Governing Finance from Within: Banking Supervision and the Federal Reserve’s Quest for Embedded Autonomy

• In Event: 40860 - Section on Economic Sociology Roundtables
  In Refereed Roundtable (60 minute): Table 5. Finance

Abstract

This paper investigates the previously overlooked practice of banking supervision at the Federal Reserve to develop an analytical framework for studying the hybrid governance architectures of advanced liberalism. Drawing on economic and political sociology as well as the sociology of expertise, this framework moves beyond sociologists’ insistence on the economy’s embeddedness by highlighting the political consequences of state-economy entanglements as well as their dynamic reconfiguration through cycles of contestation and reform. To do so, I transpose the concept of ‘embedded autonomy’ from its developmental origins to liberal democracies, using it to map controversies over their hybrid governance architectures. Banking supervision operates from within the state-economy boundary: the Fed’s supervisors are embedded inside the largest banks and wield significant discretionary authority over business decisions. However, this exposes them to accusations of being captured by capital or of unduly intervening in private business. In response, the Fed invests in autonomization strategies to assert that it acts not in the interest of capital or of partisan politicians but in the public interest. Only if this quest for embedded autonomy succeeds, can the Fed secure its legitimacy. This paper thus conceptualizes the embedded state’s legitimation needs as well as the recursive relationship between embeddedness and autonomy. Empirically, based on extensive archival research and interviews, it reconstructs how the Fed folded supervision into its project of governing finance as a vital, yet vulnerable system from the mid-20th century to the present, with a particular focus on its autonomization strategies after the 2008 financial crisis. This generates a better understanding of the Fed’s actions before, during, and after the crisis and offers more general insights for the sociology of the state and of expertise, applicable in areas such as pandemic preparedness, national security, or drug regulation.

Author

• Julian Jürgenmeyer, University of Chicago