Understanding Regulatory Capture: An Academic Perspective from the United States

THE MAKING OF GOOD FINANCIAL REGULATION, p. 31 (Stefano Pagliari, ed., 2012)

9 Pages Posted: 2 Jul 2012

Date Written: June 27, 2012

Abstract

Although it sometimes seems that financial regulatory agencies have been entirely captured by the larger players in the industry they regulate, a closer examination reveals that a variety of factors contribute to policy outcomes in this arena. Agencies have different agendas and stakeholders, and banks often perform quasi-governmental roles that blur the line between the captors and the captured. The real danger is that public policy can be distorted as a result of excessive influence by one set of interests at the expense of others. This danger is best thwarted or at least mitigated through the application of a range of institutions and processes, ranging from external checks on agency action to a strengthening of institutions designed to represent interests that the regulated industry itself is unlikely to promote. Internal checks that might provide incentives for more public-oriented actions on the part of industry participants are also relevant.

Suggested Citation

Baxter, Lawrence G., Understanding Regulatory Capture: An Academic Perspective from the United States (June 27, 2012). THE MAKING OF GOOD FINANCIAL REGULATION, p. 31 (Stefano Pagliari, ed., 2012), Available at SSRN: https://ssrn.com/abstract=2094659

Lawrence G. Baxter (Contact Author)

Duke Law School ( email )

210 Science Drive
Box 90362
Durham, NC 27708
United States
919-613-8540 (Phone)

HOME PAGE: http://www.law.duke.edu/fac/baxter/

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