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74 Vand. L. Rev. 951 (2021)
Why Supervise Banks? The Foundations of the American Monetary Settlement

handle is hein.journals/vanlr74 and id is 983 raw text is: Why Supervise Banks? The Foundations of the American Monetary Settlement Lev Menand* Administrative agencies are generally designed to operate at arm's length, making rules and adjudicating cases. But the banking agencies are different: they are designed to supervise. They work cooperatively with banks and their remedial powers are so extensive they rarely use them. Oversight proceeds through informal, confidential dialogue. Today, supervision is under threat: banks oppose it, the banking agencies restrict it, and scholars misconstrue it. Recently, the critique has turned legal. Supervision's skeptics draw on a uniform, flattened view of administrative law to argue that supervision is inconsistent with norms of due process and transparency. These arguments erode the intellectual and political foundations of supervision. They also obscure its distinguished past and deny its continued necessity. This Article rescues supervision and recovers its historical pedigree. It argues that our current understanding of supervision is both historically and conceptually blinkered. Understanding supervision requires understanding the theory of banking motivating it and revealing the broader institutional order that depends on it. This Article terms that order the American Monetary Settlement ('AMS'). The AMS is designed to solve an extremely difficult governance problem-creating an elastic money supply. It uses specially chartered banks to create money and supervisors to act as outsourcers, overseeing the managers who operate banks. Supervision is now under increasing pressure due to fundamental changes in the political economy of finance. Beginning in the 1950s, the * Academic Fellow and Lecturer in Law, Columbia Law School. Thanks to Ash Ahmed, John Crawford, Christine Desan, Jeff Gordon, David Grewal, Michael Heller, Daniel Herz-Roiphe, Bob Hockett, Kate Judge, Robert Katzmann, Jeremy Kessler, Jeremy Kress, Jed Lewinsohn, Da Lin, Yair Listokin, Jon Macey, Jane Manners, Jamie McAndrews, Gillian Metzger, Robert Miller, Saule Omarova, Robert Post, Jed Purdy, Sarah Bloom Raskin, Morgan Ricks, Reuel Schiller, Dan Schwarz, Ganesh Sitaraman, Joe Sommer, Dan Tarullo, Rory Van Loo, Art Wilmarth, David Zaring, Josh Zoffer, and workshop participants at Columbia, U.C. Hastings, and George Mason for many helpful comments and suggestions. Thanks also to support from the Gray Center for the Study of the Administrative State and to the exceptional editors of the Vanderbilt Law Review. 951

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