Hostname: page-component-cd9895bd7-jkksz Total loading time: 0 Render date: 2024-12-26T21:32:09.691Z Has data issue: false hasContentIssue false
  • English
  • Français

Bank power and public policy since the financial crisis

Published online by Cambridge University Press:  27 January 2020

Huw Macartney ,
David Howarth Open the ORCID record for David Howarth [Opens in a new window]  and
Scott James
Get access Rights & Permissions [Opens in a new window]

Abstract

Despite much commentary in the media and the popular assumption that the banking industry exerts undue influence on government policy-making, the academic literature on the role of the banks since the 2008 financial crisis remains theoretically and empirically under-specified. In particular, we argue that different forms of financial power are often conflated, while favorable policy outcomes are too-readily assumed to be evidence of regulatory capture. In short, we still know relatively little about how bank influence varies over time and in different national contexts, the extent to which banking interests are unified or divided, and the conditions under which banks are capable of producing meaningful variation in policy outcomes. This article has three objectives: 1) to explain why the debate on bank influence matters; 2) to examine the evidence of bank influence since the international financial crisis; and 3) to set out a range of conceptual tools for thinking about bank power.

Keywords

bankspublic policyfinancial regulationinterest groupsfinancial crisisregulatory capture
Type
Research Article
Information
Business and Politics , Volume 22 , Special Issue 1: Ten Years of Regulatory Reform Since the International Financial Crisis: Understanding Bank Influence in the European and International Context , March 2020 , pp. 1 - 24
Copyright
Copyright © V.K. Aggarwal 2020 and published under exclusive license to Cambridge University Press

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Acharya, V., Anginer, D., and Warburton, A. J.. 2014. “The end of market discipline? Investor expectations of implicit government guarantees.” https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1961656.Google Scholar
Alessandri, P., and Haldane, A.. 2009. “Banking on the state.” Paper by Mr. Andrew G Haldane, Executive Director, Financial Stability, Bank of England, and Mr. Piergiorgio Alessandri, based on a presentation delivered at the Federal Reserve Bank of Chicago twelfth annual International Banking Conference on “The International Financial Crisis: Have the Rules of Finance Changed?” Chicago, 25 September 2009. https://www.bis.org/review/r091111e.pdf.Google Scholar
Andrés, P. de, Reig, R., and Vallelado, E.. 2019. “European Bank's Executive Remuneration Under the New European Banking Regulation.” Journal of Economic Policy Reform 22 (3): 208–25.CrossRefGoogle Scholar
Andrews, D. 1994. “Capital Mobility and State Autonomy: Toward a Structural Theory of International Monetary Relations.” International Studies Quarterly 38(2): 193–218.CrossRefGoogle Scholar
Balasubramnian, B., and Cyree, K. B.. 2011. “Market discipline of banks: why are yield spreads on bank-issued subordinated notes and debentures not sensitive to bank risks?” Journal of Banking and Finance 35: 21–35.CrossRefGoogle Scholar
Bank of America. 2009. Annual Report 2008. New York: Bank of America Corporation. http://investor.bankofamerica.com/static-files/e583e1da-17a9-4bd3-a60e-7da061f925fb.Google Scholar
Barth, J., Caprio, G. J., and Levine, R.. 2012. Guardians of Finance: Making Regulators Work for Us. Cambridge, MA: MIT Press.CrossRefGoogle Scholar
Bell, S., and Hindmoor, A. 2015. “Masters of the Universe but Slaves of the Market: Bankers and the Great Financial Meltdown.” British Journal of Politics and International Relations 17 (1): 1–22.CrossRefGoogle Scholar
Bell, S., and Hindmoor, A. 2017. “Structural Power and the Politics of Bank Capital Regulation in the United Kingdom.” Political Studies 65 (1): 103–21.CrossRefGoogle Scholar
Bernhagen, P. 2007. The Political Power of Business. London: Routledge.Google Scholar
Blinder, A., and Zandi, M.. 2010. “How the Great Recession Was Brought to an End.” Economy. https://www.economy.com/mark-zandi/documents/End-of-Great-Recession.pdf.Google Scholar
Block, F. 1987. “State Theory in Context.” In Revisiting State Theory, edited by Block, F., 3–35. Philadelphia, PA: Temple University Press.Google Scholar
Blyth, M. 2002. Great Transformations: economic ideas and institutional change in the twentieth century. Cambridge: Cambridge University Press.CrossRefGoogle Scholar
BLS (Bureau of Labor Statistics). 2018. Employment, Hours, and Earnings from the Current Employment Statistics survey. Washington, DC: United States Bureau of Labor Statistics. https://www.bls.gov/ces/home.htm.Google Scholar
Bonefeld, W. 2017. The Strong State and the Free Economy. London: Rowman and Littlefield.Google Scholar
Brittan, S. 1989. “The ‘Economic Contradictions of Democracy’ Revisited.” Political Quarterly 60 (2): 190–203.CrossRefGoogle Scholar
Burnham, P. 2011. “Towards a political theory of crisis.” New Political Science 33 (4): 493–507.CrossRefGoogle Scholar
Campbell-Verduyn, M. 2017. “Capturing the Moment? Crisis, Market Accountability, and the Limits of Legitimation.” New Political Science 39 (3): 350–68.CrossRefGoogle Scholar
Chalmers, A., and Young, K.. 2020. “Network Effects in the Formation of the Financial Industry's Regulatory Preferences in the European Union.” Business and Politics this issue.CrossRefGoogle Scholar
Citigroup. 2008. Annual Report. https://www.citigroup.com/citi/investor/quarterly/2009/ar08c_en.pdf (accessed 6 December 2019).Google Scholar
Coban, M. 2020. “Select Compliance forces, domestic policy process, and international regulatory standards: Compliance with Basel III.” Business and Politics this issue.Google Scholar
Coen, D., and Salter, J.-P.. 2020. “Multilevel regulatory governance: Establishing bank-regulatory relationships at the European Banking Authority.” Business and Politics this issue.Google Scholar
Cohan, W.D. 2011. Money and Power: How Goldman Sachs Came to Rule the World. London: Allen Lane.Google Scholar
Claessens, S., Underhill, G.R.D, Zhang, X. 2008. “The political economy of Basle II: the costs for poor countries.” The World Economy 31 (3): 313–43.CrossRefGoogle Scholar
Culpepper, P. 2012. Quiet Politics and Business Power. Cambridge: Cambridge University Press.Google Scholar
Culpepper, P. 2015. “Structural Power and Political Science in the Post-Crisis Era.” Business and Politics 17 (3): 391–409.CrossRefGoogle Scholar
Culpepper, P., and Reinke, R.. 2014. “Structural Power and Bank Bailouts in the United Kingdom and the United States.” Politics & Society 42 (2): 427–54.CrossRefGoogle Scholar
Dahl, R.A., and Lindblom, C. E.. 1976. Politics, Markets and Welfare. Chicago, IL: University of Chicago.Google Scholar
Emmenegger, P. 2015. “The long arm of justice: U.S. structural power and international banking.” Business and Politics 17 (3): 473–93.CrossRefGoogle Scholar
Engelen, E., Ertürk, I., Froud, J., Johal, S., Leaver, A., Moran, M., Nilsson, A., and Williams, K.. 2012. After the Great Complacence: Financial Crisis and the Politics of Reform. Oxford: Oxford University Press.Google Scholar
FDIC (Federal Deposit Insurance Corporation). 1987. Mandate for Change: Restructuring the Banking Industry, 112. Washington, DC: Federal Deposit Insurance Corporation.Google Scholar
Gamble, A. 2009. The Spectre at the Feast. Basingstoke: Palgrave.CrossRefGoogle Scholar
Ganderson, J. 2020. “To Change Banks or Bankers? Systemic Political (In)action and Post-Crisis Banking Reform in the UK and the Netherlands.” Business and Politics this issue.CrossRefGoogle Scholar
Haldane, A., Roberts-Sklar, M., Wiedladek, T., Young, C.. 2016. “QE: the story so far.” Bank of England Working Paper 624, 19 October. https://www.bankofengland.co.uk/working-paper/2016/qe-the-story-so-far.CrossRefGoogle Scholar
Hall, P. 1986. Governing the Economy. Oxford: Oxford University Press.Google Scholar
Hau, H., Langfield, S., and Marques-Ibanez, D.. 2013. “Bank Ratings: What Determines Their Quality?” Economic Policy 28 (74): 289–333.CrossRefGoogle Scholar
Hay, C., and Rosamond, B.. 2002. “Globalization, European integration, and the discursive construction of economic imperatives.” Journal of European Public Policy 9 (2): 147–67.CrossRefGoogle Scholar
Hardie, I., and Macartney, H.. 2016. “EU ring-fencing and the defence of too-big-to-fail banks.” West European Banks 39 (3): 503–25.CrossRefGoogle Scholar
Helleiner, E., and Pagliari, S.. 2011. “The End of an Era in International Financial Regulation? A Post-Crisis Research Agenda.” International Organization 65: 169–200.CrossRefGoogle Scholar
Helleiner, E., Pagliari, S., and Zimmerman, H. (eds.). 2010. Global Finance in Crisis: The Politics of International Regulatory Change. London: Routledge.CrossRefGoogle Scholar
Howarth, D., and James, S.. 2020. “The politics of bank structural reform: Business power and agenda setting in the United Kingdom, France, and Germany.” Business and Politics this issue.Google Scholar
Howarth, D., and Quaglia, L.. 2013. “Banking on Stability: the European Union's New Capital Requirement Directive.” Journal of European Integration 35 (3): 333–46.CrossRefGoogle Scholar
Howarth, D., and Quaglia, L.. 2016. “The Comparative Political Economy of Basel III in Europe.” Policy and Society 35: 205–14.CrossRefGoogle Scholar
Howarth, D., and Quaglia, L. 2018. “Brexit and the battle for finance.” Journal of European Public Policy 25 (8): 1118–36.CrossRefGoogle Scholar
Ingham, G. 1984. Capitalism divided?: the City and industry in British social development. London: Macmillan.CrossRefGoogle Scholar
James, S. 2018. “The Structural–Informational Power of Business: Credibility, Signalling and the UK Banking Reform Process”. Journal of European Public Policy 25 (11): 1629–47.CrossRefGoogle Scholar
James, S., and Christopoulos, D. 2018. “Reputational leadership and preference similarity: Explaining organisational collaboration in bank policy networks.” European Journal of Political Research 57 (2): 518–38.CrossRefGoogle Scholar
James, S., and Quaglia, L. 2019. “Brexit, the City and the Contingent Power of Finance.” New Political Economy 24 (2): 258–71.CrossRefGoogle Scholar
James, S., and Quaglia, L. 2020. The UK and Multi-Level Financial Regulation: From Post-Crisis Reform to Brexit. Oxford: Oxford University Press.Google Scholar
Jimeno, J. 2015. “Long-lasting consequences of the European crisis.” ECB Working Paper Series, No. 1832, July. https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1832.en.pdf.CrossRefGoogle Scholar
Johnson, S., and Kwak, J.. 2010. 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown. New York: Vintage Books.Google Scholar
Lindblom, C. E. 1977. Politics and Markets. New York: Basic Books.Google Scholar
Lindblom, C. E. 1982. “The market as prison.” The Journal of Politics 44 (2): 324–36.CrossRefGoogle Scholar
Lindh, S., and Schich, S.. 2012. “Implicit Guarantees for Bank Debt: Where Do We Stand?” OECD Journal of Financial Market Trends 1 (June): 45–63.Google Scholar
Macartney, H. 2014. “From Merlin to Oz: the strange case of failed SME lending targets in the UK.” Review of International Political Economy 21 (4): 820–46.CrossRefGoogle Scholar
Macartney, H. 2019. The Bank Culture Debate: ethics, values and financialisation in Anglo-America. Oxford: Oxford University Press.CrossRefGoogle Scholar
Macartney, H., and Calcagno, P.. 2019. “All Bark and No Bite: the political economy of bank fines in Anglo-America.” Review of International Political Economy. 26 (4): 630–665.CrossRefGoogle Scholar
Marsh, D., and Lewis, C.. 2014. “The Political Power of Big Business: A Response to Bell and Hindmoor.” New Political Economy 19 (4): 628–33.CrossRefGoogle Scholar
Massoc, E. 2020. “Banks, power, and political institutions: the divergent priorities of European states towards ‘too-big-to-fail’ banks: The cases of competition in retail banking and the banking structural reform.” Business and Politics this issue.Google Scholar
McKeen-Edwards, H., and Porter, T. 2013. Transnational Financial Associations and the Governance of Global Finance. London: Routledge.CrossRefGoogle Scholar
Montalbano, G. 2020. “Policy entrepreneurship and the influence of the transnational financial industry in the EU reform of securitization.” Business and Politics this issue.Google Scholar
Moran, M. 2009. Business, Politics, and Society: an Anglo-American Comparison. Oxford: Oxford University Press.Google Scholar
Morgan, D., and Stiroh, K.. 2005. “Too big to fail after all these years.” Federal Reserve Bank of New York Staff Report No. 220.CrossRefGoogle Scholar
Mügge, D. 2010. Widen the Market, Narrow the Competition: Banker Interests and the Making of a European Capital Market. Colchester: ECPR.Google Scholar
Müller-Armack, A. 1978. “The Social Market Economy as an Economic and Social Order.” Review of Social Economy 36 (3): 325–31.CrossRefGoogle Scholar
Nettl, J. P. 1965. “Consensus or elite domination: the case of business.” Political Studies 13: 22–44.CrossRefGoogle Scholar
Newman, A. and Posner, E. 2018. Voluntary Disruptions: International Soft Law, Finance, and Power. Oxford: Oxford University Press.CrossRefGoogle Scholar
OCC. 2016. “Survey of Credit Underwriting Practices.” Washington, DC: Office of the Comptroller of the Currency.Google Scholar
Offe, C. 1974 “Structural problems of the capitalist state: class rule and the political system: On the selectiveness of political institutions”, German Political Studies, 1: 31–54.Google Scholar
O'Hara, M., and Shaw, W. 1990. “Deposit insurance and wealth effects: The value of being ‘too big to fail’.” Journal of Finance 45: 1587–600.Google Scholar
Pagliari, S., and Young, K.L. 2014. “Leveraged Interests. Financial Industry Power and the Role of Private Sector Coalitions.” Review of International Political Economy 21 (3): 575–610.CrossRefGoogle Scholar
PIMCO. 2018. “Investing in a Negative Interest Rate World.” Investment Education. Newport Beach, CA: PIMCO. https://global.pimco.com/en-gbl/resources/education/investing-in-a-negative-interest-rate-world.Google Scholar
Quaglia, L., and Howarth, D. 2018. “The policy narratives of European capital markets union.” Journal of European Public Policy 25 (7): 990–1009.CrossRefGoogle Scholar
Quinn, D.P., and Shapiro, R.Y.. 1991. “Business political power: The case of taxation.” American Political Science Review 85: 851–74.CrossRefGoogle Scholar
Przeworksi, A., and Wallerstein, E.. 1988. “Structural Dependence of the State on Capital.” American Political Science Review 82 (1): 11–29.CrossRefGoogle Scholar
Röpke, W. 1957. Welfare, Freedom and Inflation. London: Pall Mall Press.Google Scholar
Seabrooke, L., and Tsingou, E.. 2009. “Revolving doors and linked ecologies in the world economy: policy locations and the practice of international financial reform.” Centre for the Study of Globalisation and Regionalisation, Department of Politics and International Studies, University of Warwick, CSGR Working Paper. https://warwick.ac.uk/fac/soc/pais/research/researchcentres/csgr/papers/workingpapers/2009/26009.pdf.Google Scholar
Skidelsky, R. 2009. Keynes: The Return of the Master. London: Allen Lane.Google Scholar
Smith, M. J. 2009. Power and the State. Basingstoke: Macmillan.CrossRefGoogle Scholar
Stellinga, B. 2020. “The open-endedness of macroprudential policy. Endogenous risks as an obstacle to countercyclical financial regulation.” Business and Politics this issue.Google Scholar
Stellinga, B., and Mügge, D. 2017. “The regulator's conundrum. How market reflexivity limits fundamental financial reform.” Review of International Political Economy. 24 (3): 393–423.CrossRefGoogle Scholar
Stern, G. H., and Feldman, R. J.. 2004. Too Big To Fail: the Hazards of Bank Bailouts. Washington, DC: Brooking Institute Press.Google Scholar
Stigler, G. J. 1971. “Theory of economic regulation.” Bell Journal of Economics and Management Science 2 (1): 3–21.CrossRefGoogle Scholar
Strange, S. 1998. Mad Money: When Markets Outgrow Governments. Ann Arbor, MI: University of Michigan Press.CrossRefGoogle Scholar
Streeck, W. 2014. Buying Time: the delayed crisis of democratic capitalism. London: Verso.Google Scholar
Swank, D. 1992. “Politics and the structural dependence of the state in democratic capitalist nations.” American Political Science 86 (1): 38–54.CrossRefGoogle Scholar
Tsingou, E. 2015. “Club Governance and the Making of Global Financial Rules.” Review of International Political Economy 22 (2): 225–56.CrossRefGoogle Scholar
Turner, D., and Ollivaud, P. 2019. “The output cost of the global financial crisis: A reappraisal after ten years.” SUERF Policy Note 53. https://www.suerf.org/policynotes/4213/the-output-cost-of-the-global-financial-crisis-a-reappraisal-after-ten-years/html.Google Scholar
van Apeldoorn, B. 2002. Transnational Capitalism and the Struggle over European Integration. London: Routledge.Google Scholar
Vogel, D. 1989. Fluctuating Fortunes. New York: Basic Books.Google Scholar
Vogel, D. 1996. Kindred Strangers. Princeton, NJ: Princeton University Press.Google Scholar
Woll, C. 2014. The Power of Inaction: bank bailouts in comparison. Ithica, NY: Cornell University Press.CrossRefGoogle Scholar
Young, K., and Pagliari, S. 2017. “Capital United? Business unity in regulatory politics and the special place of finance.” Regulation & Governance 11 (1): 3–23.CrossRefGoogle Scholar
Ziegler, N., and Woolley, J. 2016. “After Dodd-Frank: The post-enactment politics of financial reform in the United States.” Politics and Society 44 (2): 249–80.CrossRefGoogle Scholar