“Transnational Governance and US Regulation: The Case of Finance”

Thursday, 2 July 2015: 4:00 PM-5:30 PM
TW1.1.02 (Tower One)
Elliot Posner, Case Western Reserve University, Cleveland, OH
“Transnational governance and US regulation:  The case of finance”

Abraham Newman and Elliot Posner

Under what conditions does transnational governance influence the domestic rulemaking of regulatory great powers?  To find answers to this question, we carry out a study comparing the two most recent major pieces of US financial regulatory legislation:  The Sarbanes-Oxley Act of 2002 and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.   Dodd-Frank integrated transnational soft law and embraced transgovernmental regulatory bodies to a greater extent than Sarbanes-Oxley.  What accounts for the change?  Our investigation suggests that explanations focused on deepening transnational governance or on varying degrees of political salience are insufficient.  Instead, we highlight the causal role of the EU’s rise as a financial regulatory power, which replaced US hegemony with Transatlantic bipolarity.  The EU’s ascendance triggered, one, a new awareness among US Treasury officials that unilateralism and extraterritoriality comes with unwanted and costly implications, and, two, a Transatlantic organization of the financial industry and a campaign to ensure coordination of US reforms with the EU’s.  Whereas transnational rulemaking played an important role in facilitating legal integration of EU financial regulation in the 1990s and early 2000s, its salience in the US was catalyzed later by the constraints of bipolarity.