The Contingent Origins of Financial Legislation
78 Pages Posted: 15 Feb 2021 Last revised: 20 Dec 2021
Date Written: 2021
Courts and scholars often view major financial legislation warily. One popular theory holds that Congress only legislates in this area when pushed by opportunistic activists in response to crises that neither activists nor legislators understand. Another account contends that financial legislation is the well-designed product of deeply entrenched schemes by special interest groups that control the process with limited input from others. Further, the Supreme Court’s application of antinovelty doctrine—which counsels that governmental structures without historical precedent are constitutionally suspect—sends a strong signal that creative solutions to these problems will be viewed with judicial skepticism.
This Article challenges the prevailing scholarly theories of financial legislation and reveals as irredeemably flawed the Court’s related assumptions about legislative processes. This reassessment is based on historical analysis of seven watershed events in American legal and financial history, grounding important moments more firmly in their political contexts. From the Federal Reserve Act of 1913 to the CARES Act of 2020, we uncover neither a pattern of responding to crises nor a logic of grand design at the frontier of congressional authority. Instead, the sweep of history reveals reactions to unpredictable events, policy entrepreneurs with proposals that change substantially during the course of the legislative process, and temporary legislative coalitions that respond to perceived problems in largely ad hoc ways. The result is a flourishing of congressional experimentation at every turn. Temporary coalitions and historical contingencies are the primary themes in financial lawmaking. Novel legislative experiments are not the exception, but the rule.
That insight exposes the impracticality and incoherence of the ascendant antinovelty doctrine. Judicial insensitivity to the ubiquity of unpredictability and experimentation in legislative design risks curtailing Congress’s legitimate and constitutional powers to shape the financial system in a democratically accountable way.
Keywords: financial legislation, legal history, agency design, antinovelty doctrine
JEL Classification: N42, K22, K23
Suggested Citation: Suggested Citation