From Independence to Politics in Financial Regulation
The Harvard Law School Forum on Corporate Governance and Financial Regulation 2012-10-18
The dominant paradigm in the U.S. financial regulatory apparatus has long centered on independent agencies like the Federal Reserve, the FDIC, and the SEC. Compared to politically controlled appointees, theorists argue, independent bureaucrats offer invaluable advantages, such as greater expertise and the ability to prioritize long-term policy goals over immediate gains. Since the early 1990s, most western democracies have followed the U.S.’s lead and strengthened the independence of their financial regulators.
But after the 2007-08 crisis, this Article argues, the independent agency paradigm is under attack. To monitor financial institutions more thoroughly and address future failures more effectively, the U.S. and other industrialized nations redesigned the framework of financial regulation. Post-2008 laws allocate new powers not to independent bureaucrats, but to elected politicians and their direct appointees.