The Twoâ€ Tiered Politics of Financial Reform in the United States
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 Doddâ€ 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 twoâ€ tier political strategy of (1) maintaining good relations with the established financial elite and (2) simultaneously responding to the demands of grassâ€ roots advocacy groups for more stringent regulation. As a result, Doddâ€ Frank Act falls far short of a thoroughâ€ going redesign of the regulatory landscape, but also amounted to considerably more than business as usual. While the Doddâ€ Frank Act creates new regulatory instruments and powers that hold the potential for farâ€ reaching changes, most of the existing agencies and market participants remain intact. This pattern of twoâ€ 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.
|Date of creation:||17 Oct 2011|
|Contact details of provider:|| Postal: 2521 Channing Way # 5555, Berkeley, CA 94720-5555|
Web page: http://www.escholarship.org/repec/iir_iirwps/
More information through EDIRC
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)
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.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 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.