Dodd-Frank: Adversarial Corporatism

Last week was the occasion of my first visit ever to Hillsdale College. Wow, was that impressive: it’s sheer bliss to encounter a horde of confident, smart, and serious kids.

The reason for my visit was a big campus event on Dodd-Frank; I was one of the invited speakers. The tape is here. It’s based on a manuscript I’m still noodling over. Here’s the gist of it:

Conservative-libertarians mope about Dodd-Frank’s subsidies to big financial institutions. They also mope about the feds’ civil and criminal prosecutions of financial institutions—like, J.P. Morgan. My view is that these things are of a piece. As David Skeel (who also spoke at the Hillsdale gig) has explained in a very fine book, Dodd-Frank cements a symbiotic, “corporatist” partnership between the government and the big banks. Wall Street lives with de facto bailout guarantees and other embedded subsidies. That’s the quid; what’s the pro quo?

Answer, the government gets to siphon off a big chunk of the profits (in the case of Fannie and Freddie, all of the profits), chiefly by means of “law enforcement” (see, e.g., the $13 billion settlement in the works between JPM and DoJ). The SEC, the CFTC, the Fed, the FHA—they’ve all become profit centers for a cash-starved Congress. That’s the essence of adversarial corporatism: the bankers get to make a boatload of money, and the government gets to treat them like a criminal class. Whether these people have actually done something wrong is secondary, if not wholly irrelevant. With Wall Street’s capable assistance, government has managed to institutionalize and monetize the perp walk.

Is this a great country, or what?

Michael S. Greve is a professor at George Mason University School of Law. From 2000 to August, 2012, Professor Greve was the John G. Searle Scholar at the American Enterprise Institute, where he remains a visiting scholar. Before coming to AEI, Professor Greve cofounded and, from 1989 to 2000, directed the Center for Individual Rights, a public interest law firm. He holds a Ph.D. and M.A. in government from Cornell University, and completed his undergraduate studies at the University of Hamburg. Currently, Professor Greve also chairs the board of the Competitive Enterprise Institute and is a frequent contributor to the Liberty Law Blog. Professor Greve has written extensively on many aspects of the American legal system. His publications include numerous law review articles and books, including most recently The Upside-Down Constitution (Harvard University Press, 2012). He has also written The Demise of Environmentalism in American Law (1996); Real Federalism: Why It Matters, How It Could Happen (1999); and Harm-less Lawsuits? What's Wrong With Consumer Class Actions (2005). He is the coeditor, with Richard A. Epstein, of Competition Laws in Conflict: Antitrust Jurisdiction in the Global Economy (2004) and Federal Preemption: States' Powers, National Interests (2007); and, with Michael Zoeller, of Citizenship in America and Europe: Beyond the Nation-State? (2009).

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  1. gabe says

    Interesting take on this corporatism. I am glad you mentioned it as I was beginning to feel a little paranoid after having come to a similar conclusion. Interesting isn’t it that within the last two weeks the Enlightened One issued an Executive Order “encouraging” Executive agencies to become self funding. Gee, duh ya think there is a connection here?

    take care

  2. gabe says

    A further thought on this.
    How many times have we asked “Why can’t the Government act more like a business”
    Well, be careful what you wish for, guys! We may now have it – a government seeking enhanced revenues will, no doubt, have / create incentives and opportunities via law / administrative rulings to enhance said revenues by reaching ever more deeply and frequently into our pockets.
    Ultimately, perhaps, we should be asking ourselves whether we REALLY want government to operate at a surplus – after all, that surplus comes from US.

    BTW: Just started your Upside Down Constitution (interrupted, of course, by Bama -LSU game) Would you say that this “adversarial corporatism” fits in with cartel federalism or is it the logical conclusion of such a practice?

    take care


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