Imperfect alternatives: Networks, salience, and institutional design in financial crises
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With the benefit of hindsight - and some aspiration to foresight - it is useful to consider the type of regulatory regime that might best address financial crises. What could policymakers have done to prevent the recent crisis? And once the crisis started, what interventions might have alleviated it? These questions have been widely debated, with an eye to both substantive policy and the design of effective regulatory institutions. This Article speaks to the latter project - one of comparative institutional analysis - though with a framework that implicates our substantive policy choices as well. It begins with an account of financial crises as grounded in the multiple equilibrium character of the financial markets. Given the latter, it suggests, questions of "salience" become central to the design of both substantive policy and relevant institutions. To emphasize as much, the Article considers the role of transnational regulatory networks in preventing and responding to financial crises. Drawing on the example of the recently re-formed Financial Stability Board, it highlights certain inherent limits of networks, but also points to institutional reforms that might be expected to enhance their capacity to impact salience - and thereby play a role - in regulating financial crises.
University of Cincinnati Law Review
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