*This is the eighth post in a symposium on Morgan Ricks, Ganesh Sitaraman, Shelley Welton, and Lev Menand’s “Networks, Platforms, and Utilities: Law and Policy.” For other posts in the series, click here.
Writing a law textbook is a huge task. Writing a textbook that takes a panoramic view of multiple substantive issues and areas of law is an enormous undertaking. Ricks, Sitaraman, Welton, and Menand have produced a formidable volume that brings together chapters on regulation of communications, transportation, energy, money and finance, and technology platforms. As Bill Novak aptly put it, their Networks, Platforms & Utilities is a fitting successor to some of the past century’s most celebrated and formative casebooks and treatises on public utilities and regulated industries.
What makes Ricks, Sitaraman, Welton, and Menand’s textbook stand out, however, is not only the scope of its coverage but its substantive ambition to define a new field of study: NPU law. It is a bold project that strikes just the right note at just the right time, both politically and intellectually. The last few years have unleashed a new wave of progressive legal scholarship questioning dominant misconceptions and prescriptions that blindly relied on “free market” principles and ignored the political side of law. Networks, Platforms & Utilities is an important addition to this broader Law & Political Economy (LPE) literature, tapping into its potential to shape the minds of law students. Ricks, Sitaraman, Welton, and Menand deserve full credit for spotting that potential and taking on that challenge.
This combination of the cross-disciplinary scope and the field-defining spirit—the very thing that makes the book so valuable and promising—also makes it a tremendously complex project. The fundamental difficulty here is blending together the richly detailed narratives of sector-specific regulatory schemes and the conceptual framework that unifies these narratives. While it is hard to overestimate this inherent difficulty, the authors have done an impressive job tackling it in this first edition of the book. Of course, as they themselves emphasize, this work is very much “in progress.” I’m sure they will agree that there is still a lot more to be done on this exciting path.
Finance is an especially challenging case in this respect. Because it is also a subject near and dear to my heart, my attention was immediately drawn to the “Money and Finance” chapter of the book. The chapter’s principal authors, Morgan Ricks and Lev Menand, are my close colleagues and fellow travelers in the field of financial regulation. Over the years, we have written on many of the same issues from a fundamentally similar LPE perspective. And I am absolutely delighted to see them incorporate this particular understanding of money and finance in the new textbook on regulated industries and public utilities.
This editorial choice has significant substantive implications. Financial regulation has long been treated as something much closer to corporate and business law, with its emphasis on private ordering and market efficiency, than to energy or telecommunications law. For decades, textbooks and scholarly texts on economics, finance, and the law governing financial markets propagated the so-called “financial intermediation” paradigm. Staying on the surface of things, they continue to paint banks and other financial institutions as purely private “intermediaries” facilitating transactions among private market participants: lenders, borrowers, investors, insurers, and so on. The financial system, in this view, is little more than yet another private market for private (financial) assets.
Much of my own scholarly work seeks to debunk this paradigm and show how absolutely central the sovereign public’s role in modern finance really is. Shifting the prevailing attitudes toward this understanding, however, is not easy. That makes it especially gratifying to see Networks, Platforms & Utilities take this effort to the next level, by explicitly placing financial services in the broader context of industries directly affected with a public interest. It enriches both our current view of finance and our appreciation for the diversity and structural drivers of NPU sectors as a whole.
In line with the book’s overall approach, the “Money and Finance” chapter offers a historically-grounded narrative of U.S. banking and its regulation. It focuses on banks’ role and evolution as monetary institutions to which the state outsources money-creation. The chapter skillfully explains both the historical origins and the functional operation of various core provisions of the U.S. bank regulatory regime. The resulting narrative is easily accessible to novices, which is a huge plus for a textbook. To experts, it is an effective and “natural” exposition, insofar as U.S. banking law is always and everywhere a history lesson. While there is always room for differing interpretations of historical evidence, the chapter’s authors made the right choice by discussing substantive law though the lens of institutional design and evolution.
By doing so, they also established a terrific baseline for further exploration of the underlying dynamics and key drivers of this evolution. The chapter’s historical account aims to show that money and banking are deeply rooted in the broader public utility tradition. Decades of deregulation in the financial sector, however, have significantly weakened this fundamental connection. Many of the utility-like elements of U.S. bank regulation—including interest rate controls, geographic restrictions, community reinvestment requirements, and so forth—have been either repealed or defanged, often in the name of market competition and efficiency. Today, America’s banks are not overtly regulated as traditional public utilities. Nor do they act as Wyman’s “public callings” in practice—at least, not anymore. In fact, the systematic failure of the U.S. banking system to deliver affordable and equally accessible financial services to every community explains much of the currently widespread distrust and dissatisfaction with banks.
The “Money and Finance” chapter creates a much-needed intellectual platform for a sustained interrogation of the conceptual and normative implications of this gradual erosion of banks’ public utility functions. Deeper and more direct engagement with these issues through the NPU lens will not only strengthen the book but also enhance its potential to shape more effective public policy solutions. I eagerly look forward to seeing it happen.
Saule T. Omarova is the Beth and Marc Goldberg Professor of Law at Cornell University, Senior Fellow at Roosevelt Institute.