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41 Yale J. on Reg. 591 (2024)
Rebuilding Banking Law: Banks as Public Utilities

handle is hein.journals/yjor41 and id is 591 raw text is: Rebuilding Banking Law: Banks as Public Utilities Lev Menandt & Morgan Rickstt Under the New Deal framework for money and payments-which had its roots in the National Bank Act of 1864-banks in the United States were governed in many respects as public utilities. Charters were available only where they were consistent with public convenience and need, the usual standard for utilities. Banks enjoyed an exclusive privilege to aug- ment the money supply, maintaining deposit account balances that house- holds and businesses could use as a means of payment and store of value. Banks were largely limited to conducting activities consistent with their monetary purpose. Geographic expansion was constrained to promote ad- equate service to local communities. And a government agency, the Federal Reserve, regulated the quantity of bank money in circulation and set the in- terest that accrued to its holders. The result was an unprecedented period of overall financial stability that lasted more or less until 2008. Unfortunately, policymakers have steadily undermined and degraded key elements of this system, and now its logic has been largely forgotten. Deposit alternatives-financial products that as a formal, legal matter are distinct from bank deposits but that function like them in practice-match or exceed deposits in value, and the country's once-diffuse banking system has given way to a top-heavy financial architecture in which a handful of complex conglomerates engage in a broad range of monetary and non- monetary financial activities with little meaningful government oversight. Although policymakers dramatically expanded regulation after the 2008 financial crisis, we still face rolling panics, a central bank committed to backstopping much of private finance, massive rent extraction by Wall Street, and democratic decline. This paper offers a blueprint for reform: what we call a New National Banking system. Our goal is part restoration, part innovation. We aim to both renew the framework that undergirded American prosperity in the twentieth century and refine it by improving access to bank services and t Associate Professor of Law, Columbia Law School; Fellow, The Roosevelt Institute. tt Herman O. Loewenstein Chair in Law, Vanderbilt Law School. The authors thank Yochai Benkler, Christine Desan, Howell Jackson, Kate Judge, Joshua Macey, Saule Omarova, Todd Phillips, Steven Schwarcz, Howard Shelanski, Nathan Tankus, Art Wilmarth, and Josh Younger, as well as participants in seminars, workshops, and conferences at Harvard Law School, Columbia Law School, Vanderbilt Law School, Brooklyn Law School, Michigan Law School, Duke School of Law, Yale Law School, UC Berkeley School of Law, the U.S. Treasury Department, and the European Commission Directorate-General for Financial Stability, Finan- cial Services and Capital Markets Union. 591

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