Overlapping Legal Rules in Financial Regulation and the Administrative State

Reforms which seek to overhaul the Dodd-Frank Acthave begun to gain support within the TrumpAdministration and Congress. The leading proposals gobeyond technical matters and reflect a wholesalecritique: financial regulation has become tooburdensome, too complex, and grants too muchdiscretion to regulators. This Article argues that what isreally at stake in these debates is the distinct issue of“regulatory overlap”—the joint use of multiple legalrules to address a common market failure. It begins bydeveloping a general framework for analyzingoverlapping legal rules of all kinds.

That framework isthen applied in case studies of the two cornerstones offinancial regulation: capital adequacy requirements andresolution authority procedures.The most direct contribution of this Article is tosubstantive issues in financial regulation. Each casestudy yields insights about particular portions of theDodd-Frank Act that pending reforms attempt toeliminate, as well as the big picture problems of systemicrisk and banks that are “Too Big To Fail.” On a moretheoretical level, it also situates the concept of regulatoryoverlap within the law-and-economics literature on the optimal design of legal rules, where it is otherwiseconspicuously absent. Lastly, this Article shows how ananalysis of overlapping rules in finance carries lessonsfor the regulatory process as a whole. It thereby adds toscholarship on administrative law, especially toresearch in that area that deals with a related set ofproblems concerning agency jurisdiction, cost-benefitanalysis procedures, and the role of uncertainty in thepolicymaking environment.