The Legal Response to the Next Financial Crisis

21 Pages Posted: 2 May 2017

See all articles by David T. Zaring

David T. Zaring

University of Pennsylvania - Legal Studies Department

Date Written: May 1, 2017


This essay, done for a symposium sponsored by the Transatlantic Law Forum, speculates as to how legal and regulatory institutions will respond to the next financial crisis. To be sure, much of the governing done during that crisis will be by actors making political decisions that will either be within their legal discretion or that, at least, will not be challenged during the crisis by those so worried about the threat to the economy as to be cowed from standing up for procedural regularity.

Underneath this exercise of discretion, however, lies an increasingly robust set of legal and regulatory relationships that take some crisis response options off the table, while creating frameworks for others, and a predictable and familiar system around which businesses and policymakers can plan. Governments will attempt to forestall the next crisis by regulating their financial entities in the same way, and by reviewing one another’s work to ensure consistency. When the next crisis occurs, independent central banks will stand ready to lend to one another, while finance ministers and heads of states will collaborate. The prominence of reinvigorated institutions like the G-20 and arrangements like central bank swap lines, along with (maybe) cooperation and coordination in the resolution of large, cross-border financial institutions, will comprise much of the institutional response to the next crisis.

There are gaps in this structure — a multinational financial institution will collapse in the future, and yet countries and their regulators may well disagree how they will handle the corresponding race for the assets of the firm. Moreover, power in this system is distributed extremely unevenly. Nonetheless, as a model of global governance, this system can only be deemed an accomplishment, as it has created process and institutions to rationalize what was formerly pure discretion, and, at worst, panic.

Keywords: International Law, Financial Regulation, Administrative Law, International Relations

Suggested Citation

Zaring, David T., The Legal Response to the Next Financial Crisis (May 1, 2017). George Mason Law Review, Vol. 24, No. 2, 2017, Available at SSRN:

David T. Zaring (Contact Author)

University of Pennsylvania - Legal Studies Department ( email )

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Philadelphia, PA 19104-6365
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