Infrastructural Boundary Work, Federal Reserve Independence, and the Birth of Shadow Banking, 1948–1958

• In Event: Reconfiguring State–Market Relations in Contemporary Capitalism

Abstract

Why do “markets” and “states” appear to be separate even when markets are dominated by state actors? Sociological accounts show how public agency is obscured in markets, but they rarely examine the systematic institutional labor required to make markets appear credibly “free” from the state. This article develops the concept of infrastructural boundary work: practices through which state actors construct market infrastructures that enhance governance capacity while remaining insulated from direct political control. Drawing on archival research on the Federal Reserve’s postwar project to build a “free market” in U.S. Treasury securities (1948–1958), we show how the Fed used low-interest repurchase agreements to support dealers, constructing a market infrastructure that enacted the monetary policy independence granted by the 1951 Treasury–Fed Accord. The legal, operational, and interventionary boundary work required to stabilize this infrastructure generated sustained conflict within the Federal Open Market Committee and with Congress, culminating in competing interpretations of the 1958 Treasury crisis—a crisis precipitated by the very speculation the Fed had encouraged. By tracing struggles over infrastructural boundary work, we demonstrate how state power is embedded, disguised, and contested within market-making processes. Our findings also illuminate the sociological foundations of shadow banking and the infrastructural power of central banks, showing that markets “free” from the state are, in fact, produced through ongoing institutional labor.

Authors

• Nathan Coombs, University of Edinburgh

• Matthias Thiemann, Sciences Po