The Democratic Slipperiness of Rule Evasion: 15 Days of Failed Hearings to Regulate a Money-Market Product

• In Event: 40860 - Section on Economic Sociology Roundtables
  In Refereed Roundtable (60 minute): Table 11. Finance, Credits, and Rules

Abstract

How does an economic innovation make it onto the political agenda (or not)? After 1945, U.S. banks circumvented the law on deposits to issue so-called money-market products. These products allowed the banks to access cheap and plentiful funding, which they lent out in ways that reinforced gender, racial, and class inequalities. Drawing on novel archival sources, I show how the few activists and academics who tried to raise the alarm were ignored. I study the moment when the public came closest to developing knowledge about the money market. In 1966, Wright Patman, chairman of the House Banking Committee, held 15 days of hearings to prohibit a new money-market product, the negotiable certificate of deposit. On the most granular level, I engage in a close reading of the hearing transcripts, showing how the repurposing of an old financial instrument as a money-market product created a barrier to understanding. On the most structural level, I show how Patman’s authority in the hearings suffered from a lack of allies in academia. While 19th-century politicians could still publish their own monetary pamphlets, the postwar public ascribed this authority only to academics.

Author

• Pierre-Christian Fink, University of Virginia