Debt expansion as "relief and rescue" at the time of the Covid-19 pandemic: insights from the legal theory of finance

The upshot of relief and rescue policies is that debt expansion has been adopted as a key policy response to the financial woes of corporations and households during the pandemic. We situate the policies for relief and rescue within the theorization of legal elasticity in Pistor’s legal theory of finance, which offers a path for structural reforms in law and regulation as part of post-crisis management. The theoretical insight drawn is that legal elasticity is often more structural in nature and will have to continue to apply to mitigate the long-term adverse consequences of debt expansion. We apply these insights to construct a methodological framework for mapping long-term policy and reform considerations, in order to address the adverse consequences of corporate and household fragility, as well as risks to the financial system as a whole, and offer a blueprint for substantive policy choices.