Through the Looking Glass to a Shared Reflection: The Evolving Relationship between Administrative Law and Financial Regulation
Administrative law and financial regulation might be thought closely connected, sharing a focus on federal regulation and intertwined at key historical junctures such as the birth of the New Deal administrative state. Yet, oddly, in many ways these two fields stand today poles apart, divided not simply by their separation in law school curricula and faculty, but even more by opposite precepts and framing principles. Modern U.S. administrative law takes notice-and-comment rulemaking as the paradigmatic example of administrative action, with the goal of such regulation often being to compensate for market deficiencies. Accountability, particularly political accountability through presidential and congressional oversight and legal accountability through the courts, is administrative law’s central obsession. While financial regulatory agencies engage in notice-and-comment rulemaking, their regulatory mode is often more informal and hidden from public view, with the market serving as much as an arbiter of successful financial regulation as the object of regulators’ attention. Here the defining structural precept is not accountability but independence, and the vast majority of financial regulators enjoy a range of independence protections, including protection from removal, budgetary autonomy, and exemption from White House regulatory oversight.
This essay explores the historical contrasts between administrative law and financial regulation, with the aim of elucidating the contingent and contestable nature of each field’s framing presumptions. Its aim is to provide the basis for a sustained and reciprocal engagement that will provide room for rethinking regulatory approaches in both. Indeed, in part as a result of the financial crisis that rethinking is already underway, and the essay also identifies ways in which the historical differences between these two fields are abating.