Understanding Federal Reserve enforcement behavior: Bureaucracy and regulatory structure in the United States banking industry.

摘要

The U.S. banking regulatory structure has been forced to respond to an incredible array of challenges: financial crises, technological change and innovation in the banking industry, and the internationalization of financial markets, to name a few. This project attempts to explore three sources of influence on the regulatory enforcement behavior of the Federal Reserve—regulatory competition, strategic lobbying, and international institutions—and thereby highlight the policy implications of these factors for institutional design.; Bendor and Moe (1985) developed a computer simulation model which demonstrated the difficulty of overseeing a regulatory agency. Their simulation results showed the importance of legislative oversight in making an agency responsive to the balance of political power. This project extends their model in three ways and applies it to the case of the Federal Reserve. First, I add a second agency to the single-agency Bendor-Moe model. My simulations demonstrate that inter-agency competition for budget can serve the same role as oversight in controlling the enforcement behavior of both agencies. I propose testing the model empirically by correlating changes in enforcement behavior to actual and potential changes in budget and jurisdiction of the U.S. federal banking regulators.; Second, I introduce a second economy to the single-economy Bendor-Moe model. International differences in enforcement create an international competitive inequality. My simulations show that strategic lobbying by firms is effective in reducing the competitive inequality. I propose testing the model empirically by studying the impact of changing lobbying demands by the U.S banking industry on enforcement of existing regulations and support for new legislation by the U.S. federal banking regulators.; Third, I add an international institution to my two-economy model. The simulations find that the institution can satisfy the oversight role and empower domestic interest groups to control the behavior of the agency. I propose testing the model by linking international negotiations in the Committee on Banking Regulation under the auspices of the Bank for International Settlements to changes in enforcement behavior and legislative proposals by the U.S. federal banking regulators.; Together, these models demonstrate the impact of institutional design on a bureaucracy's ability to respond to regulatory challenges.