About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline

24 Geo. Mason L. Rev. 533 (2016-2017)
The Legal Response to the Next Financial Crisis

handle is hein.journals/gmlr24 and id is 541 raw text is: 





      THE  LEGAL RESPONSE TO THE NEXT FINANCIAL CRISIS


                                David  Zaring*



INTRODUCTION

     Financial crises are now cross-border  affairs, and yet many feel that law,
and  especially international law, does little to either constrain or enable the
response  to them.' This essay identifies the ways that law and regulation will
affect the response to the next financial crisis, and in so doing, makes a case
for law as a constraint on  crisis management.   The  law that most  obviously
constrains will be domestic,  rather than international-and   in that sense the
critics are right to suspect that traditional international law will not govern
the response  to what will almost certainly be an international crisis. Instead,
it is local regulation, as opposed to treaty or even statute, that will form much
of the underpinnings   of that response. But that domestic  regulation  will be
created and  applied as the result of an international process, meaning  that if
the law comes   from home,  the governance   will not.
     The  next crisis response will be facilitated by a track record of interna-
tional coordination  designed  to minimize  the impact of shocks  to the finan-
cial system. And  the precedents created by the response to the last crisis, such
as central banks lending to one another, offer clues to how the next crisis will
be addressed.2 None  of this means that law and tradition will supplant politics
and  discretion when  the next crisis comes. In crisis response, as opposed  to
crisis preparation, international law  and domestic   administrative  law have
shown   their limits; the difficulties of either regime to grapple with so-called



    *  Associate Professor, The Wharton School of the University of Pennsylvania. Thanks to Michael
Greve, Yuliya Guseva, Chimene Keitner, and Stephen Lubben, and presentations at the 8th Annual Trans-
atlantic Law Forum hosted at George Mason University and Wharton. Thanks also to Jayme Wiebold for
research assistance.
    1  See Steven M. Davidoff & David Zaring, Regulation by Deal: The Government's Response to
the Financial Crisis, 61 ADMIN. L. REV. 463, 465 (2009); Narissa Lyngen & Glaton Simmons, The Fi-
nancial Stability Board: The New Face of International Financial Regulation, 54 HARV. INT'L L.J. i, iii,
vii-ix (2013).
    2  See e.g., FIN. CRISIS INQUIRY COMM'N, THE FINANCIAL CRISIS INQUIRY REPORT: FINAL REPORT
OF THE NATIONAL COMMISSION ON THE CAUSES OF THE FINANCIAL AND ECONOMIC CRISIS IN THE
UNITED STATES 275 (2011); Dietrich Domanski, Richhild Moessner & William Nelson, Central Banks
as Lenders ofLast Resort: Experiences During the 2007-2010 Crisis and Lessons for the Future 12 (Div.
of Res. & Statistics & Div. of Monetary Affairs, Fed. Reserve Bd., Fin. & Econ. Discussion Series 2014-
110, 2014) (describing the Federal Reserve's practice of establishing dollar liquidity swap lines with...
a number of foreign central banks).


2017]1


533

What Is HeinOnline?

HeinOnline is a subscription-based resource containing nearly 3,000 academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Short-term subscription options include 24 hours, 48 hours, or 1 week to HeinOnline with pricing starting as low as $29.95

Contact us for annual subscription options:

Already a HeinOnline Subscriber?

profiles profiles most