Lecture 2: This Time Is Not Different

The Clarendon Law lecture Series 2015

"Sunsetting the Iron Law of Financial Regulation"

Professor Romano - Sterling Professor of Law and Director, Yale Law School Center for the Study of Corporate Law

In my lectures, entitled, “Sunsetting the Iron Law of Financial Regulation,” I will analyze what I term “the Iron Law of Financial Regulation,” which is a one-way ratchet of increasingly, complex, opaque, inapt and inadequate regulation that follows from the cumulation of regulation implementing crisis-driven legislative directives, and then propose mechanisms by which we can get financial regulation back on track.

In the first lecture, “The Iron Law of Financial Regulation,” I will introduce what I mean by the “Iron Law,” and illustrate its operation in broad strokes using examples across time and space. The second lecture, “This Time Is Not Different,” will drill down more deeply into the Iron Law with examples taken from the legislative and regulatory responses to the global financial crisis of 2008-09. My primary examples will come from the United States, as that is what I know best. The concluding lecture, “How to Get Financial Regulation Back on Track,” will elaborate on two mechanisms that seek to mitigate the Iron Law’s deleterious effect, and suggest how they could be applied to the Iron Law examples mentioned in the prior lectures: sunsetting crisis-driven legislation and its implementing regulations, that is, time-delimiting the duration of such legislation and regulation to force a legislative reassessment; and facilitating regulatory experimentation, to better inform the quality of regulation.