Daniel Hawley

"five news media requesters pertaining to Board members' communications and meetings with members of the executive branch as well as various memoranda concerning a Federal Reserve System publication." Look @danielhawley.bsky.social, we made it into the FRB FOIA report!

Andrew Ferguson is a soulless political climber and a shame on the FTC and the entire profession

Excited to share that my new paper, The Federal Reserve’s Forgotten Credit Mandate, was just published in Harvard Law Review! 🚨It argues that we are misinterpreting the Fed’s statutory mandate. 1/22

the hardest part about writing this piece was resisting the urge to dedicate it to Jamie Dimon

👀

❤️❤️❤️

highly, highly recommend!!

thanks so much! ❤️🙏

Many thanks to everyone who helped get this across the finish line, and to everyone who was generous enough to read an earlier draft. If you have the stomach for the additional 10,000 words here, I hope you'll find it worthwhile 🙏

(fin)

Although my new resolution method is a tool of transition, the prescription for participatory control of monetary institutions is not limited to the moment of bank failure.

My hope is that this can be part of a broader vision for the legal forms of a more just future.

(21/n)

In sum, the FDIC puts its thumb on the scale for hierarchical firm-based coordination. It doesn't have a good reason for doing so. And choosing to disperse intrafirm coordination rights instead better aligns with the law and political economy of antitrust and banking.

(20/n)

To support IRT, bank regulators can draw on their supervision and examination powers to require, for example, cooperative resolution planning before failure (see "living wills") and station cooperative experts on site

(19/n)

Like any other resolution method, in IRT the FDIC fires the senior mgmt, officers, and directors and appoints their own board. The FDIC writes new bylaws suited to participatory control. Then the workers bid for permanent control of the bank in the typical auction process

(18/n)

It uses the same administrative process that allows private equity to bid for and acquire failed banks. But instead transferring bank charters to PE firms, IRT turns over control to the workers (and community members)

(17/n)

I'll save the goriest details for the bravest readers, but for now it suffices to say that my new resolution method, IRT (intrafirm reallocation transaction), can be just as orderly as failed bank mergers.

(16/n)

You might be thinking: sure, but the FDIC needs to merge the failed bank because it's the most orderly way to prevent bank runs, etc. I.e., they do it out of administrative necessity, right?

(15/n)

Beyond antitrust law, bank resolution must be situated in a broader field of banking law as well. Drawing on the work of Lev Menand, I argue that like antitrust law, banking law in many ways favors dispersing coordination rights.

(14/n)

In fact, it's more likely that failed bank mergers are the most harmful to cost-based efficiency and consumer welfare. Among other things, acquiring banks tend to reduce lending to the failed bank's customers, lower their deposit rates, and close their branches.

(13/n)

Yet even if we set aside the many problems with that account, minimizing costs to maximize consumer welfare doesn't explain why the FDIC merges failed banks. It isn't clear that failed bank mergers accomplish any of those goals, even on their own terms.

(12/n)

As @sanjukta.bsky.social's work has shown, antitrust law orthodoxy has an ahistorical and incoherent justification for hierarchical firm-based coordination in the first place. It assumes that hierarchical firms minimize the costs of production, in turn increasing consumer welfare

(11/n)

Second, the FDIC adopts antitrust's default allocation (favoring hierarchical firm-based coordination) but leaves the antitrust justifications (which are problematic in their own right) behind...

(10/n)

the FDIC could stop reflexively merging failed banks AND transition them to participatory control—i.e., a more dispersed, more horizontal allocation of interfirm and intrafirm coordination rights.

(9/n)

The balance sheet, bylaws, and bank charter of a failed bank are putty in the hands of the FDIC.

I show that within the bounds of both antitrust and resolution law (section 1, least cost test, etc.)...

(8/n)

It allocates INTRAfirm coordination rights by retaining antitrust law's preference for hierarchical firm-based coordination.

This is so familiar to us that it escapes notice. However...

(7/n)

First, the FDIC allocates INTERfirm coordination rights by effecting a merger between the failed bank (First Republic, SVB, and Signature) and a larger acquirer (JPMorgan, First Citizens, and NYCB).

(6/n)

my Note finds a more fundamental problem with bank resolution: It allocates coordination rights and does so on an incoherent basis.

That means FDIC can (and should) allocate coordination rights differently. I argue it'd be best to disperse rather than concentrate control

(5/n)

Bank resolution is the process of dealing with failed banks. In 2023, the FDIC resolved three of the four largest bank failures in U.S. history (First Republic, SVB, and Signature). For now, let's set aside the much discussed problems with that episode...

(4/n)

In fact, bank resolution's allocation of coordination rights clashes with the law and political economy of antitrust and banking

(3/n)

At the highest level, the Note connects coordination rights (the right to economic coordination) to banking and bank resolution.

Two central claims:
1. bank resolution allocates coordination rights
2. bank resolution does not have a good reason for that allocation

(2/n)