Mercatus Scholar Hester Peirce Discusses "Regulation in the Form of Big Bank Coercion"
Mercatus Scholar and former Congressional and SEC staff attorney Hester Peirce posted a commentary titled "Regulation in the Form of Big Bank Coercion." The commentary examines bank regulators' ability to "strong-arm" banks – an ability that, in Ms. Peirce's words, "sidesteps the regulatory processes designed to ensure accountability, public input, and transparency."
In her commentary, Ms. Peirce discusses the recent effort by the Financial Stability Board ("FSB") to "force" contractual changes in short-term borrowing arrangements, known as repo agreements, among financial institutions. Ms. Peirce explains that, generally, U.S. regulators adopt regulations that include the FSB standards, which entail a comment period to consider public input and "think methodically about whether and how rules will work." Ms. Peirce states that the FSB's recent "voluntary" agreement approach, in which industry members embed FSB prescriptions in their private contracts, is a poor substitute for legislation or an orderly rulemaking process.