Current Scholarship
Technocratic Pragmatism, Bureaucratic Expertise, and the Federal Reserve

Authors: Peter Conti-Brown & David A. Wishnick

The Federal Reserve (Fed) regularly faces novel challenges to its broad statutory mandates. Often, these challenges—from financial crises to pandemics to climate change—raise a critical question. When should the Fed act beyond the boundaries of its core institutional identity and expertise? On the one hand, some voices demand the Fed “stay in its own lane,” avoiding experimentation so that it may preserve its perceived legitimacy to carry out core historical functions. On the other, hewing too closely to precedent and existing expertise risks institutional failure of a different sort.

To navigate that tension, this Feature sketches an ethos of technocratic pragmatism—one that permits the Fed to develop the expertise necessary to address emergent problems as long as it remains constrained by norms designed to preserve its long-run legitimacy. We illustrate the ethos by examining three cases where the Fed has confronted, or is confronting, challenges that test the boundaries of its expertise: engagement with cyber risk, emergency lending before and during the COVID-19 pandemic, and nascent efforts to understand the intersection of central banking and global climate change. We also engage with cases where the Fed has transgressed legitimacy-preserving limits by intervening in policy disputes beyond the range of its statutory concerns. Taken together, these cases illustrate how the Fed must walk a fine line between valuable experimentation and the usurpation of politics.

Peter Conti-Brown & David A. Wishnick, Technocratic Pragmatism, Bureaucratic Expertise, and the Federal Reserve, Yale Law Journal 636, (2021): https://www.yalelawjournal.org/feature/technocratic-pragmatism-bureaucratic-expertise-and-the-federal-reserve

Private Markets, Public Options, and the Payment System

Peter Conti-Brown, University of Pennsylvania

David A. Wishnick, University of Pennsylvania

The speed at which money moves between people and businesses in the United States lags well behind international standards. Far from being a mere inconvenience, slow payment speeds create needless financial uncertainty, lead to inefficiencies across the economy, and drive demand for high-cost credit products like payday loans and overdraft protection. To speed up the payment system, the Federal Reserve has announced “FedNow” a platform due in 2023 that would operate as a public real-time payment rail, competing with a privately-run platform in the interbank payment market.

This Article analyzes the problem of slow payments and the Fed’s many roles in addressing it. Against the Fed’s critics, we argue that the Fed’s operational involvement in the payment system holds the capacity to achieve three objectives at the heart of payment policy in the United States: to catalyze innovation, enhance access to developing payment networks, and shore up financial stability. Fed participation in the payment system and public-private competition are not troublesome bugs or unfortunate byproducts of political compromise. Rather, they represent valuable features of the Fed’s hybrid, public-private system and are likely to drive faster payment development in the United States.

We also argue for an expanded use of Fed tools to achieve payment objectives well beyond FedNow, including by using the Fed’s unique status as operator, market participant, regulator, and supervisor of the payment system and the private financial institutions that participate in it. These are different roles that can be harmonized for the same public policy outcome.

Conti-Brown, Peter and Wishnick, David, Private Markets, Public Options, and the Payment System (April 17, 2020). Yale Journal on Regulation, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3578844

Bank Supervision, the Great Depression, and the Creation of the New Deal

Authors: Sean Vanatta and Peter Conti-Brown

The banking crises of 1930-1933 created the Great Depression and with it the momentum that remade American politics with the election of Franklin Roosevelt in 1932. Pivotal to Roosevelt’s political success was the banking holiday of 1933, an event that restarted the financial system and became a keystone of 20th century political and financial history. In the conventional contemporaneous and historical narrative of these events the holiday represents the apotheosis of high politics and presidential power. Such accounts, however, say virtually nothing about what happened during the holiday itself. We reinterpret the banking crises of the 1930s—before and after Roosevelt’s election—through the lens of bank supervision, an institutional arrangement whereby government actors structure private markets in direct, visceral, haphazard, technocratic, political, disciplined, and arbitrary ways. This reinterpretation illustrates how the union of FDR’s inimitable political skills with the technocracy of bank supervision became key to the solving the banking crisis, jumpstarting the New Deal, and bringing the country back from the brink. Placing supervision at the center of this period of economic, political, and financial transition provides key insights into the exercise of government power, including the relationship between and among legitimacy, legality, politics, finance, and—perhaps especially—what it means for a government official to exercise discretion within a broad legislative mandate. This new approach, we argue, can provide an example of other reinterpretations of political history, from the New Deal and beyond, as an act of onsite government power, interacting with but defined only partially by law and politics.

Conti-Brown, Peter and Vanatta, Sean, Bank Supervision, the Great Depression, and the Creation of the New Deal (February 14, 2020). Available at SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3538411