The New Political Economy of the Macroprudential Ideational Shift

Baker, Andrew

doi:10.1080/13563467.2012.662952

Cited by 261 publications

(218 citation statements)

References 44 publications

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“…Figure 2009, legislative activity was higher than it was even in 1983 and 1985, after the interest rate hikes associated with the Volcker Revolution, and approached the maximum number seen, of 142 bills, in 1981. While this legislative activity might be dismissed as "grandstanding" or cheap talk, the time costs involved in initiating bills imply that legislative activity is a meaningful indicator of Congressional interest in a subject area (Schiller, 1995, Wawro, 2001 This new emphasis on MPP was in some ways ironic given the chilly reception shown to advocates of a macro-prudential approach under the Chairmanship of Bernanke's predecessor, Alan Greenspan (Baker, 2013). However, the adoption of macro-prudential concepts gave the The actions taken by the Fed may also have tempered the desire for radical change in Congress.…”

Section: The Fed's Role After the Financial Crisismentioning

confidence: 99%

“…In light of the incremental nature of reforms enacted through Dodd-Frank, scholars have questioned whether the legislation truly marks a change in the conduct of financial regulation (and the quote above indicates some skepticism among regulators). Indeed, Baker (2013) describes the move to MPP as "ideational" and characterized by a desire for change without operational consensus (see Borio and Drehmann (2009) for a similar critique). Effective implementation of MPP, however, would mean requiring banks to take costly precautions against risk.…”

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confidence: 99%

“…Further, and since this mandate could politicize the Fed's activities, it may also erode the institutional independence that 1 From this point on, the phrase "the Federal Reserve" or "the Fed" will be used to refer to the Federal Reserve System comprising the Board of Governors and regional Reserve Banks. 2 For an explanation of the diffusion of MPP concepts, see Baker (2013). For a discussion of changing mandates at the Fed and the need for new policy tools, see Reinhart and Rogoff (2013).…”

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confidence: 99%

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Brave New World? Macro-prudential policy and the new political economy of the federal reserve

Goodhart

2014

Review of International Political Economy

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The Financial Crisis that started in 2007 ushered in new responsibilities for central banks, particularly for what is termed "macro-prudential policy," or MPP. The goal of this policy is to monitor and contain overall risk in the financial sector. Implementing MPP, however, carries the potential for distributional conflict with the largest financial firms and the politicization of central bank policy. In light of this risk, this essay analyses the institutional implications of MPP for a leading central bank, the U.S. Federal Reserve. Specifically, how will MPP affect the autonomy of the Fed to set the policy it thinks right? The analysis is based on interviews with financial regulators, including Fed staffers and policymakers, and with journalists who report on financial regulation. It is also informed by a case study of the "Volcker Revolution" in monetary policy. Based on these sources, I identify the factors that contributed to All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means without the prior permission in writing of the publisher nor be issued to the public or circulated in any form other than that in which it is published.Requests for permission to reproduce any article or part of the Working Paper should be sent to the editor at the above address.

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Section: The Fed's Role After the Financial Crisismentioning

confidence: 99%

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confidence: 99%

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Brave New World? Macro-prudential policy and the new political economy of the federal reserve

Goodhart

2014

Review of International Political Economy

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“…At the same time, a remarkable consensus has emerged regarding the flaws in the assumptions upon which the pre-crisis regime was built. There is broad agreement amongst senior officials and prominent economists that, prior to the crisis, banking supervisors paid too little attention to risks arising in the financial system as a whole and failed to adopt a sufficiently 'macro-prudential' approach (see Baker 2012). The central tenet of this new orthodoxy is that, prior to the crisis, regulators believed 'financial stability [could be] ensured as long as each and every institution [was] sound' (Crockett 2000).…”

Section: Introductionmentioning

confidence: 99%

Formal Rules versus Informal Relationships: Prudential Banking Supervision at the FSA Before the Crash

McPhilemy

2013

New Political Economy

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Prior to the 2007 -9 banking crisis, the UK Financial Services Authority presented itself as a 'proportionate' and 'risk-based' regulator, preferring firms to adhere to the spirit of high-level principles rather than the letter of detailed rules. Simultaneously, it developed a supervisory regime that was unprecedentedly complex, producing a 'Handbook' of intricate secondary legislation that ran to some 8000 pages. Explaining these contradictory aspects of the pre-crisis regime demands a reappraisal of the dominant explanations of the supervisory failures that contributed to the banking crisis. In contrast to accounts that focus on officials' uncritical adherence to efficient market thinking (regulatory groupthink) or the political clout of the financial industry (regulatory capture), this article suggests that supervisory officials' actions can be understood only by reference to their institutional and structural contexts. Amid heightened public sensitivity to risk, officials developed an elaborate and transparent supervisory framework as a defence against potential political censure. At the same time, collegial firm -supervisor relationships were preserved as state-of-the-art risk-management ideas were recombined and repackaged in line with the institutional legacies of earlier 'club-like' modes of supervision. Together, these divergent tendencies contributed to overconfidence in the use of predictive risk assessment and neglect of banks' fundamental business risks.

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“…However, we also know that often established financial groups are not well organized (Young 2014), and that coherent policy communities can fracture (Tsingou 2015). We also know that in the post-crisis period there has been a search for new ideas, even when there is not a clear policy consensus (Baker 2013). We suggest that when such opportunities arise, professionals who can power ideas through expertise and claims to moral authority can make significant advances in their David vs Goliath struggles.…”

Section: Conclusion: Switchmen In Global Tax Battlesmentioning

confidence: 99%

Powering ideas through expertise: professionals in global tax battles

Seabrooke¹,

Wigan²

2015

Journal of European Public Policy

117

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This contribution discusses how ideas are powered through expertise and moral authority. Professionals compete with each other to power ideas by linking claims to expertise, how things best work, to moral claims about how things should be. To show how, we draw on a case of battles over global tax policy. Corporate reporting for tax purposes is an area where the European Union, Organization for Economic Co-operation and Development, the United Nations, large global accountancy firms and non-governmental organizations have been active. The point of contention here is what form of financial reporting multinational corporations should provide to ensure they pay their fair share of tax. Ideas powered by expertise contain shared causal beliefs, as well as principled beliefs about value systems. We demonstrate that professionals can contest the established order when demonstrations of expertise can be fused with claims to moral authority. Such a constellation is more likely when political conditions are favourable.

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The New Political Economy of the Macroprudential Ideational Shift

Cited by 261 publications

References 44 publications

Brave New World? Macro-prudential policy and the new political economy of the federal reserve

Brave New World? Macro-prudential policy and the new political economy of the federal reserve

Formal Rules versus Informal Relationships: Prudential Banking Supervision at the FSA Before the Crash

Powering ideas through expertise: professionals in global tax battles

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