Financial Sector Regulation and the Revolving Door in US Commercial Banks

Abstract

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A double-edged sword: The conditional properties of elite network ties in the financial sector

“…We included two versions of this variable: one that includes both employment and educational ties and another that includes just employment ties. The general distribution of these scores broadly match existing findings on such firms’ revolving door connections to the federal government (Brezis and Cariolle, 2014; Shive and Forster, 2016).…”

Lobbying “from within”: A new perspective on the revolving door and regulatory capture

“…As they move to the private sector, individuals familiar with the workings, rules, and constraints of the government system can encourage mutual understanding. Their enhanced professional experience in negotiations surrounding political issues—Brezis (2017) refers to a “bureaucratic capital”—can also increase private organizations’ productivity and efficiency when discussing with the government (Makkai and Braithwaite 1992; Brezis and Cariolle 2017; Kowalewski, Leiko, and Leonard 1991).…”

“…The revolving door contributes to creating a tight‐knit circle of actors connected to the political and administrative sphere—or “inner circle.” (Useem 1984 as quoted in Laurin‐Lamothe 2017: 124). As stressed by Brezis and Cariolle (2017: 54), “These ‘politically‐connected firms’ through the revolving door will gain significant advantage over their ‘non‐connected’ competitors, by benefitting from a wide range of preferential treatments: tailored regulations, lenient regulatory oversight, biased procurement processes, and so on.” Indeed, the results of a wide‐ranging empirical study by Baumgartner et al (2009: 209) have shown that lobbies which call upon the services of former public officers are more successful in their endeavors than others.…”

“…Rules have been implemented in the western world to mitigate or curb the revolving door, with limited results (Brezis and Cariolle 2017). For instance, in Quebec, the Lobbying Transparency and Ethics Act, adopted in 2002, introduced a “cooling‐off” period of one or two years during which a former POH cannot act as a lobbyist for the sector in his or her former purview.…”

Hero or villain? The financial system in the 21st century

“…Another component of “depoliticizing” the financial industry is to minimize the revolving‐door problem. Various useful suggestions have been spelled out, see, for example, Brezis and Cariolle (2017). However, as the authors conclude “regulations of the revolving‐door process are scarce and when they exist, they are often poorly enforced.”…”