Derivatives and Deregulation: Financial Innovation and the Demise of Glass-Steagall

• 成果类型: Article
• 署名作者: Funk, Russell J.; Hirschman, Daniel
• 署名单位: University of Minnesota System; University of Minnesota Twin Cities; University of Michigan System; University of Michigan
• 刊物名称: ADMINISTRATIVE SCIENCE QUARTERLY
• ISSN/ISSBN: 0001-8392
• DOI: 10.1177/0001839214554830
• 发表日期: 2014
• 页码: 669-704
• 关键词: Banking; MARKET; institutions; IDENTITIES; BOUNDARIES; BUSINESS; industry; IMPACT; credit; entry

摘要

Regulators, much like market actors, rely on categorical distinctions. Innovations that are ambiguous to regulatory categories but not to market actors present a problem for regulators and an opportunity for innovative firms. Using a wide range of primary and secondary, qualitative and quantitative sources, we trace the history of one class of innovative financial derivativesinterest rate and foreign exchange swapsto show how these instruments undermined the separation of commercial and investment banking established by the Glass-Steagall Act of 1933 even as overt political action failed to do so. Swaps did not fit neatly into existing product categoriesfutures, securities, loansand thus evaded regulatory scrutiny for many years. The market success of swaps put commercial and investment banks into direct competition and, in so doing, undermined Glass-Steagall. Drawing on this case, we theorize that ambiguous innovations may disrupt the regulatory status quo and shift the political burden onto parties that want to maintain existing regulations. Our findings also suggest that category-spanning innovations may be more valuable to market participants if regulators find them difficult to interpret.