Academic journal article Harvard Law Review

Cashing out a Special Relationship? Trends toward Reconciliation between Financial Regulation and Administrative Law

Academic journal article Harvard Law Review

Cashing out a Special Relationship? Trends toward Reconciliation between Financial Regulation and Administrative Law

Article excerpt

Like an optical illusion or an Escher drawing, the relationship between financial regulation and administrative law is intricate and prone to reflect one's perspective. (1) From a distance, the fields may appear entirely in sync, even derivative. Financial regulation--legal structures governing markets, institutions, and actors--is formally bound by the procedural constraints of administrative law and that law limits agency action. (2) Yet on closer approach, the two show signs of serious inconsistencies. (3) The day-to-day practice of financial regulation operates relatively unimpeded by major elements of administrative procedure, and the larger commitments of administrative law--visions of ordered agency policymaking and expansive judicial engagement--remain largely unrealized. (4) Closest up, the fields offer stark contrasts on their first principles: each locates itself in divergent economic and political ecosystems and calls for separate end goals. (5)

Juxtaposing financial regulation with administrative law thus seems to offer a paradox: the fields are coordinate in their basic descriptions but vaguely detached in day-to-day activities and misaligned on their points of deep logic. Perhaps for this reason, scholars have often struggled to understand how financial regulation fits within the administrative law scheme--whether it represents administrative principles applied to a transformative extreme, or else is a curious exception to the general norm.? Regardless of the reason, the result is a financial regulatory system that appears distinctive from many other forms of regulatory law: it is faster moving, opaque in its decisionmaking, and highly oriented to preventing crisis--at the cost of some inconsistency with general administrative procedure.

Recently, however, a new leveling wind has begun to blow. In a number of cases at the boundaries of the two fields, courts have applied rigid constraints of administrative law to resolve relatively amorphous financial regulatory issues. These cases express a strong set of presumptions about how financial regulation should be conceptualized and administered. (7) They reject views of financial regulation as demanding a tailored approach, and instead seek to cover the field with off-the-rack administrative law doctrines. Underlying this movement are two broad yet congruent thoughts: a heightened concern for a perceptibly overpowering financial regulatory apparatus (8) and increased confidence in the methods of administrative law, most notably a heavily monetized cost-benefit analysis (CBA). (9) The result is an approach treating financial regulatory action as largely indistinct from any other subject of agency policymaking.

Yet this impulse toward a one-size-fits-all framework eludes the reasons why approaches to financial regulation have and should be tailored to their circumstances. This normalization trend applies administrative tools to situations outside the scope of their design and contradicts the major principles underlying the modern financial regulatory state. (10) The result is both overinclusive in limiting necessary exercises of regulatory power and underinclusive in confounding the areas of most pointed concern. Rather than attempting to channel the anxieties generated by regulatory policymaking through such an untailored approach, the impulses driving the normalization trend should be realized in a more nuanced and limited form. (11)

Part I of this Note outlines the conceptual relationship between administrative law and financial regulation. Part II grounds the trend in history. Part III identifies the countertrend of financial regulatory normalization, as found in three recent decisions straddling the administrative-financial regulatory line: Business Roundtable v. SEC, (12) State National Bank of Big Spring v. Lew, (13) and Metlife, Inc. v. Financial Stability Oversight Council (14) Part IV discusses the latent concerns behind this development and suggests reasons why a more tailored approach acknowledges anxieties and better achieves the intended ends. …

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