?  BY David Zaring

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I’d like to put Claire Hill’s and Richard Painter’s fine proposal in the context of how we think about the purpose of financial regulation more generally.  Specifically, how should we think about reforming the financial system to avoid the problem the financial crises? The question is one of the most central to regulation in general, and has been a preoccupation of policymakers ever since the last such crisis. Many look to forestall financial crises with institutional reform.  In the case of banking safety and soundness, that dictates regulation designed to strengthen the balance sheets of banks. Since 2010, American banks have been required to hold more money on hand so that they are ready for shocks, to limit their proprietary trading, to hive off their derivatives arms, and so on. Each of these requirements, of course, have been the subject of regulatory battles and industry pushback.  But all of them are about banks as institutions.

But what if the solution is not to change what banks do, but rather to change what bankers do?

Regulators have taken some steps in this direction recently. They are emphasizing the importance of ethical behavior in banks, set by a “tone at the top”, or unimpeachable conduct in the boardroom.  Regulators haven’t really defined what the tone is, or listed the ethical requirements they find to be important, but there has a been a change in perspective.  Banks are being scrutinized not merely as institutions with balance sheets, but as ones with cultures, and cultures but need improving.

 

Hill and Painter are interested in boardrooms too.  They have condemned the lack of ethics among bankers, but their solution is much less diffuse than the idea of imposing ethical standards and hoping for the best.  Hill and Painter argue that bankers should “be personally liable from their own assets for some of their banks’ debts” and “personally liable from several years of their past, present, and future compensation for some portion of fines and fraud-based judgments (including settlements) against the bank.”

The book is great, and the solutions are intriguing ones. As Hill and Painter observe, current compensation and contractual arrangements within banks lead those bankers to take lots and lots of risks. To change the culture in any bank, the incentives must change as well. Hill and Painter’s elegant solutions looks to incentives to instill a culture that would discourage excessive risk taking and illegal behavior and embrace the sort of behavior that we want to see from our bankers.

Will that lead to safer banks?  I worry about the instability inherent in financial intermediation – many financial crises have macroeconomic causes, rather than causes rooted in financial misconduct.  But there is financial misconduct as well, and if instability inheres in anything, you’d like to promote caution.  Hill and Painter’s solutions would certainly be a step in that direction.

DAVID ZARING

 

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Better Bankers Book Symposium: Forget “God’s Work,” Just Do your Clients’

If Oliver Stone made another Wall Street movie, he might include Goldman CEO Lloyd Blankfein’s remarkably tone-deaf quip about his bank doing “God’s Work”. This quote has come to represent just how out of touch and unscrupulous Wall Street has become. Talk like this is what made the modern pitchfork wielders excoriate the whole banking enterprise. Stephen Colbert, after repeating the quote called the bank Goldman Calf. Matt Taibbi called Goldman “the great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” Many people have demanded that bankers go to jail, disgorge their bonuses, and that banks should be broken up. It’s either Golden Calves or God’s work—greed is good or it is evil.

Hill and Painter’s Better Bankers, Better Markets comes in like a grownup to this squabble to describe banks not as vampire squids, but as a collection of people motivated by the same things that motivate you and me. Hill and Painter are not naïve nor do they sugarcoat the banks’ collective bad behavior. The first few chapters of the book thoroughly outline the misdeeds from the specific (LIBOR manipulations) to the general (putting lipstick on worthless assets). The book is valuable if only for the thorough and well-explained cataloguing of the ways in which banks as a collection of individual decision makers defrauded clients or otherwise engaged in unethical behavior.

Hill and Painter accept that bankers and shareholders are motivated by personal profit, they’re  just asking that they don’t “rip their clients’ eyeballs out.” This book is firmly grounded in reality of modern banking industry without excusing or soft pedaling the problematic behavior of those banks. And they are clear that there is a big problem. Hill and Painter explain the genesis as the investment banking world’s shift from the partnership structure to the shareholder structure. In other words, there is no skin in the game, they aren’t eating their own cooking, the incentives are all wrong. It seems to me that Hill and Painter are joining (though not explicitly) a growing chorus of critics who doubt that market discipline can properly reign in Wall Street excess.

While most other reform proposals focus on changing the banks’ incentives—making them smaller, higher capital, more skin in the game—Hill and Painter look to change the individual bankers’ incentives. They are realistic enough to not suggest that we go back to partnerships, but they want bankers to feel some obligation or duty to the firm and to their clients. Hill and Painter suggest that the best way to do this is through covenant banking: to impose both contractual obligations and fiduciary duties, make banking to be a professional enterprise like law or medicine—a career with ethical boundaries, codes, and consequences for violating those.

Hill and Painter’s proposals are both traditional in that they want banking to return to the days when bankers felt duty-bound to both the firm and their clients, but also forward-thinking in that it recognizes that current activity restrictions and bright line rules in banking can easily be averted and real reform happens only insofar as the bankers’ and the publics’ incentives are aligned. The strength of the book’s argument is that the authors are not suggesting radical change, rather a look back to what worked in the past and distill those lessons to meet the needs of the present. While the bankers of the past are not perfect, perhaps there is comfort in the fact they were never accused of being vampire squid.

 

 

 

 

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Essays of Warren Buffett (Fourth Edition)

The following is a review by Nick Murray of the new (fourth) edition of The Essays of Warren Buffett: Lessons for Corporate  America, which he kindly is allowing to be shared beyond the subscribers to his fine investment newsletter.   

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To mark the fiftieth anniversary of Berkshire Hathaway under the leadership of Warren Buffett, the redoubtable Lawrence Cunningham—in his own way, Buffett’s ablest biographer—has released a new fourth edition of his classic book The Essays of Warren Buffett: Lessons for Corporate America.
As with the earlier editions, it is something to be treasured by the evolved advisor, not merely in her role as a capital allocator but as a philosopher of the economy and even as a moral leader to clients.
In addition to a perceptive and nuanced understanding of Buffett’s annual letters, the genius of Professor Cunningham has been to edit the material thematically, so that we may find related observations down the years brought together. This is not merely a collection of Buffett’s Greatest Hits, but a systematic and rigorous examination of his important themes.
Nor does Professor Cunningham fail to honor his subject as a prose stylist, though this is by far Buffett’s least appreciated gift. In his own unaffected, colloquial, Midwestern style, Buffett at his best is an essayist on a par with Emerson and even Montaigne, and this quality shines through The Essays as it does nowhere else.
The enduring irony of Warren Buffett’s career as perhaps the greatest capital allocator who ever lived is that he remains at once the world’s most admired and least imitated investor. Professor Cunningham’s is thus a book to be read slowly over time—to be tasted and pondered by the advisor almost as a program of daily reflections. I cannot recommend it too highly.

A Review of The Black Box Society

I just learned of this very insightful and generous review of my book, by Raizel Liebler:

The Black Box Society: The Secret Algorithms that Control Money and Information (Harvard University Press 2015) is an important book, not only for those interested in privacy and data, but also anyone with larger concerns about the growing tension between transparency and trade secrets, and the deceptiveness of pulling information from the ostensibly objective “Big Data.” . . .

One of the most important aspects of The Black Box Society builds on the work of Siva Vaidhyanathan and others to write about how relying on the algorithms of search impact people’s lives. Through our inability to see how Google, Facebook, Twitter, and other companies display information, it makes it seem like these displays are in some way “objective.” But they are not. Between various stories about blocking pictures of breastfeeding moms, blocking links to competing sites, obscurity sources, and not creating tools to prevent harassment, companies are making choices. As Pasquale puts it: “at what point does a platform have to start taking responsibility for what its algorithms go, and how their results are used? These new technologies affect not only how we are understood, but also how we understand. Shouldn’t we know when they’re working for us, against us, or for unseen interests with undisclosed motives?”

I was honored to be mentioned on the TLF blog–a highly recommended venue! Here’s a list of some other reviews in English (I have yet to compile the ones in other languages, but was very happy to see the French edition get some attention earlier this Fall). And here’s an interesting take on one of those oft-black-boxed systems: Google Maps.

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Better Bankers, Better Banks

bbbbAnyone seeking a fresh and compelling assessment of global financial stability should consider the forthcoming book Better Bankers, Better Banks, due out later this month.  The simple central thesis is that banks fail because bankers fail and the logically inexorable prescription is covenant banking, meaning getting banker’s to assume personal liability for bank failures.  U. Minnesota business law professors Claire Hill and Richard Painter offer a work of elegant simplicity, as reflected in the book’s Table of Contents:

Part I: The Problem

1 Irresponsible Banking  

2 How Banking Became What It Is Today
3 Explaining Banker Behavior  

Part II: Solutions
4 Law and Its Limits
5 Covenant Banking
6 Responsible Banking

The sub-title suggests an intriguing twist on the normative thrust: “Promoting Good Business Through Contractual Commitment.”  I discussed the book and its themes with the authors on several occasions and read some draft chapters. I am now eager to devour the final.  My guess is the read will benefit not only policymakers and scholars but bankers as well.  Kudos to Claire and Richard.

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FAN 71 (First Amendment News) Just Released: 2nd ed. of Cogan’s “The Complete Bill of Rights” — 30 New Pages on History of Press & Assembly Clauses

This book is an invaluable resource for constitutional scholars, teachers, litigators, and judges alike. It collects and collates the basic texts necessary for informed interpretation of the Bill of Rights and gives them to researchers in a compact, comprehensive, and reliable form that is wonderfully organized for both quick scanning and sustained critical analysis. It makes previously difficult research tasks easy and opens new lines of thinking at a glance.– Anthony G. Amsterdam (2015)

41lkMJ+mUtL._SX348_BO1,204,203,200_The second edition of Professor Neil Cogan’s monumental The Complete Bill of Rights: The Drafts, Debates, Sources, & Origins (Oxford University Press) has just been released. Get out your wallet, for this book is well worth the $185.00 list price. Really!

Here is what Floyd Abrams said of the first edition: “For anyone interested in our Constitution, our history, or our political theory, this book is an intellectual treasure chest. It is more than legislative history. It is constitution-drafting in the raw — all the proposals and all the give-and-take (some of it disturbing) that resulted in the adoption of the Bill of Rights.” The historian Stanley Katz referred to it as “a major occasion in American publishing. . . . This is a triumph of careful and thoughtful scholarship. It is now one of the essential components of the the library of constitutionalism.” Though it is hard to imagine, Cogan’s second edition is even better and more triumphant!

 The second edition (1362 pp.) almost doubles the first edition (705 pp.) in length by adding, among other things, lengthy excerpts from the treatises and dictionaries familiar to judges and lawyers in the 1780s. (Note: the pages in the new edition are also longer and its margins are narrower.)

In the First Amendment section — other than in the religion clauses segments which total 146 pages — new materials were added to the Press Clause segment and to the Assembly Clause segment. The majority of the newly added materials in those areas appears in the Press Clause segment (five new entries: Bacon, Burn, Cunningham, Jacob, and Viner) and one new entry for the Assembly Clause segment (Burn). The new sources materials for those segments of second edition of The Complete Bill of Rights are listed below:

  1. Matthew Bacon, A New Abridgment of the Law (London (Savoy): E. & R. Nutt & R. Gosling, 1736) [NB: hyperlink is to a later edition]
  2. Richard Burn, Justice of the Peace & Parish Officer (London: Ho. Woodfall & W. Strahan, 10th ed., 1776) [NB: hyperlink is to a later edition]
  3. T. Cunningham, A New And Complete Law-Dictionary (London: Law Printers to the King, 1764, 1765) (Adams Library)
  4. Giles Jacob, The New-Law Dictionary (London (Savoy): Henry Lintot, 1743) (Adams Library) [NB: hyperlink is to an earlier edition]
  5. Charles Viner, A General Abridgment of Law and Equity (London, 1742) (Adams Library)

In the Press Clause segment, the 27 pages of new materials (pp.  182-208) consist of definitions and discussions of defamation:

  • What is it?
  • What amounts to a libel?
  • How much certainty is required?
  • Can statements made in court amount to defamation?
  • Who qualifies as a libeler?
  • What constitutes publishing?
  • What matters are for a judge or jury to decide?, and
  • What  punishment (civil and/or criminal), if any, is appropriate?

Beyond this, there is also an entry from Richard Burn’s treatise concerning religious and civil laws regulating swearing (pp. 206-208)

The new entry concerning the Assembly Clause (pp. 254-61) segment consists of seven pages (also from Richard Burn’s treatise). Those pages largely concern definitional and related questions, which are divided into the following six subcategories:

I.    “What is a riot, rout, or unlawful assembly”?

II.   “How the same may be restrained by a private person.” [re common law powers to suppress a riot]

III.  “How by a constable, or by other peace officer.” [re common law powers to suppress a riot]

IV.  “How by one justice.” [re statutory powers of a justice of the peace to restrain, arrest, chastise or punish.]

V.    “How by two justices.”  [re statutory powers of two or three justices of the peace to use “the power of the country” or that of the sheriff to enforce an order re a riot or unlawful assembly]

VI.  “How by a process out of chancery.” [re statutory powers of chancery court to inquire into the truth of any complaint brought by an aggrieved party].

Professor Neil Cogan

Professor Neil Cogan

Whatever one thinks of textualism and/or historicism, Professor Cogan has performed a great public service in bringing into sharper focus the historical backdrop of the Bill of Rights. In a 1993 letter to Cogan, the late Gerald Gunther tagged the first edition as a “very valuable book” and a “marvelous collection” of historical documents. (Cynthia Cotts, “A Dean’s Book on Bill of Rights Scores with Supremes, Scholar,” National Law Journal, Nov. 24, 1997). For those who knew Gerry Gunther, he was not one to offer exaggerated or unmerited praise. That said, he was too modest in his assessment of The Complete Bill of Rights. Then again, perhaps he knew better than most that superlatives may sometimes devalue the true worth of a great work. In that spirit, nothing much need be added other than this: The second edition of The Complete Bill of Rights is even more “valuable” than the first.    

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When Love’s Promises Are Fulfilled By the U.S. Supreme Court

Today, in a 5-4 decision, the United States Supreme recognized the fundamental nature of love’s promises. In Obergefell et al. v. Hodges, the Court held,  “the Fourteenth Amendment requires a State to license a marriage between two people of the same sex and to recognize a marriage between two people of the same sex when their marriage was lawfully licensed and performed out-of-State.”  Referring to marriage as a “keystone” of the U.S.’s “social order,” Justice Kennedy declared same-sex marriage bans unconstitutional. Importantly, the case makes clear that forcing gay couples to go across state lines to marry only to deny them the franchise after returning home undermines fundamental principles of liberty.

It’s no surprise that Professor Martha Ertman’s powerful book: Love’s Promises: How Formal and Informal Contracts Shape All Kinds of Families on which she copiously and beautifully toiled while rearing her son debuts the summer that equality in marriage becomes a fundamental right for gay men and women. Nor should anyone be surprised if the book, along with the decision itself, becomes a central text at universities and beyond. In what David Corn calls a “love letter to marriage,” from the pen of Justice Kennedy, the Court reasoned:

“No union is more profound than marriage, for it embodies the highest ideals of love, fidelity, devotion, sacrifice, and family. In forming a marital union, two people become something greater than once they were. As some of the petitioners in these cases demonstrate, marriage embodies a love that may endure even past death. It would misunderstand these men and women to say they disrespect the idea of marriage. Their plea is that they do respect it, respect it so deeply that they seek to find its fulfillment for themselves. Their hope is not to be condemned to live in loneliness, excluded from one of civilization’s oldest institutions. They ask for equal dignity in the eyes of the law. The Constitution grants them that right.“

With that, the Supreme Court overruled the prior judgement of the Court of Appeals for the Sixth Circuit and set in gear the reversal of centuries’ worth of stigma, shame and inequality, which may not erase overnight, but overtime will ease. Professor Ertman might also suggest that by the decision, the Court resituates contracts too. That is to say, if viewed from the lens of contracts, which serves as the core, theoretical foundation of Love’s Promises, this decision recognizes a fundamental right in contract for gay men and women. Further, the case expands the “contract” franchise to include gay women and men.

Some scholars approach gay marriage primarily from the constitutional liberties encapsulated in the 14th Amendment, upholding equal protection for U.S. citizens regardless of their status, others approach the issue as a matter of privacy. For Professor Ertman, contracts offer an additional lens and much to deliberate about on matters of marriage, parenting, and familial intimacy. Professor Ertman’s writings on contract (The Business of Intimacy,  What’s Wrong With a Parenthood Market?, and Reconstructing Marriage to name a few) precede the book, and presaged its birth.

Here for example, in a passage from Chapter Eight, she explains that “[i]t takes two more trips to the lawyer’s office to hammer out terms that satisfy Karen, Victor, the attorney, and me, from lawyerly technicalities to the emotional terms we call “mush.” From what started out as an addendum to Victor’s and my coparenting agreement has blossomed into a bouquet of wills and powers of attorney, alongside the amended parenting agreement.” She tells readers, “On the way downstairs, clutching documents still warm from the copying machine, Karen squeezes my hand, as if she too feels that signing all those dotted lines brought a family into being every bit as much as vows of forever that we plan to recite…” As she explains, “if you scratch the surface of marriage—straight or gay—you’ll find contracts there, too.”

Professor Ertman urges us to remember time and again that what builds relationships and sustains them are the formal and informal contracting that take place daily in marriage; they establish the foundation for marriage and what comes after. She works diligently in the book to demonstrate love too undergirds contracts. That is to say, she wants readers to reimagine contracts—not as the products of cold, calculated bargaining or business arrangements—though one must acknowledge contracts can be that too—even in marriage.  Often marriage is the product of love, intimacy, and warm innocence.  At other times, it is the product of business arrangements.  It was that too in the U.S. chattel system: contracts that gave legal sufficiency to the buying, selling, bartering, and even destroying of slaves, including children (among them the Black biological offspring of slave owners). In light of that history yet to be fully explored and appreciated in law, it is a formidable task to resituate or reintroduce contract in the space of families and intimacy. However, Professor Ertman rises to that challenge.

Like it or not, contracts pervade marriage and suffuse premarital agreements. Sometimes contracting in this regard attempts to resituate power and status expost marriage, providing the economically weaker spouse economic stability after the breakup. Martha highlights cases from that of Catherine Simeone who received a “raw deal,” to those of celebrities, including Michael Douglas and Beyonce. Who knew that Beyonce would receive $5 million for “each of their children,” if she and Shawn Carter (otherwise known as Jay-Z) divorced? Professor Ertman might argue that despite the businesslike nature of contracts, these legal arrangements and agreements make most matters clearer for everybody. Professor Ertman explains that contracts and even verbal agreements provide information, they can provide context, and they offer choice.

In Ertman’s life, it was a contract that bestowed her wife, Karen, parenthood of their child—not something biological, legislative, or derived from courts. And she offers multiple reasons for readers to consider the salience of contracts in intimacy, including voluntariness, reciprocal promises, and equal status. She offers an additional reason: love’s promises.