Academic journal article Journal of Corporation Law

The Foreign Affairs of the Federal Reserve

Academic journal article Journal of Corporation Law

The Foreign Affairs of the Federal Reserve

Article excerpt


The contours of foreign relations law have been contested since the founding, when American alliances with European powers created rifts between a new presidency and an increasingly factionalized legislature. (1) These contests have not stopped since. Whether in military conflicts like the wars in Afghanistan and Iraq, diplomatic initiatives like the Joint Comprehensive Plan of Action for Iran's nuclear capabilities, (2) or executive agreements like the Paris Agreement on climate change, (3) the paradigm has been, as Edward Corwin famously put it in 1955, a constitutional "invitation to struggle" between the executive and legislative branch, with the judiciary playing the role of cautious referee. (4) Congress can protest or forestall or sometimes control foreign policy programs implemented by the executive branch, in the manner of a political dispute.

Corwin's staging of the constitutional play is incomplete. While Congress and the president continue to fight in political and judicial fora over foreign policy, they are not the only players in the game. In this Article we profile other actors--focusing on one in particular--who contributes to American foreign policy independent of the executive, legislature, and courts.

The actor on which we focus is the U.S. Federal Reserve System (Fed), the American central bank. The Fed has practiced its own brand of foreign relations since its 1913 legislative founding. Throughout its existence, it has kept up relations with its foreign counterparts, in many ways uncoordinated with either Congress or the presidential administrations, forging relationships, traditions, legal commitments, and even building formal organizational institutions with counterparts abroad. In other cases, it has snubbed foreign officials who have objected that its policies are inconsistent with their place as allies of the country.

The Fed's international connections are not unique; rather it is the most extreme and important version of a phenomenon that can be observed at almost every federal agency outside the executive branch--almost every agency now has an international relations office and belongs to an organization of regulators that cross national boundaries. (5) We call this phenomenon "regulatory diplomacy."

Regulatory diplomacy is ubiquitous. As we document in the appendix, 13 of the 18 agencies designated as independent by Congress have international affairs offices, including the Nuclear Regulatory Commission, the Office of the Comptroller of the Currency, and the Postal Regulatory Commission. (6) The former chair of the Securities and Exchange Commission, reported that international work "comprise[d] over half of [his] time and responsibilities." (7)

The D.C. Circuit has nervously observed that "an independent agency[] is a responsible governmental agency and will surely take into account ... any foreign policy concerns communicated to it by the Department of State." (8) But that is not always clearly the case. ICANN, the Internet Corporation for Assigned Names and Numbers, assigns domain names on the Internet, which in turn makes it an authority with worldwide power. (9) Created by the Department of Commerce, ICANN is now much less responsive to it, a fact that some observers have celebrated, and others have treated as cause for concern. (10) The Federal Communications Commission has gone its own way regarding foreign access to American infrastructure, which it can condition on reciprocal access-rendering some of its decisions out of step with the views of the departments within the executive branch. (11)

These institutions, and the agreements that they conclude, are at the forefront of some of the country's most prominent foreign initiatives. They come at a cost to the power of Congress, as regulators conclude their own international arrangements, and in so doing dispense with the advice and consent required by treaty ratification--something the Senate has been increasingly reluctant to give. …

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