Regulatory Conflict and Competitive Equality
Regulatory competition is an important part of US regulatory mythology, and, as suggested in Chapter 4, occasionally it works in practice as theory would predict, generating beneficial innovation and deregulation. Most players in US financial markets probably would concur that the deregulatory process that culminated in the approval of the Citicorp/Travelers combination represented regulatory competition at its best. Nevertheless, tributes to regulatory competition may overlook a troubling aspect of the competitive process that was mentioned in Chapter 4 but was not fully explored. Certainly, regulatory competition may encourage the innovation that is a hallmark of US financial markets. At the same time, however, regulatory competition does not necessarily result in equal regulatory treatment of competing financial players. To the contrary, in the short run, and perhaps even in the long run, regulatory competition may exacerbate inequities in the regulatory scheme.
KeywordsFinancial Market Federal Reserve Functional Regulation Financial Regulation Security Regulator
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Notes and References
- For examples, see John C. Coffee, Jr. (1995), ‘Competition versus Consolidation: The Significance of Organizational Structure in Financial and Securities Regulation’, The Business Lawyer, vol. 50, pp. 458–9.Google Scholar
- Ferdinand Pecora, general counsel to the committee, later wrote that all three statutes (and the Public Utility Holding Company Act of 1935) were enacted in direct response to his hearings. Ferdinand Pecora (1939), Wall Street Under Oath: The Story of Our Modern Money Changers (New York: Simon and Schuster), pp. 284–92.Google Scholar
- This story is told in James Landis (1938), ‘The Legislative History of the Securities Act of 1933’, George Washington Law Review, vol. 28, pp. 44–5.Google Scholar