divAs trade flows expanded and trade agreements proliferated after World War II, governments—most notably the United States—came increasingly to use their power over imports and exports to influence the behavior of other countries. But trade is not the only way in which nations interact economically. Over the past two decades, another form of economic exchange has risen to a level of vastly greater significance and political concern: the purchase and sale of financial assets across borders. Nearly $2 trillion worth of currency now moves cross-border every day, roughly 90 percent of which is accounted for by financial flows unrelated to trade in goods and services—a stunning inversion of the figures in 1970. The time is ripe to ask fundamental questions about what Benn Steil and Robert Litan have coined as “financial statecraft,” or those aspects of economic statecraft directed at influencing international capital flows. How precisely has the American government practiced financial statecraft? How effective have these efforts been? And how can they be made more effective? The authors provide penetrating and incisive answers in this timely and stimulating book. /DIV

How the American government has long used financial credit programs to create economic opportunities Federal housing finance policy and mortgage-backed securities have gained widespread attention in recent years because of the 2008 financial crisis, but issues of government credit have been part of American life since the nation’s founding. From the 1780s, when a watershed national land credit policy was established, to the postwar foundations of our current housing finance system, American Bonds examines the evolution of securitization and federal credit programs. Sarah Quinn shows that since the Westward expansion, the U.S. government has used financial markets to manage America’s complex social divides, and politicians and officials across the political spectrum have turned to land sales, home ownership, and credit to provide economic opportunity without the appearance of market intervention or direct wealth redistribution. Highly technical systems, securitization, and credit programs have been fundamental to how Americans determined what they could and should owe one another. Over time, government officials embraced credit as a political tool that allowed them to navigate an increasingly complex and fractured political system, affirming the government’s role as a consequential and creative market participant. Neither intermittent nor marginal, credit programs supported the growth of powerful industries, from railroads and farms to housing and finance; have been used for disaster relief, foreign policy, and military efforts; and were promoters of amortized mortgages, lending abroad, venture capital investment, and mortgage securitization. Illuminating America’s market-heavy social policies, American Bonds illustrates how political institutions became involved in the nation’s lending practices.

After two generations of emphasis on governmental inefficiency and the need for deregulation, we now see growing interest in the possibility of constructive governance, alongside public calls for new, smarter regulation. Yet there is a real danger that regulatory reforms will be rooted in outdated ideas. As the financial crisis has shown, neither traditional market failure models nor public choice theory, by themselves, sufficiently inform or explain our current regulatory challenges. Regulatory studies, long neglected in an atmosphere focused on deregulatory work, is in critical need of new models and theories that can guide effective policy-making. This interdisciplinary volume points the way toward the modernization of regulatory theory. Its essays by leading scholars move past predominant approaches, integrating the latest research about the interplay between human behavior, societal needs, and regulatory institutions. The book concludes by setting out a potential research agenda for the social sciences.

Publisher Description

An examination of regulation and use of information in capital markets, offering comparisons across different jurisdictions, regulated entities, and financial instruments. Financial information is a both a public resource and a commodity that market participants produce and distribute in connection with other financial products and services. Legislators, regulators, and other policy makers must therefore balance the goal of making information transparent, accessible, and useful for the collective benefit of society against the need to maintain appropriate incentives for information originators and intermediaries. In Chasing the Tape, Onnig Dombalagian examines the policy objectives and regulatory tools that shape the information production chain in capital markets in the United States, the European Union, and other jurisdictions. His analysis offers a unique cross section of capital market infrastructure, spanning different countries, regulated entities, and financial instruments. Dombalagian uses four key categories of information—issuer information, market information, information used in credit analysis, and benchmarks—to survey the market forces and regulatory regimes that govern the flow of information in capital markets. He considers the similarities and differences in regulatory aims and strategies across categories, and discusses alternative approaches proposed or adopted by scholars and policy makers. Dombalagian argues that the long-term regulatory challenges raised by economic globalization and advanced information technology will require policy makers to decouple information policy in capital markets from increasingly arbitrary historical classifications and jurisdictional boundaries.