EBOOK
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The strange and contested evolution of the management of banking risk
Banks in America are private institutions with private shareholders, boards of directors, profit motives, customers, and competitors. And yet the public plays a key role in deciding what risks are taken as well as how, when, and to what end. Public-private negotiations over financial governance has evolved into an essential ecosystem of banking risk management. In Private Finance, Public Power, Peter Conti-Brown and Sean Vanatta offer a new history of finance and public policy in the United States by examining the idiosyncratic way the nation manages financial risk across the public-private divide. Covering two centuries, from the founding of the Republic to the early 1980s, Conti-Brown and Vanatta describe the often-contested, sometimes chaotic, engagement of bankers, politicians, bureaucrats, and others in the overlapping spaces of the public-private system of bank supervision.
Conti-Brown and Vanatta trace the different supervisory frameworks that evolved over time, from the imposition of private liability on bank shareholders to the development of the central bank to the creation of federal deposit insurance. Negotiations took place at federal and state levels, but, over time, the federal government assumed most of the responsibility for managing financial risk. Moreover, federal supervisory officials began to undertake more varied tasks, including monitoring racial discrimination and managing financial concentration. Conti-Brown and Vanatta introduce a diverse cast of characters-bankers, politicians, bureaucrats, and others-and show how they navigated two hundred years of financial panics, scandals, and crises to build the system that structures modern America's banking system. Peter Conti-Brown is the Class of 1965 Associate Professor of Financial Regulation at The Wharton School of the University of Pennsylvania and a nonresident fellow in economic studies at the Brookings Institution. He is the author of The Power and Independence of the Federal Reserve and the coauthor of The Law of Financial Institutions. Sean H. Vanatta is senior lecturer in financial history and policy at the University of Glasgow and nonresident fellow at the Julis-Rabinowitz Center for Public Policy and Finance at Princeton University. He is the author of Plastic Capitalism: Banks, Credit Cards, and the End of Financial Control. "Conti-Brown and Vanatta have written a brilliant history of the murky realm of banking supervision. Recovering over two centuries of intense conflict and negotiations over risk within America's banking system, the authors explain how the federal government readily absorbed the vital responsibility of managing financial risk. This sweeping history is a must-read for anyone interested in understanding the origins of our modern financial system."-Julian Zelizer, Princeton University
"Conti-Brown and Vanatta masterfully illuminate the historical evolution of bank supervision from a regular assessment of an individual bank's financial condition into the sweeping system of institutionalized discretion over every aspect of the banking system we have today. This pathbreaking and careful historical account will be critical in the coming debate on bank supervision between those who want to defend the role of government discretion in moderating private risk taking and those who want to ensure that government action is always grounded in transparency and due process."-Randal Quarles, Former Vice Chair of the Federal Reserve
"In a book that manages to be both weighty and entertaining, Peter Conti-Brown and Sean Vanatta establish the pivotal role of discretionary supervision in the history of American banking regulation. In showing the persistence of key policy debates through major changes in the scope of supervision, they illuminate the important issue of defining public and private responsibilities for banking practices an
Banks in America are private institutions with private shareholders, boards of directors, profit motives, customers, and competitors. And yet the public plays a key role in deciding what risks are taken as well as how, when, and to what end. Public-private negotiations over financial governance has evolved into an essential ecosystem of banking risk management. In Private Finance, Public Power, Peter Conti-Brown and Sean Vanatta offer a new history of finance and public policy in the United States by examining the idiosyncratic way the nation manages financial risk across the public-private divide. Covering two centuries, from the founding of the Republic to the early 1980s, Conti-Brown and Vanatta describe the often-contested, sometimes chaotic, engagement of bankers, politicians, bureaucrats, and others in the overlapping spaces of the public-private system of bank supervision.
Conti-Brown and Vanatta trace the different supervisory frameworks that evolved over time, from the imposition of private liability on bank shareholders to the development of the central bank to the creation of federal deposit insurance. Negotiations took place at federal and state levels, but, over time, the federal government assumed most of the responsibility for managing financial risk. Moreover, federal supervisory officials began to undertake more varied tasks, including monitoring racial discrimination and managing financial concentration. Conti-Brown and Vanatta introduce a diverse cast of characters-bankers, politicians, bureaucrats, and others-and show how they navigated two hundred years of financial panics, scandals, and crises to build the system that structures modern America's banking system. Peter Conti-Brown is the Class of 1965 Associate Professor of Financial Regulation at The Wharton School of the University of Pennsylvania and a nonresident fellow in economic studies at the Brookings Institution. He is the author of The Power and Independence of the Federal Reserve and the coauthor of The Law of Financial Institutions. Sean H. Vanatta is senior lecturer in financial history and policy at the University of Glasgow and nonresident fellow at the Julis-Rabinowitz Center for Public Policy and Finance at Princeton University. He is the author of Plastic Capitalism: Banks, Credit Cards, and the End of Financial Control. "Conti-Brown and Vanatta have written a brilliant history of the murky realm of banking supervision. Recovering over two centuries of intense conflict and negotiations over risk within America's banking system, the authors explain how the federal government readily absorbed the vital responsibility of managing financial risk. This sweeping history is a must-read for anyone interested in understanding the origins of our modern financial system."-Julian Zelizer, Princeton University
"Conti-Brown and Vanatta masterfully illuminate the historical evolution of bank supervision from a regular assessment of an individual bank's financial condition into the sweeping system of institutionalized discretion over every aspect of the banking system we have today. This pathbreaking and careful historical account will be critical in the coming debate on bank supervision between those who want to defend the role of government discretion in moderating private risk taking and those who want to ensure that government action is always grounded in transparency and due process."-Randal Quarles, Former Vice Chair of the Federal Reserve
"In a book that manages to be both weighty and entertaining, Peter Conti-Brown and Sean Vanatta establish the pivotal role of discretionary supervision in the history of American banking regulation. In showing the persistence of key policy debates through major changes in the scope of supervision, they illuminate the important issue of defining public and private responsibilities for banking practices an