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Delegation and the regulation of U.S. financial markets

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  • Groll, Thomas
  • O’Halloran, Sharyn
  • McAllister, Geraldine

Abstract

We analyze the institutional determinants of U.S. financial market regulation with a general model of the policy-making process in which legislators delegate authority to regulate financial risk at both the firm and systemic levels. The model explains changes in U.S. financial regulation leading up to the financial crisis. We test the predictions of the general model with a novel, comprehensive data set of financial regulatory laws enacted specifically between 1950 and 2009. The theoretical and empirical analysis finds that economic and political factors impact Congress’ decision to delegate regulatory authority to executive agencies, which in turn impacts the stringency of financial market regulation, and our estimation results indicate that political factors may have been stronger and resulted in inefficiencies.

Suggested Citation

  • Groll, Thomas & O’Halloran, Sharyn & McAllister, Geraldine, 2021. "Delegation and the regulation of U.S. financial markets," European Journal of Political Economy, Elsevier, vol. 70(C).
    • Handle: RePEc:eee:poleco:v:70:y:2021:i:c:s0176268021000549
    DOI: 10.1016/j.ejpoleco.2021.102058
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    2. Markus Gastinger & Eugénia C Heldt, 2022. "Measuring actual discretion of the European Commission: Using the discretion index to guide empirical research," European Union Politics, , vol. 23(3), pages 541-558, September.

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