The Federal Reserve’s Path to Power
In the wake of the collapse of Silicon Valley Bank (SVB) in March 2023, the third largest bank failure in US history and the first domino to fall in a broader regional banking crisis, a common refrain echoed among scholars, policymakers, and the public alike: where were the regulators?
The collective gaze of the nation quickly turned toward the Federal Reserve, which served as the primary regulator of SVB and bore responsibility for its safety and soundness.
While the immediate aftermath of SVB’s downfall brought focused and valuable critiques of the Federal Reserve’s supervisory process, this article revisits the institutional history of the Federal Reserve to raise broader questions about the very framework of financial regulation in the 21st century.
Retracing the evolution of the Federal Reserve reveals that its regulatory and supervisory power has grown dramatically over the course of a century in ways neither Congress nor the central bank anticipated. Reckoning with the Federal Reserve’s largely accidental path to regulatory supremacy, and the efforts to reconfigure that arrangement throughout the 20th century, ultimately serves as a critical reminder of the roads not taken and opens up new possibilities in a key moment of reform.
About the Law and Economics Workshop
Michigan’s Law and Economics Workshop provides an opportunity for faculty and students from across the University to engage with cutting-edge law and economics research by leading scholars on a wide range of legal and policy topics.
Professors Adam Pritchard ([email protected]) and Gabriel Rauterberg ([email protected]) organize the workshop. If you would like to receive workshop announcements, please contact Alex Wroble ([email protected]) and ask to have your name added to the workshop’s email list.
