IDEAS home Printed from https://ideas.repec.org/p/cdl/indrel/qt2k3219pt.html
   My bibliography  Save this paper

The Two†Tiered Politics of Financial Reform in the United States

Author

Listed:
  • Wooley, John T.
  • Ziegler, J. Nicholas

Abstract

The literature on regulation has typically emphasized the ability of concentrated interest groups to secure the rules they prefer. One view argues that concentrated interests are consistently able to impose diffuse costs across large and unorganized interests. A second, largely compatible, view emphasizes the ability of powerful interest groups to mobilize expertise and to provide informational goods to politicians who adjust their legislative proposals accordingly. This paper shows that the Dodd†Frank legislation for financial reregulation in 2010 departs from both versions of this now conventional wisdom. Instead, this paper shows that both political parties adopted what we call a two†tier political strategy of (1) maintaining good relations with the established financial elite and (2) simultaneously responding to the demands of grass†roots advocacy groups for more stringent regulation. As a result, Dodd†Frank Act falls far short of a thorough†going redesign of the regulatory landscape, but also amounted to considerably more than business as usual. While the Dodd†Frank Act creates new regulatory instruments and powers that hold the potential for far†reaching changes, most of the existing agencies and market participants remain intact. This pattern of two†tier politics is evident through the four primary policy domains treated in the legislation: macroprudential regulation, consumer protection, reestablishment of the partition between deposit banking versus proprietary trading (the Volcker Rule), and the regulation of derivatives trading.

Suggested Citation

  • Wooley, John T. & Ziegler, J. Nicholas, 2011. "The Two†Tiered Politics of Financial Reform in the United States," Institute for Research on Labor and Employment, Working Paper Series qt2k3219pt, Institute of Industrial Relations, UC Berkeley.
  • Handle: RePEc:cdl:indrel:qt2k3219pt
    as

    Download full text from publisher

    File URL: http://www.escholarship.org/uc/item/2k3219pt.pdf;origin=repeccitec
    Download Restriction: no

    References listed on IDEAS

    as
    1. Moore, Don A. & Klein, William M.P., 2008. "Use of absolute and comparative performance feedback in absolute and comparative judgments and decisions," Organizational Behavior and Human Decision Processes, Elsevier, vol. 107(1), pages 60-74, September.
    2. Brad M. Barber & Terrance Odean, 2000. "Trading Is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors," Journal of Finance, American Finance Association, vol. 55(2), pages 773-806, April.
    3. Waldman, Michael, 1994. "Systematic Errors and the Theory of Natural Selection," American Economic Review, American Economic Association, vol. 84(3), pages 482-497, June.
    4. Erik Hoelzl & Aldo Rustichini, 2005. "Overconfident: Do You Put Your Money On It?," Economic Journal, Royal Economic Society, vol. 115(503), pages 305-318, April.
    5. Moore, Don A., 2007. "Not so above average after all: When people believe they are worse than average and its implications for theories of bias in social comparison," Organizational Behavior and Human Decision Processes, Elsevier, vol. 102(1), pages 42-58, January.
    6. Dan Lovallo & Colin Camerer, 1999. "Overconfidence and Excess Entry: An Experimental Approach," American Economic Review, American Economic Association, vol. 89(1), pages 306-318, March.
    7. Larrick, Richard P. & Burson, Katherine A. & Soll, Jack B., 2007. "Social comparison and confidence: When thinking you're better than average predicts overconfidence (and when it does not)," Organizational Behavior and Human Decision Processes, Elsevier, vol. 102(1), pages 76-94, January.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Business;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cdl:indrel:qt2k3219pt. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lisa Schiff). General contact details of provider: http://edirc.repec.org/data/irucbus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.