Regulatory Competition in the US Federal System: Banking and Financial Services

Abstract In this chapter, I will discuss the concept of federalism in the banking and financial services sectors from the narrow, and rather peculiar, way that the term ‘federalism’ is used to describe the contemporary federalist system of government in the United States. As I have observed before, federalism generally describes ‘the complex relationship between the states and the federal government’ (Macey 1990: 265). In principle, federalism ‘restricts economic policymaking via limits on the discretion of government’ (Weingast 1995: 3; Oates 1972; Tiebout 1956: 416-24). A properly functioning system of federalism appears to be highly correlated with economic success. As Barry Weingast (1995: 3) has observed, for much of the world’s history over the past 300 years ‘the richest nation on earth has had a federalist structure’.1