The President and International Financial Regulation

Article excerpt


The president's powers in foreign relations have long been touted as strong, but for international financial regulation, they are at their lowest ebb. Congress does not defer in it. The domestic agencies involved, in particular the Federal Reserve, are independent, and in this way less easy for the president to influence. And the international process, featuring technocratic collaboration by bureaucrats, is also not amenable to dispositive presidential supervision. The good news for the president, however, is that the perceived need for political oversight of international financial regulation has led to a new role for the G-P0, of which he is an influential member. It is not authoritative command, but it may afford him more of a role in a process that, until the financial crisis, proceeded without much presidential input.

The president's role in setting foreign policy is usually regarded as commanding, but in international economic law presidential authority is, if anything, at its lowest ebb. (1) Rather than enjoying the authority to act alone presumed by cases such as United States v. Curtiss-Wright Export Corp., (2) the president's power-sharing role in economic relations is constitutionally constrained, as well as structurally encouraged. This short essay explains the reasons for the reduced executive role and identifies one route to more influence that is developing in the field--increased oversight of international financial regulation by the G-20, an informal grouping of heads of state of which the president is a member.

While often the Constitution has been used to justify broad, almost plenary authority in foreign affairs, it does not afford the president as much comfort in any kind of economic regulation. Instead, the Constitution gives Congress the express power "to regulate Commerce with foreign Nations." (3) In international economic law, Congress has used that power vigorously, passing laws establishing tariff rates, implementing trade agreements, and even creating some barriers to trade, such as the trade in "critical infrastructure" that implicates national security. (4) When Congress has delegated some of its authority to set trade policy to the president, it has often limited its delegations through regular use of the sunset clause. (5)

In the critical arena of finance, and the supervision of it, the president's power is even more limited, even though, as the last financial crisis has made clear, finance is critical to the country's prosperity (and also to the president's job prospects). The legal limitations requiring the president to share economic lawmaking power are paired with a number of structural impediments to the exercise of any additional power by him.

One such impediment lies in the president's authority over his own financial bureaucracy. American policy in international financial regulation has traditionally been set not by the President and his delegates in the State Department, but largely by independent agencies, including the Federal Reserve (perhaps the most independent of all government agencies), the Securities and Exchange Commission, and the Commodity Futures Trading Commission. (6) These agencies are led by multi-member boards, whose members are subject to Senate confirmation, and, once confirmed, cannot be removed by the president without cause. (7) They do not report to the Office of Management and Budget, and therefore do not have to coordinate their regulatory agendas with White House priorities. (8)

It is also difficult for the executive branch, even apart from these domestic impediments, to affect the increasingly international process that now characterizes the most important portions of financial regulation. The amount of capital banks must hold in reserve to deal with emergencies or shocks, for example, is not set by the president or even by the independent agencies that, if not under his supervision, are at least located in his jurisdiction. …