Money and Banks in the American Political System

Abstract

In Money and Banks in the American Political System, debates over financial politics are woven into the political fabric of the state and contemporary conceptions of the American dream. The author argues that the political sources of instability in finance derive from the nexus between market innovation and regulatory arbitrage. This book explores monetary, fiscal and regulatory policies within a political culture characterized by the separation of business and state, and mistrust of the concentration of power in any one political or economic institution. The bureaucratic arrangements among the branches of government, the Federal Reserve, executive agencies, and government sponsored enterprises incentivize agencies to compete for budgets, resources, governing authority and personnel.

The Puzzle

“…There is a vast, and growing, literature on the politics of financial regulation within and among countries in the core of the global financial system (see for instance Botzem, 2014;Büthe and Mattli, 2011;Haber and Calomiris, 2015;Helleiner, 2014;Kapstein, 1989;Lall, 2012;Lavelle, 2013;Oatley and Nabors, 1998;Perry and Nölke, 2006;Porter, 2005;Quaglia, 2019Quaglia, , 2014Singer, 2007;Tarullo, 2008;Underhill and Zhang, 2008;Young, 2012;Zysman, 1984). Scholarship on the politics of financial regulation in emerging economies and developing countries is equally insightful yet much less extensive and has tended to focus on the largest emerging and developing countries (Chey, 2014;Haggard and Lee, 1995;HamiltonHart, 2002;Hutchcroft, 1998;Knaack, 2017;Lavelle, 2004;Martinez Diaz, 2009;Naqvi, 2019;Walter, 2008).…”

The politics of state compliance with international “soft law” in finance

“…Members of Congress were particularly sympathetic to the concerns of community banks because congressional districts in the House of Representatives are geographic; hence, many of these districts have small‐ and medium‐sized banks, whereas the large banks are concentrated in New York, California, and South Carolina (Lavelle, , p. 27). This contributes to explaining why the large banks, despite their lobbying power, did not manage to press their case for the implementation of Basel II more successfully.…”

Constructing the Governance of American Finance: Timing and the Creation of the SEC, OTS, and CFPB

“…Here, the existing bureaucracy becomes an actor as agencies compete for mandates and politicians pursue electoral goals in the executive branch and legislature. 24 As Terry Moe argues, political actors build the bureaucracy that is not necessarily the most eff ective, but one designed by organized interests selecting a particular set of bureaucrats who follow their expert judgment free of explicit instructions. 25 Th erefore, the answer to the historical question of whether or not the administrative state supports or opposes large corporate interests must be considered with respect to the phases of a fi nancial crisis.…”