Financial Crises and Legislation

Journal of Financial Crises, 2022, Vol. 4: Iss. 3, 1-59.

NYU Law and Economics Research Paper No. 22-02

61 Pages Posted: 16 Nov 2021 Last revised: 27 Sep 2022

See all articles by Peter Conti-Brown

Peter Conti-Brown

University of Pennsylvania - The Wharton School; Brookings Institution

Michael Ohlrogge

New York University School of Law

Date Written: September 29, 2021

Abstract

Scholars frequently assert that financial legislation in the United States is primarily crisis driven. This “crisis-legislation hypothesis” is often cited as an explanation for various supposed shortcomings of US financial legislation, including that it is poorly conceived and inadequate to the problems it aims to address. Other scholars embrace the hypothesis, but from the perspective that crises are the needed impetus to prompt constructive reforms. Despite the prevalence of this hypothesis, however, its threshold assumption—that Congress passes major financial legislation only when financial crises arise—has never been analyzed empirically. This article provides that analysis. We first devise a new system for assessing legislative importance based on the notion of citation indexing, the principle at the heart of algorithms employed by modern search engines such as Google. Using a suite of legislative importance metrics, we show that the crisis-legislation hypothesis strongly fits for securities laws but far less so for banking laws. We conclude, therefore, that reformers would be ill-advised to push for government interventions in the banking system only following crises and that those seeking to understand dysfunction in US bank regulation will need to pursue fuller explanations.

Keywords: Financial Regulation, Banking Law, Securities Law, Financial History, Political Economy

JEL Classification: G28, K22, L5, D7, P16

Suggested Citation

Conti-Brown, Peter and Ohlrogge, Michael, Financial Crises and Legislation (September 29, 2021). Journal of Financial Crises, 2022, Vol. 4: Iss. 3, 1-59., NYU Law and Economics Research Paper No. 22-02, Available at SSRN: https://ssrn.com/abstract=3460698 or http://dx.doi.org/10.2139/ssrn.3460698

Peter Conti-Brown

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

Brookings Institution ( email )

1775 Massachusetts Ave, NW
Washington, DC 20036
United States

Michael Ohlrogge (Contact Author)

New York University School of Law ( email )

40 Washington Square South
New York, NY 10012-1099
United States

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